How Kumu uses virtual gifting to make revenue as a livestreaming app

So, how does a livestreaming app such as Kumu make its revenue?

In this email interview with e27, Kumu Co-Founder and President Rexy Josh Dorado explains how the company’s revenue is currently driven by virtual gifts available on its platform. It allows users to send one-time animations to support their favorite streamers, who earn commissions from those virtual gifts.

“In doing so, users can also support streamers in winning campaigns, which are contests that allow streamers to win prizes, get themselves on a billboard or TV broadcast, etc. But more broadly, our economy is driven by people around the world supporting Filipino content creators–and retained on the platform by a sense of authentic connection that they can’t find elsewhere. Through the years, one thing still rings true – users are willing to support their favorite creators financially, and this has been a key driver of revenue growth for Kumu,” he stresses.

While virtual gifting remains the main source of revenue for Kumu, according to Chief Operating Officer Arianne Kader-Cu in the same interview, there are also a couple of other contributing streams from advertising and social games.

“Advertising involves partnering with brands to create highly targeted and engaging ads or executions that run during live streams and shows. Meanwhile, social games provide a platform for our community to interact with each other making the platform more fun and engaging. One of our games, color raid, allows the community to work together to achieve a common goal to win,” she explains.

To get a better understanding of how this Philippine-based startup do it, Dorado and Kader-Cu answer some of the biggest questions about making revenue in this Q&A session. The following is an edited excerpt of the conversation.

Also Read: Kumu nets Series C to become the ‘Disneyland of social media’; total funding exceeds US$100M

What process did you have to go through to come up with this revenue model?

Dorado: We took pointers from the success of live streaming apps in China, which pioneered livestream virtual gifting. The trial-and-error has been more around how to execute this in a way that promotes a safe, family-friendly content environment that has the potential to break into the mainstream.

We’ve done this by working with some of the leading local influencers, TV shows, and films in the Philippines–which have helped launch live streaming into the public consciousness. The challenge now is how to execute that playbook with talents and IP for whom we are true partners and help them grow their careers while enriching the Kumu ecosystem in the process.

Kader-Cu: There were definitely a lot of experimentations before we got things right. One of the biggest lessons we learned while scaling up the business was the importance of building a strong community of users. It was a balancing game to establish an online culture based on positivity and new possibilities.

Who are your users and how do you acquire them?

Dorado: Our users are Filipinos both within the Philippines and around the world. Specifically, Filipinos who are looking for entertainment and connection at a deeper level. The average user spends 60 minutes a day on the platform on just a few pieces of content. We have found user growth primarily effective via word of mouth, but it is also accelerated through partnerships with talents and IP with established fanbases.

Also Read: Kumu nets Series C to become the ‘Disneyland of social media’; total funding exceeds US$100M

There has been greater pressure for startups today to become more sustainable businesses financially. What are your thoughts on this? How do you approach building a profitable and sustainable business model?

Dorado: It’s the right move–especially if you are in a business that’s less winner-takes-all, and more about creating enduring and differentiated value for a specific but highly engaged group of people. This is the case for Kumu; just 20,000 paying users generate millions of dollars a month for our economy.

And in the past, we’ve been profitable for a full quarter before we started investing heavily in growth–which means we are well-positioned to be sustainable again as we go through the rocky macroeconomic movements of the next few years.

Kader-Cu: Having a sustainable business model is crucial for the long-term success of any startup. At Kumu, we have found that diversification of revenue streams and being able to pivot in response to market changes is key to achieving this goal. Relying too heavily on any one source of income can leave a startup vulnerable to changes in the market or unexpected disruptions. That is why we built a model that provides us with multi-faceted revenue streams as a safety net to mitigate any risks and ensure that there are multiple sources of income to draw from.

However, we also recognise that diversification alone may not be enough to guarantee long-term success. Through the pandemic, we’ve had to enact swift strategic changes in our business, which we can admit have been difficult calls to make, but that’s growth; that’s the journey.

Also Read: Kumu raises Series B funding round co-led by SIG, Openspace Ventures

How do the back-to-back global crises affect your business? And how do you deal with it?

Dorado: We grew from COVID-19 as people got stuck indoors–and so growth became harder when the economy opened up. Moreso when inflation started to hit our users’ wallets. For us, this means a shift in focus from aggressive growth to indefinite survival to ensure we are positioned to win in the long term when the tide rises back up.

What other opportunities do you aim to seize this year? What will be your big plan?

Dorado: Growing our base of homegrown talents and IP. Engaging around them more holistically–not just through virtual gifts but through other revenue streams, such as merch, gaming, etc. We are laying the foundations for what we believe will be the most vibrant network of Filipino creativity that we can proudly showcase to the world.

Kader-Cu: Our long-term vision at Kumu is to become a formidable digital entertainment company.

We have begun planting seeds throughout 2022 among a number of local businesses – acquiring Penlab, a leading local comics and webtoons platform with over one million monthly reads, and beginning to take major steps into gaming.

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Image Credit: Kumu

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