SCARcitY
When Messi scored a $150m contract for Inter Miami, Apple TV subscriptions jumped up from 6,000 to 100,000 overnight.
Messi caused the biggest single-day subscription event in Apple TV’s history. How can one man have such an outsized impact on one of the biggest tech companies in the world?
The answer: scarcity.
There is and will always be just one Messi in this metaverse, just like there was only one Steve Jobs, and there is only one Elon Musk. If there were several Musks, we wouldn’t care about the tirades of this one so much.
Kickoff
The MLS has a limit of 29 franchised soccer teams. Each team can only have 11 players on the field. There is one captain and one goalkeeper. The seats are limited. Literally.
The appeal of sports is deeply rooted in scarcity. For example, only 300 out of 16,000 players are drafted into the NFL each year.
The NFL is the most searched and most valuable sports league in the US.
However, when it comes to valuation (not value), The MLS beats the NFL with a revenue multiple of 10.2x compared to 7.6x. The year before (2021), the average valuation of MLS teams was 12.2, only slightly higher. Contrast that to tech companies who have an average revenue multiple of ~3x these days.
Average revenue by team per league:
MLS: $57m, avg valuation: $582m
NHL: $187m, avg valuation: $934m
NBA: $303m, avg valuation: $2.6b
MLB: $313m, avg valuation: $2.3b
NFL: $545m, avg valuation: $4.1b
Almost no MLS team is profitable. Some lose up to 8 figures every year. Aswath Damodaran’s excellent analysis1 comes to a simple conclusion: sports teams are “trophy assets” for billionaires. Owning a team is a status symbol because they’re scarce.
And so is watching sports: ticket prices have surged to 25.1% YoY in September and October compared to the previous year.2
People watch live sports because they crave togetherness and live events, reinforced by low prices during the pandemic.
“People are getting back to things that they enjoy doing and are willing to pay a bunch.”
“There’s a real craving for that kind of feeling of togetherness that the sports world brings,” he said. It’s “a really exciting experience that maybe is even more exciting now because people had lost it in the past.”
Sports is the opposite of a commodity.
Foul
Last week, Sports Illustrated got caught red-handed with AI content that pretended to be human.
Maggie Harrison, journalist at Futurism, spotted AI-generated headshots and text on si.com. Sports Illustrated refuted the claim but acknowledged that it worked with a content vendor who wrote and published affiliate guides under fake names. Shortly after, SI gave its vendor the red card, claimed the Hand of God and removed the content.3
Two interesting observations about the story: one, people were more upset about the attempt to hide AI content than the fact that it was (presumably) written by an AI. Robots pretending to be humans is a modern fear with many movies: Blade Runner, A.I. Artificial Intelligence, Ex Machina, Westworld and Her.
Two, SI using AI to create buying guides is a perfect example of a shift from differentiated content (journalism) to arbitrage (affiliate marketing) and commodity content.
TV made news a commodity, except for the new breaker. AI does the same to generic content. A Tweet about traffic stealing recently attracted 6.7m impressions on X alone. The idea is to recreate content from a competitors site with AI and use it to beat them in organic search.
The reaction to the Tweet was a cocktail of anger and fear. Excessive wording (stealing = unethical) meets fear of SEO’s disruption from AI. It’s scary that
someone can copy content in minutes that took writers many hours
SEO as an industry and user acquisition channel changes so fast
no one could tell SI was using AI to generate content before spotting the headshots
One year after Chat GPT 3 unleashed a massive AI wave, generic content has turned into a commodity. And it was always meant to be because we’re just accelerating what humans have done by hand for years. Carpenter and drill.
Benched
What do you get when pairing vast product options with low-profit margins and high product volume? A commodity.
In sports, commodities are interchangeable players that don’t make a difference on the field. They can be replaced instantly by any athlete on the bench.
In economics, commodities are metals, wheat, cattle. But, to a degree, also soda, laundry detergent, and frozen pizza. Those commodity products have low margins because competition is high, and companies compete with price, speed, distribution and brand.
In SEO, commodities are generic content for any keyword with shallow user intent, like “how to” keywords (remember traffic stealing?) or definitions. Google often gives the answer away with Featured Snippets or other SERP Features, and if traffic gets to sites, it doesn’t stay long.
We used to create content for commodity keywords manually. The way to get ahead was to have more writers on payroll.
Now that AI can create commodity content in minutes and everyone has access to AI tools, the value of commodity content has gone from low to zero. Generic content has turned from Cronut to wheat. Imagine you could effortlessly grow wheat in your garden and a machine would turn it into bread. Would you still go to the supermarket?
The only way to win is either by differentiating with a stronger brand and better user experience or by trying to win the production race with speed and price. While the latter might work, it’s a race to the bottom. Even winning is losing.
Big brands might get away with it, but you can only build a brand to market a commodity. You can’t build a brand with a commodity. Nobody knows the biggest wheat producer in the US (it’s Archers Daniels Midland).
Anything mass-produced and easy to make loses value. The opposite of commodities are differentiated brands and scarce supply. VW builds 8.7m cars every year and has a market capitalization of $62b. Porsche builds 309k cars per year and has a market cap of $82b. Tesla started with a limited supply of luxury cars and then expanded into the mass market. In the early days of the iPhone, people would camp in front of stores to get a new one. All examples are scarcity tactics. And they created the most valuable companies in the world.
Win
The obvious way to leverage scarcity in marketing is discounts and sales offers. But habituating consumers to wait for the next sale can damage your brand. Notice that Apple doesn’t reduce the price of its products for BFCM (Black Friday / Cyber Monday) but gives away coupons for purchases over a certain amount.
True ball control is running seasonal editions and pairing scarcity with gravity. Pumpkin Spice Lattes are Starbucks’ most popular seasonal drink and sell hundreds of millions of units every year. Clubhouse, despite its failure, built a huge buzz because it had the cool kids and a strict bouncer (waitlist). Superhuman, Sidebar, Hampton and Bluesky used the same playbook.
But as soon as a limitation becomes predictable or boring, it loses its gravity. iPhone buyers are not camping in front of stores anymore. The Black Friday 2023 season was the smallest in 6 years because deals start earlier and earlier.4
Smart marketers invest in differentiation and don’t dilute their brands with commodities.