The Rise of the Vertical Stack

Posted By Atul Patel On February 11, 2013 @ 6:00 AM In Emerging Platforms, Opinions, Video | 1 Comment

Welcome to the era where being a contender in the technology industry means offering the consumer the vertical stack. Remember Amazon as a bookstore, Apple as a high-end computer company, and Google as a colorful search engine that replaced our four-legged friend, Lycos? Fast forward to the present and these businesses bring a dizzying array of products and services to mind – from the tablet, to the cloud, to the music service, to the video service, to the photo service, to even a credit card. While cataloging all of their products may be overwhelming, the spread of these and other big brands’ reaching into vertical products presents a boon of opportunities for digital video stakeholders and, of course, audiences.

Everybody has a rumor

So what brought this trend of the vertical stack into the norm? From their birth, these businesses specialized in making information more efficient, connected, and available, and the demand for this efficiency from consumers only grew. Add in the fact that the cost of adding new products and services, including those backed by physical hardware, has been falling fast, and we now have phones that integrate with our email and calendar, photos, games, and videos at our fingertips, and the ability to store an unlimited amount of creations and data in the cloud. The companies who introduced us to these technologies have evolved, from providing a product to providing efficiencies across every layer of the spectrum (from the device to the data) – and each wants to be considered the best. Evidence of this new reality can be seen with almost all of the tech giants. Amazon has gone from a popular online retailer to leading with its Amazon Web Services, its Kindle devices, Amazon Instant Video, and the rumored Amazon phone [1]. Apple has expanded its reach into cloud storage, music, phones, Apple TV companion box, tablets, and a rumored television set [2] and streaming radio [3]. A search engine is just the beginning of how you interact with Google’s popular innovations, including Google Maps and Talk, Gmail, Google+, the Galaxy Nexus device family and now Google Wallet and the rumored physical credit card [4]. The list of brands going vertical goes on. Microsoft expanded to tablets with Surface and recently launched its Xbox music service. Barnes and Noble launched its own NOOK tablet [5]. Toys “R” Us released the Tabeo tablet and streaming video service Toys “R” Us Movies. Blockbuster, the once dead physical store, is rumored to create its own Blockbuster phone [6]. And, RedBox [7] is starting to sell event tickets through their presence in almost every grocery store. While this array of new technology can make for a lengthier consumer decision process, the vertical stack is a recipe for success for the vendors involved and the audiences who have their pick of efficient technology.

What does vertical stack mean for you?

Publishers: When it comes to connected devices, publishers play a pivotal role in a tech company’s vertical stack success, as applications for accessing the publisher’s content are often key to platform adoption. Audiences expect content wherever they go, and they have their list of go-to publishers for consuming it. Audiences want to read the Washington Post [8] on their smartphones, catch up on E!’s celebrity gossip [9] on their tablets, and stream Grimm on their connected TVs. If vertical stack companies don’t make competitor’s applications available on their devices or provide a similar service for accessing this content (at a similar price), customers may end up opting for a device company that has. In some cases, they work together – Netflix can be downloaded on Kindle Fire. However, in other cases the services are only on the provider’s own devices, like Apple iTunes (if you exclude Windows). This is why publishers need to develop content applications for every device and every platform [10] to stay connected to their audience. Bottom line: if vertical stack companies don’t work with publishers, not only do they not gain audiences but they risk losing the ones they have – all while seeing subscription and advertising dollars walk out the door.

Producers: Producers benefit from the increased flexibility of this new structure. Instead of the traditional one-to-one relationship with a specific publisher, producers can get their content in front of more eyes, on more platforms, earning more revenue for the assets they have already generated. We are living in an era of demand for content everywhere, where producers will have the opportunity to negotiate deals with numerous publishers across websites, devices, and traditional mediums, and reserve some opportunity to go directly to the consumer. For example, with the Kindle Direct Publishing system [11], writers can skip the costs of a distributor and self-publish straight to the Kindle network, for free. Similarly, producers can quickly get their videos in front of a wider audience by syndicating to publishers with web-based and connected device applications. The opportunities don’t end there; native stores on devices (e.g., Apple’s Newsstand and Google’s YouTube) are continually seeking out new sources of interesting content to stand out in the democratized landscape (see Google’s funding of YouTube’s premium channels [12]). Producers with quality videos will not have a hard time finding publishers as the democratization continues.

Advertisers: Let’s not forget our favorite friends – the advertisers. Advertisers have a slew of reasons to embrace the vertical stack and incorporate the new outlets into their business models, as well. Gone are the days of marketing through one platform and reaching a large segment of the population. For example, broadcast TV ad campaigns are “lucky to reach 60% of TV viewers in their target audience,” while just 15 years ago penetration was closer to 90%, according to AdAge [13]. Although traditional advertising methods should not be abandoned, audiences are more fragmented than ever before. According to recent data by eMarketer [14], 77% of audiences are interacting with another device while watching TV, and the percentage of simultaneous cross-device usage is similar for tablets, PCs, and smartphones. After all the complexities are solved, new outlets can allow for even better planning, targeting, and engagement. From pairing a popular CPG product pre-roll with videos about staying healthy to an appliance company sponsoring how-to videos on a foodie blog, advertisers can now target smaller audiences at more niche outlets related to their interests, instead of trying to force a message that resonates on a national scale. The best part is that many of these outlets are accessed through devices in audiences’ hands, keeping them actively engaged. As has always been the case, advertisers are an important part of the content and publishing industries, so you can count on the vertical stack companies waiting with open doors to deliver your message, provide the creativity necessary to make an impact, and to deliver a ROI for the spend.

Audiences: And what does vertical stack mean for audiences? It means we have access to the content we crave, on the devices and platforms we use, available to us everywhere we are connected. Audiences are the biggest winners in this new paradigm because the stakeholders in the vertical stack’s success depend on their satisfaction with the content and the user experience they’re providing. All of this high praise for the vertical stack company should not suggest that these new opportunities don’t come without their own set of obstacles. There will be an abundance of new relationships to manage between the platforms, publishers, producers, and advertisers. Agreements around exclusivity and economics will have to adapt to the new landscape. And, the competition for the attention of an increasingly fragmented audience will become even more intense. In order for the relationships in this new ecosystem to thrive, it will require intermediaries with the right technology, connections, and data to smoothly manage it all. But these topics are for exploring at another time. For now, one thing is clear: The vertical stack is the new norm and the future looks promising for all who successfully adapt.

URLs in this post:

[1] Amazon phone:,2817,2412582,00.asp

[2] television set:

[3] streaming radio:

[4] credit card:

[5] NOOK tablet:

[6] Blockbuster phone:

[7] RedBox:

[8] Washington Post:

[9] E!’s celebrity gossip:

[10] develop content applications for every device and every platform:

[11] Kindle Direct Publishing system:

[12] Google’s funding of YouTube’s premium channels:

[13] AdAge:

[14] recent data by eMarketer:

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