YouTube fame and ghost kitchens on The Future, This Week

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Intro This is The Future, This Week on Sydney Business Insights. I'm Sandra Peter, and I'm Kai Riemer. Every week we get together and look at the news of the week. We discuss technology, the future of business, the weird and the wonderful, and things that change the world. Okay, let's start. Let's start!

Kai Today on The Future, This Week. Welcome to Season 6, with hidden YouTube fame and ghost kitchens.

Sandra I'm Sandra Peter, I'm the Director of Sydney Business Insights.

Kai I'm Kai Riemer, professor at the Business School and leader of the Digital Disruption Research Group.

Sandra So we're back.

Kai Looks like it.

Sandra Sounds like it more like it.

Kai Sounds like it. It's been a bit of a break.

Sandra Yes. And now we're back for Season 6 of The Future, This Week.

Kai Exciting, there's a lot of things that happened while we were away.

Sandra We have, of course, been outraged at a whole number of things, such as the realisation that Facebook has been paying people to listen to users private voice memos. Outraged but not outraged. The company did admit to using human reviewers to help with AI transcriptions, but then again all the users have given consent for this to happen. So we're not quite sure what the big outrage is. But, in a similar vein Microsoft's new privacy policy also admits that humans are listening to some of your conversations.

Kai Instagram influencers cried over the company hiding the likes from their posts, so that was drama.

Sandra Libra has happened since we've been away.

Kai Yeah. Facebook announced its own cryptocurrency, something that we will come back to for sure.

Sandra We'll probably have a special: cryptocurrency, not cryptocurrency.

Kai Then there was Uber announcing its financial results, and the world wondering how could Uber lose 5 billion dollars in a single quarter? So that made news, and we will come back to this.

Sandra Actually we're going to be doing a whole special on Uber, because quite a few things have been happening there, and there is a larger story to be told around the business model and around the gig economy in general. But if you're in Australia, another thing that's happened over the last couple of weeks has been...

Kai The ACCC has put forward a report, a ruling on the power of big tech platforms, a topic that we've been discussing in Season 5 quite extensively. And the regulator has come up with a whole number of recommendations for how they would reign in the power of platforms such as Google and Facebook, in particular when it comes to the spreading of fake news, the way they appropriate journalistic content and how they limit competition in the markets that they're in.

Sandra A riveting read at 613 pages. And whilst the two of us have commended the ACCC on their diligent and very comprehensive analysis of Google and Facebook dominance of online advertising, we've also written a short op-ed piece that we will include in the shownotes, talking about the fact that the report is really largely very good news for Google and Facebook, because it fundamentally reaffirms and cements their business model.

Kai The business model of course being that they are in the business of exploiting user data for advertising, so our point is that the report does not challenge the fundamental reality of that business model, but rather tries to regulate the negative effects that stem from its execution. And that presents a problem in so far as it basically now turns that business model into a given reality that we all have to live with, and the outcomes being merely a natural flow on from this.

Sandra And there has been a whole host of articles on a variety of security breaches from legit-looking iPhone lightning cables that will hijack your computer...

Kai To remote-start apps for cars that allows hackers to take control of the cars. There's been some interesting news about a phenomenon called phreaking, where people dial into phones that are installed in elevators to freak people out. And of course, all of these news come off the back of the DEF CON hacker conference that's happened while we were on a break.

Sandra But this is the first episode of Season 6 of The Future, This Week, and this is the weird and the wonderful, so we're not going to tackle any of these today.

Kai No, and neither are we going to tackle some of the other weird and wonderful stories such as disruption in the toilet paper industry, which Sandra and I thought we might bring up because it allows us to say shit, but then we decided there's really more interesting stories here.

Sandra The more interesting stories this week have to do with the music industry. Today, after all is the 50th anniversary of the Woodstock Music Festival. And Woodstock really has had a legacy, of course it wasn't the first really big music festival, but it was the one that everybody remembers, and it's the one that capitalised the rise of the modern monetised music festival. Today, music festivals are really, really big business. In the US alone for instance, this year there'll be roughly 100 multi-day large festivals, akin to Woodstock. Most of them hosted by one company called Live Nation, with more revenue than most traditional record labels today. And of course our listeners would have heard about Coachella, or Lollapalooza or South by Southwest. But the really, really interesting thing about music festivals today is that they actually follow one of the megatrends that we look at here at the University of Sydney Business School, which is that of urbanisation. So whilst music festivals used to be rural affairs, they have today become a large part of City Development Strategies, and most of them are now attached to big cities.

Kai And there's a great article by Richard Florida in CityLab, which is titled "The Rise, and Urbanization, of Big Music Festivals". And in this article he reports on research done by Patrick Adler who is an academic at University of Toronto's School of Cities, who looked into where festivals actually take place these days in the United States, and he has some really interesting data and his research shows that 86 percent of today's large festivals, that are those with at least 25000 people in attendance, take place in metro areas, and that is up from 75 percent only a decade ago. And very few of these large festivals now take place in rural areas, which is quite significant.

Sandra And we see a very similar trend in places like Australia, where although we have the Woodford Folk Festival, which is out in Woodfordia, Queensland. we do have festivals like Splendour In The Grass or Ultra Australia which are very much in urban centres, or within suburbs of bigger cities or towns. But the music story we really want to talk about today actually takes place somewhere very different.

Kai Our first story comes from Bloomberg, and it is called "Bollywood Rapper Sets Viewer Record YouTube Isn't Talking About".

Sandra Now imagine you're a moderately successful Indian rapper.

Audio MUSIC

Sandra You've gotten a few number one hits in India, and you've been on a few Bollywood soundtracks.

Audio MUSIC.

Kai But now you've managed to make it really big on YouTube, much like PSY and Taylor Swift.

Audio MUSIC AND LYRICS

Sandra You've broken the YouTube record of most views in a day. And yet no one knows about it.

Audio MUSIC AND LYRICS

Kai So this is rapper Badshah, whose real name is Aditya Singh, with his song 'Paagal'.

Sandra Who within 24 hours of posting his new music video, has broken a record that not even Taylor Swift managed to break.

Kai 75 million views in one day.

Sandra That is more than Korean boy band BTS. That is more than Ariana Grande, and more than Tay Tay.

Kai So why then did YouTube not formally acknowledge this record? And that's what the story is about.

Sandra The first rumours were that the video had benefited from farms and bots doing the views, so basically fake views. But, turns out there was actually a different explanation which is that the rapper and his record label had purchased advertisements from Google and YouTube that would embed the videos within other music videos, or between them.

Kai So this is an interesting practice that I, for one, didn't know about, whereby YouTube actually counts the views of those music videos that are put as ads inside other videos. Which means that you can effectively buy yourself millions of views by embedding music videos as ads inside other videos.

Sandra And let's make it clear this is not a practice that only Badshah is guilty of. This is a widespread practice, so Taylor Swift videos and all other videos would have benefited from the same moves. Many music companies have now moved on to ads. So music companies today either buy ads that direct viewers to the music video or employ the music itself in the ad.

Kai And so what is interesting here is that Badshah basically made use of a service that Google, or YouTube as the Google subsidiary, actively promotes to its channels. So while using YouTube advertising in that way is now common practice, what makes this a particularly interesting story is the scale and size of the Indian market.

Sandra India is both YouTube's largest market, and home to its most popular channel. Turns out there's actually quite a few very interesting facts about Internet usage in India.

Kai And this is where we want to give a shout out...

Sandra To SBI's Scottish friend from Singapore...

Kai Simon Kemp.

Sandra Very shortly we will feature a one on one interview with Simon Kemp who has been working with some of the world's biggest companies, with Google with Coca-Cola, Nestlé. But he is most well-known for publishing every year 'the state of digital', which is basically everything you need to know about the Internet and the use of Internet around the world. He develops that every year in collaboration with Hootsuite and We Are Social. So keep an ear out for our special with Simon.

Kai And so let's have a look at some of his data that he collected about, as a background to understanding why this story is so interesting.

Sandra First of all there's the sheer size of the Indian market, there are 560 million active Internet users in India.

Kai Who on average spend seven hours and 47 minutes per day on the Internet, which is a lot.

Sandra And guess what? After Google the place they mostly go to is YouTube.

Kai YouTube has 1.35 billion monthly visitors in India, and significantly they spend almost 17 minutes per visit on the site, which is vastly more than any other site in Simon's ranking.

Sandra "Video" is also the most searched item on Google, followed by "download" and "song". And 97 percent of people in India watch videos online.

Kai That explains why India is so important for YouTube, but it also explains why an artist that is little known outside of India can top this ranking.

Sandra But it's not just the sheer size of the market that makes this possible. The other very interesting thing is that if you were to purchase ads in India, for about 5 million rupees (which is just a little over 72 thousand dollars US), you could theoretically generate about 67 million video ad impressions in India.

Kai Which contrasts markedly with the 1.5 million U.S. dollars you would have to spend to generate 60 million impressions on the US or UK YouTube site.

Sandra And these numbers are reported in The Economic Times of India and by Bloomberg, we will include the links in the show notes.

Kai So this explains how with relatively little investment Sony which is Badshah's label was able to catapult the video to this record number and we do know that advertising was heavily involved in creating those. Because the number of likes and dislikes and genuine engagement that the video did in fact get were far below what genuine views would normally generate.

Sandra But there is a bigger story here, not unlike the story behind the success of Old Town Road, Lil Nas X's surprise hit that made it to the number one place in the Billboard charts. And the bigger story here is about...

Kai YouTube's business model of course, or Google's in a wider sense. So YouTube finds itself in a real pickle here. On the one hand of course it can't be seen to let anyone game its rankings and mess with its records...

Sandra Because they do want to promote genuine engagement on the platform.

Kai Absolutely, but on the other hand they also don't want to dissuade any of the advertisers from buying their ads, which, you know, drove this phenomenon.

Sandra Which is indeed the way that YouTube works, the way it makes money.

Kai And so this story really is so interesting because, once more, it brings to the fore what the actual business model of these platforms is. So places like Facebook, and Google and YouTube, they want us to believe that their services is providing community or allowing the sharing of videos, or promoting artists, or enabling search and finding things on the Internet.

Sandra On the other hand, the best way to generate engagement on this social media platform is to buy it.

Kai To engage in advertising. And so every once in a while, a story like this comes along that pierces just a little the fine illusion that these platforms create, and highlight the rather messy reality of what it takes to utilise the algorithms that drive engagement on the platform, by purchasing your way to the top.

Sandra So on the one hand, a platform like YouTube enables people to game the system by purchasing positions in these rankings. On the other hand, they cannot be seen to reveal that publicly because then the magic's gone.

Kai And so what this means for artists and labels is that you can actually engineer your popularity on the platform, which then in turn will drive sales in this brave new economy.

Sandra That's a phenomenon worth researching actually.

Kai Here's an academic title for it. How about ‘From fake views to fame: Engineering for popularity in the algorithmic attention economy'.

Sandra And if you want to do that bit of research. Call us.

Kai Call us. Which brings us to our next story from fake views to fake restaurants. We had a fake restaurant before on the podcast.

Sandra Yes that was our episode when we discussed The Shed. The number one restaurant on TripAdvisor in London that did not exist.

Kai That was an actual real fake restaurant. The fake restaurants today, they're not that fake, but they're virtual or ghost kitchens, so to speak. And the story is about food delivery services such as Uber Eats or Deliveroo.

Sandra The story comes from the New York Times and it's titled "The Rise of the Virtual Restaurant".

Kai So the article concerns a new phenomenon that is driven by these delivery platforms, whereby either existing restaurants create new brands exclusively for these platforms, which are then called 'virtual restaurants'. So let's say a burger place also creates a pizza brand, they start making pizza. But you can't buy them in the shop, they only trade under a new name as a ''virtual restaurant on these platforms, or there's now restaurants called 'ghost kitchens' that don't actually have a shopfront. They exclusively function as kitchens to sell through these delivery apps.

Sandra The picture in the New York Times is actually quite revealing. It's a pizza place that has big signs in the windows that say. 'We do not carry cash or a cash register on the premises", "Delivery only, no slices. Sorry, sorry, sorry".

Kai So what's driving this change?

Sandra So it is Uber and in particular Uber Eats, and the range of other delivery companies such as Deliveroo and Grubhub who have become extremely popular not only in the US, but also in places like Australia and the UK and France. And similar companies have become widely spread in China, where in densely populated big cities people use them almost on a daily basis. And indeed we have a few examples of such companies, Uber Eats has helped about 4000 virtual restaurants spring up in the US. Travis Kalanick, the former Uber chief executive has bought a majority stake in CloudKitchens, a startup that incubates such ghost kitchens. In Europe the food delivery app Deliveroo has also started testing such ventures. They put up windowless kitchens called Rooboxes in really unlikely locations, including derelict parking lots in East London, warehouses in Paris and so on, where Uber Eats also has tried delivery-only kitchens. And we've seen the same trend in China as well where ghost kitchen startup Panda Selected recently managed to raise more than 50 million US dollars from investors to support the development of virtual restaurants.

Kai And so there's different things that we want to highlight with this story. The first one is that as digital companies, Deliveroo or Uber Eats quite deliberately use the data that they collect in the process of organising food delivery, to suggest to existing restaurant owners to set up certain brands certain virtual restaurants in areas where there might be unmet needs. So Uber Eats might realise that in a certain area people order a lot of pizza, but there's not enough restaurants that provide pizza. And so they approach other restaurants in the area. If they don't want to maybe add pizza to their menu, and maybe create a virtual restaurant brand that then is listed on their platform.

Sandra Or indeed, and Uber calls this 'selection gaps' on its platform, will invite people to join an accelerator, based on this particular selections, and incubate the virtual, the 'ghost kitchens' that would then provide this particular type of cuisine.

Kai So kitchens set up to exclusively trade on Uber Eats. And in that respect they become a little bit more like Netflix for food, in that Netflix commissions a lot of original content, shows that only exist on Netflix and then obviously drive viewership. Platforms such as Uber Eats commission kitchens to trade as restaurant brands that then exclusively exist on their platform. Again, as a mechanism in their competition with rival delivery services to have a wider range of products in a certain area.

Sandra And we must say that this trend is not just about startups or about little pizzerias that are looking to expand, but it's also a way for big franchises or traditional restaurant brands to leverage some of their services into this space. So in the US for instance, the famous Chick-fil-A has fulfilment-only centres which simply will cook the food. But you cannot stop by and eat.

Kai And so what we wanted to do is we want to look at the wider implications of where this trend is leading us and there's two main things we want to highlight here.

Sandra First is that paradoxically there is actually the complete opposite trend playing out at the very same time. So whilst on the one hand we have these 'ghost kitchens' or 'virtual restaurants'.

Kai That exclusively concentrate on cooking and then providing the food without any storefront.

Sandra The popularity of platforms like Instagram are also driving the experiential cuisine, so it's not about the food, it is about being in a particular place and being able to take a particular picture that then you can showcase on Instagram.

Kai So we have those two digital platforms, food delivery and Instagram, which are pulling this traditional physical bricks and mortar industry, into two opposing directions. On the one hand, restaurant owners create ever-more elaborate experiences with nice ambience and decor, and beautiful styling of the food. Almost an artistic quality that then becomes Instagramable, and on the other hand, the exact opposite where food basically, in a very utilitarian way, ends up in a brown bag. And in both instances, what is a restaurant is being redefined.

Sandra And indeed that trend can contribute to the epidemic of loneliness which we've talked about previously on the podcast, and we'll include the link in the shownotes. And so the other thing that we want to highlight is not only that restaurants are being redefined, but what it means to own the restaurant or to operate the restaurant, is also being redefined. Working in a small Italian restaurant in a neighbourhood where you know your clients, is very different from working in windowless metal boxes that are now known as 'dark kitchens' or operating maybe two or three different restaurants out of the same kitchen. Indeed in a virtual restaurant with no physical storefront, there is no reason not to run more than one restaurant out of your back kitchen.

Kai And so this ties in with another article, also from this week in Restaurant Dive, which is the specialist hospitality publication, which reports on Deliveroo’s rescue team that will convert struggling restaurants to delivery only. And so what has been reported previously is that many restaurants actually are worse off initially from these delivery services because they take away traditional patronage, and even though they might gain a lot of business through the app, the fact that the app provider takes a 15 to 30 per cent cut of the price, means that financially many restaurateurs are in difficulties. And so companies like Deliveroo, who have now started to help these companies to convert from having a shopfront to become essentially 'ghost kitchens', financially becoming more successful and in some instances thriving, but in the process changing very much what it means to run a restaurant.

Sandra And since this trend is predicted to grow quite significantly, so Morgan Stanley has recently come out and estimated that the delivery segment would grow from about 30 billion in 2017, to about 220 billion by 2020. That is a very significant growth. This is a very worthwhile area to keep an eye on and maybe do some research on as well.

Kai And so here's another title for a potential research paper 'When Uber eats your world: How restauranteurs cope with identity stress from delivery apps'.

Sandra Maybe we should make this a proper segment, we should do this every week.

Kai Well maybe, well after all we are in an academic institution here, and many of the things that we discuss happen now, but warrant further investigation so we think it might be a good idea to highlight certain research opportunities. and provide you with a title for your study for free, how's that?

Sandra That sounds like a segment in the making.

Kai We'll think about it a bit more, but that's all we have time for today.

Sandra Welcome back to Season 6 of The Future, This Week, we'll see you next week. Thanks for listening!

Kai Thanks for listening.

Outro This was The Future, This Week, made possible by the Sydney Business Insights Team and members of the Digital Disruption Research Group. And every week, right here with us, our sound editor Megan Wedge who makes us sound good, and keeps us honest. Our theme music was composed and played live on a set of garden hoses by Linsey Pollak. You can subscribe to this podcast on iTunes, Stitcher, Spotify, YouTube, Soundcloud or wherever you got your podcasts. You can follow us online on Flipboard, Twitter, or sbi.sydney.edu.au. If you have any news that you want us to discuss, please send them to sbi@sydney.edu.au.