S1E8 | Truths About Building A Billion Dollar, Profitable Content Business | Joseph Phua, 17LIVE

We often think about startups as a 0 to 1 game with a team of founders working and pivoting around one theme in the hope of finding success. But that is a highly risky way to try and build VC-scale businesses. In this episode, we learn of a different model, one that has led to the creation of a billion-dollar, profitable business in the highly competitive media and content space.

Discussion Topics: Truths About Building a Billion Dollar, Profitable Content Business

• Sound On acquisition and building a portfolio of startups
• How 17LIVE was formed
• Vertex’s role in their success
• The NYSE listing that never happened
• Hard Truths for entrepreneurs
• Changing trends in content distribution and monetization
• Not being sure about doing the right thing
• The future of content and media businesses
• Variables affecting content businesses
• Closing thoughts

Transcript: Truths About Building a Billion Dollar, Profitable Content Business

Elise Tan: Hi, I’m Elise Tan and I’m your host for this episode of Hard Truths by Vertex podcast. Today, I’m really thrilled to have Joseph Phua on our show. Hi, Joseph.

Joseph Phua: Hi, Elise.

Elise Tan: Great to have you here. Joseph is the founder of Paktor. And now he is the Chairman of 17Live a live-streaming technology to empower content creators around the world. What are the other projects that you are involved with? Could you tell us?

Joseph Phua: Thank you, Elise. I found Paktor all back in 2013. So it’s been almost 10 years since we started. Paktor merged with a company called 17Live back in 2016. Back then I was CEO of 17Live, the group back in 2020, while still maintaining my Chairman position in the company. I was introduced to a podcast company called SoundOn in Taiwan by an investor of ours in Taiwan and fell in love with what they were doing and ended up acquiring the company.

So SoundOn is a podcast hosting platform. It has about 60% of market share in the Taiwanese market. And hosts most of the top shows that you hear in Taiwan today. This company is about 60 people strong today. And we have actually done quite a bit of improvements to its business model over the last year or so.

So from SoundOn as our first acquisition, I started to build a team around investing and acquiring, because I find that acquisition is a way to grow, where you overcome the Zero to One to acquisitions, and then you build from 1 to 10 it’s actually a more efficient way for operators like myself and more efficient spend by time and to remove the uncertainties from zero to one, which is the hardest, as we all know.

And so over the last two years, I set up my family office, and we do this in a single-family office. And we have done two of these so far, of which six are full acquisitions with a majority control. But the last and most recent deal that we worked on, is where we set up a news media outlet called Next  Apple in Taiwan, we rehired the employees, for the functional news media platform. Today, it is a top five media platform in Taiwan.

And I spend quite a bit of time managing the operations of their business. The team today continues to scout for opportunities globally. We’re very much into consumer-related technology businesses because our experience actually comes from Paktor and 17Live that’s where I got my training over the last 10 years.

Elise Tan: 17Live is invested by Vertex ventures in Southeast Asia and India. So would you like to tell us more about how 17Live came about?

Joseph Phua: So I founded Paktor, back in 2013. And I expanded our dating business into Taiwan. And there I met my partner, Jeff. Jeff, at a point in time, was also doing a dating business and was building a dating business in Taiwan. He exited the dating business in 2015 and pivoted into a livestream business for the purpose of getting people to meet people. And that was back in 2015.

And so, I mean, we remain in very close contact, although we are competitors in 2014, and 2015 I would meet up with him whenever I was in Taiwan, and he would tell me all about his live streaming business. And in 2016, he was facing some challenges in terms of growing the business and I was looking at opportunities to expand our business of connecting people with other people. And we felt that there was actually a very strong commonality within the TA of both businesses. And so then we thought about possibly working together, and eventually, we merged the business together.

So 17Live was more of an opportunity that I saw together with Jeff, we saw the potential to build this. And I guess we were lucky. So in 2016, we started building the business, in 2017 and 2018, we got leadership within Taiwan and in Japan, and then in Hong Kong. And then moving into Southeast Asia, we started building in 2018, and 2019, and COVID hit in 2020. And so people cannot go out so that actually basically just accelerates the business. significantly over the last two to three years today, it is a billion-dollar business.

We have leadership positions in Japan, Taiwan, Hong Kong, parts of Southeast Asia, and the US. We were very profitable. And the team is actually quite lean. It’s a very strong, operational, strong team. We’ve done this for the last six, or seven years. We are right at the top of the game in terms of live stream and interactive content, especially this time when people are so used to interacting with other people through remote means I think it’s a very good timing for our business.

Elise Tan: How did you know at the time when you decided to merge, that you would have the right opportunity? What were the signs that you were seeing?

Joseph Phua: I didn’t know. Luck played a huge part in this process. I wouldn’t say that we saw anything, what we did see was the strong propensity for the audience and the consumers to pay. But what we couldn’t tell, I mean, nobody could tell COVID nobody could tell that we would move so quickly, nobody could tell that we would advance quickly into this part of the spectrum of communication through the air.

Elise Tan: Nevertheless, I mean, there’s good news for 17Live and for Vertex as well as being an investor. I’m just curious, how did you get to know Vertex?

Joseph Phua: I think it goes back to 2013 when I first launched our dating business in Singapore, Paktor quickly became the top dating application back then. And when you rise quickly through the ranks Vertex has a very rigorous way of spotting trends and spotting up and coming on products. And so my investment manager at that point in time Evie reached out to us very early on.

I think one month after launch Evie reached out to me and we started chatting about possibly working together but at a point in time we weren’t raising. And so then only back in 2014, one year after we first interacted at the first meeting, and then we raise capital from Vertex. Of course, Evie brought me to see the extended team, Kee Lock, Joo Hock, and the team.

And the Vertex culture is I would say very family. I will say that generally, the investment space is not one that is made of families, it is spot trends to invest in those companies, It’s a relatively aggressive environment, not to say that Vertex has not been aggressive over the 10 years, I have seen the aggression from the way Vertex bets on their winners, however, Vertex exudes a family environment where they’re very supportive of the founders.

It was from the very first day, you get the sense that, they’re looking more to bring founders into the family into the Vertex family, and they’re looking to invest into the winners. But at the same time, they also understand very well that winners go through ups and downs. And they were very willing to play the long game that sets Vertex very much apart from the rest of the investors in the market. I mean, we have a very stellar roster. 17Live has a very stellar roster of investors.

Don’t get me wrong, but I would say that Vertex is the first anchor investor that you really want to bring on board. I’ve been to so many, in the last 10 years. I mean, we were the first company to ring the bell on a New York Stock Exchange, and not list. And to the difficulty, we managed to claw our way back up into the very profitable cash, growing business, fast-growth business that we have today. And if not because of Vertex. I mean, we wouldn’t have been able to cross that difficulty. This was one of many challenges that we faced over the last 10 years.

Elise Tan: Thanks for sharing that. I mean, when I spoke to many of our founders, they mentioned how Vertex had helped them through the thick and thin. And actually, since you mentioned how you have rung the bell on the stock market but not listed, can you tell us about what actually happened? And how did you feel? And how did you actually kind of turn the business around, I think there’s something really interesting.

Joseph Phua: So there is a tech in Asia article of an interview that I did. So I’m not going to go into much detail, because it’s all out there in a market already. But essentially, there were some technicalities with the listing process that we missed. By the same time, I feel that it was a confluence of many bad events that led to the event of us not being listed.

I remember it was Friday, we rang the bell in the morning, and I spent the next three, four days holed up in a boardroom in New York, working through with the bankers, the lawyers, our investors, the Vertex team was there, trying to fix and resolve the issue. But if I remember correctly, it was Monday night, New York time, Tuesday Asia time when I made a call to pull out IPO, call off the IPO.

I mean, it wasn’t the easiest thing. Because you have a team that is counting on this happening, you have a team that trusted you to make this happen, you have a group of investors that trusted you to make this happen. And we felt just at a point in time, it wasn’t the best thing to do. If we had to push it through, we might have been able to do it. But it would have been a disastrous outcome.

It turned out to be the best decision ever because we had to hunker down in 2018 because the listing didn’t happen. We had to hunker down there was fundraising and the environment wasn’t as bad. And we managed to raise very quickly with the support of investors around the funding to basically get us across the tide of loss-making in 2019 we were breakeven and slightly profitable. And then when people started seeing the winter was coming, that was back in 2019, 2020, and so we turned profitable just before the winter. And when people were starting to scramble around for fundraising, we were profitable, and sustainable, because COVID came along and the businesses exploded and grew very strongly.

And even now after COVID, where businesses are suffering, we’re doing very well, because we have a very strong and profitable business and a very stellar foundation here. And so I would say, yes, I mean, looking back, that’s possibly the most painful experience I’ve had to go through as a founder, letting down so many people in one shot. But at the same time, I feel if that didn’t happen, I may let down a lot more people.

Elise Tan: Thank you for being authentic and sharing this experience. I’m sure it hasn’t been easy. And I’m so happy with the kind of turnaround and the results that 17Live is having now. So what would you say will be the Hard Truth, you will share with entrepreneurs who have gone through your experience?

Joseph Phua: I think everybody has their own positions, their own strengths, their own characteristics, their businesses are very different, and they have a different set of circumstances. So it’s actually very difficult to share anything that they would apply throughout but I would say like, it’s very, very important to pick the right partners, it is very, very important to pick the right investors, it’s very important to pick the right shareholders, we have been lucky because we have had Vertex supporting us.

Now we had the chance across the last 10 years to pick other investors that we didn’t pick. And we didn’t work with. And we’re thankful we didn’t work with them, because not all investors can do what Vertex has done. Secondly, I think, it’s also very important to understand that it’s a long game, and at times may be tough times may be difficult, just like now, capital is short. And a lot of businesses are being challenged right now.

But I mean, I always firmly believe, like I told my last interviewer, and I tell my portfolio companies I tell the entrepreneurs, that I mentor, that you only truly fail when you give up, even if you left with yourself, you have lost all the employees because you cannot afford to pay them. And your website is almost close to being cut off because you cannot pay your cloud bills.

I wouldn’t say you have failed yet. You might have failed to a certain extent, but you will not completely have failed as long as you don’t give up there is still a chance, and that’s why it actually really boils down to what you hope to achieve. If you want to build something because you believe in it, you enjoy what you’re doing, and you believe that what you’re building is actually creating value for the world, then it’s a very strong intended motive for you to carry on.

But if you’re building it, because hey, you think that this business is an easy business to build, you’re probably going to make a lot of money in that’s possibly not the right way. There are easier ways to make money than that. And building a business is tough. I mean, these two, I believe are universal truths. You have to find good partners. And at the same time, you never quit, you never fail.

Elise Tan: You mentioned SoundOn, I did a little bit of research before interviewing you. So it seems like there are 500 million downloads in 2021. So I think that sounds amazing.

Joseph Phua: So, SoundOn actually does a lot more today. SoundOn does about close to 300 million listens every month now. And it’s the fastest-growing hosting platform in the local market in Taiwan. And today, we host active podcast shows of about 11,000 every month, we also started to work into other genres of audio, within live stream audio, through social networks, built on the basis of audio.

So think about it as like radio on demand created by semi-professional user-generated content by 1000s of content creators every day. If you think about the evolution of media and the media types, and the media channels and whatnot, in the very early days, it’s basically street form entertainment. Street form entertainment where everybody gathers around the town square, and you watch and listen to entertainment.

And then you move into radio, and then you move into television video. That’s also the straight line form, fixed programming, and consumer absorption. And then you move into on-demand radio and an on-demand video. And then you move into live video. And then you move in live audio, so these different modes of content and information dissemination through media types, have only changed in the form of dissemination and have not really changed in the form of content creation or whatnot.

But this dissemination is actually quite key because the form of dissemination and technology around the form of dissemination actually allows for different types of monetization. Different types of business models around there were in single form dissemination or video or audio content generally resulting in very fixed business models, either through subscriptions or through advertising.

When you move on into two-way information flow from, for example, live content, or, for example, chat-based interaction, this actually allows for payroll type, monetization methods or for real time, monetization through gifting. For example, Twitch has a very active gifting model, Facebook also has stars, and YouTube also has claps. So this two-way form of communication has also enabled different types of monetization to evolve.

So SoundOn per se has both the one way, which is a podcast, which essentially is audio on demand through multiple verticals because you have many, many creators, so it’s like having like infinite channels, and you can pick the content that you like, and the monetization it is quite varied as well, you have donations, you have subscriptions, you have advertising.

So that allows for a lot but at the same time, if you move into audio live streaming, the same creators can also have the same type of monetization methods, but a lighter form of communication from the creators to the consumers. And then you have added forms of monetization to that. So SoundOn encompasses quite a wide spectrum of audio, or audio content creation and monetization.

Elise Tan: You mentioned how, when you have a vision, when you believe in what you’re doing that keeps you going even though things are tough. So what makes you so sure about your business?

Joseph Phua: I’m never sure about my business model. And that cannot happen because if you’re very sure about your business model, something is wrong you’re not trying new things. There are always ways to improve. And so I’m never 100% sure, but you can always be sure when you’re making progress. When you’re doing better than what you were doing yesterday.

And I think it is very important for you to continue to do better than you were doing yesterday. Another one of my partners often says, you’ll never find a golden bullet. It’s 1% a day is a lot over a year. And so I think one can never be sure about the business model you’re building but one can be sure that you’re making progress.

I enjoy doing every single thing I’m doing right now I’m running multiple companies, I’m investing, I’m building, I’m solving problems, I’m trying to help companies break even, I’m trying to help companies become more profitable, I’m working on listings, I’m working on divestments, I’m creating value. Like this is what I enjoy doing. Can I be sure that I’m doing the right thing?

I mean, what is right? Right and wrong defined by who? I know that I like what I’m doing. And so I enjoy waking up every morning. I enjoy going to work every morning. I enjoy speaking to people, building teams, and working with my team members. Of course, there are days that are off, there are moments that you get upset, there are things that don’t go your way.

This is just life, right? And so can I be sure that I’m doing the right thing? No, I can never be sure. But can I be sure that I’m enjoying what I’m doing? Yes, for sure. And if I’m enjoying what I’m doing, and I’m making money while I’m doing it, I must be doing something away.

Elise Tan: Thanks for sharing that. And this reminds me of a previous podcast we did. So Jessica, one of our Investment Directors, was sharing about how actually, our founders take years to get the product market fit. But some they are so fixated on getting it right in a short time, which actually creates a lot of pain.

So I like it that you mentioned you may not know this is the right thing you’re doing but at least you’re enjoying what you’re doing. And you’re seeing the value that you deliver to your customers. I think that is actually one learning point, perhaps for the audience. So I want to actually move back into the content part. Because I think content is really something that you have a lot of experience and expertise in. For Vertex this is also very close to heart.

We have also invested in also audio podcast platform in India Kuku FM, and then we have invested in TipTip in Indonesia, which is also a live streaming platform. So would love to hear, you know, what do you think will be the future?

Joseph Phua: I can’t really tell what’s going to be in the future because I’d be very rich. But I would say that it is this uncertainty in the evolution of content creation and media dissemination that requires companies to continuously evolve. Five six months ago, speaking to a bot to ask for a travel itinerary seemed quite a bit far. But today, it’s not so far anymore.

So how does the advent of ChatGPT actually affect all our business models? I think this is something that is an opportunity and a risk for all business models. So I would say this, that as tools become more and more available, as resources become more and more distributed, I would say that the mode of content creation and content dissemination will end up becoming more and more decentralised. And the decentralisation of this business necessarily requires the support of business models, or tools to help us grow.

So it’s very important for all types of media related businesses to be cognizant of the fast-changing landscape. I guess, actually, for all businesses it’s very important, but for me, I think the business model changes every single day. We have teams working on figuring out how to use ChatGPT to a similar mode to create the basis of content, can we actually do so?

I saw recent articles about influencer creation with videos and photos, that are life, like creating songs, singing, and creating good content, It’s quite scary, but at the same time, it’s quite exciting. One certainty is that it’s going to continue to evolve but trends going forward are that it would become less and less likely that we are going to move backward into a centralised content creation or distribution model, it’s very likely it’s going to be more and more decentralised.

And I think the winners in this space will be predicated on how we can follow this trend, and build for this trend, you don’t necessarily have to be involved in the actual content creation, because it’s just too difficult. But if you’re involved in the process of this content creation, as the supporting platform as a supporting tool as a supporting distribution function, I think generally you will win.

One of the things that we constantly tell our portfolios is, that it may not always be the best thing to be at the forefront of something, you could be a part of the forefront. Because then you would have time to react, you would have time to change this model. Because if you’re at the forefront you’re going to get the maximum return on everything, but you’re taking massive, massive risk.

But if you’re part of the chain, you could have the ups and downs. But it will never be one that is massively detrimental to the likelihood of your business. I mean, it’s difficult to say what it will look like tomorrow. But at least one hypothesis that I hold true that I constantly inculcate in the team is that decentralization will continue in terms of the way content is created and distributed.

Elise Tan: Yeah, I like what you mentioned about decentralisation of content. And I think in the past 10 years there are a lot of, I guess, people looking at how they can control their own content, their own data, and all that, how do you see the patterns differing across different parts of the world? Because for Southeast Asia and India, Vertex sees quite different patterns across India, Indonesia, and Singapore, the way we consume content and interact with the content creators, so tell us more.

Joseph Phua: So one thing I can say for sure is that that is correct. One thing I cannot say for sure is how it differs very much. What we see is that markets like Taiwan, Japan, Hong Kong, Singapore, Malaysia, behave roughly similarly. And so our business model works very well, without any type of modifications, the same business model applied in India, wouldn’t work.

So we have two applications, we have 17Live and we have Meme and Meme is specifically tailored for the Indian market but it is a much more populous market, but in terms of average revenue per user, it’s lower. So you have to adapt your business model for market different variables like pull, conversion rates, time spent, and the technology of their mobile phones as well Android or iOS and in the frames, the speed of loading of the video, the latencies and all these things need to be adapted.

So I would say it differs for many reasons hardware, software, culture, spending behaviour, cultural norms and whatnot. it all differs, but I cannot tell you specifically like hey, so the US market is what, India is what, Taiwan is what no but on this point, like for example, like in India, people use generally more Android than iOS and Android phones have a lower resolution and have poorer latency.

And so in terms of adapting your product, you have to do a lot of work on that in terms of creating live content in terms of creating good content. But it also means when you have very, very good content, it may not be appreciated to the maximum because the quality of content that comes out may not be that good, which means the amount of money you can spend on creating good content may be less. And so actually all just boils down.

So there are many, many, many variables that affect the trends of content creation, and I would say, only the locals know. So that’s one thing that we often do. So when we expand into different markets, it’s the local team that runs the show. At HQ, we provide the technology, we listen to the product managers on the ground, we will listen to the marketers and ground we will listen to the content managers on the ground.

And so one thing is for sure, true, we have to have local teams guide their business. But in terms of how content strategies differ across markets, that’s a very wide topic that could span many different areas of the business.

Elise Tan: Got it. I think this is super useful for the audience. I think we have come to the end of our conversation so I really appreciate the time, as well as the Hard Truths and knowledge you have shared on this discussion. So any last words for the audience?

Joseph Phua: I would say that if you’re running a business now, it’s not going to be the easiest time. But I mean, the company that  survive will be very, very strong after this because the weaker companies would have died off, the times will become better. I’m very thankful to Vertex. So I’m very thankful for everything that Vertex has done for myself, for my company, for my team over the last 10 years, Kee Lock and Joo Hock and the team.

We very much appreciate everything you’ve done. So happy to speak to anybody who is looking to build a business and considering if Vertex is a good partner to be with because I can tell it is something, I can talk to you about all the experiences we’ve had with Vertex.

Elise Tan: Thank you so much Joseph.

Our Guest: Joseph Phua

Joseph Phua is Chairman at Turn Capital and the SoundOn Group as well as Co-Founder and Chairman at 17LIVE Inc. 17LIVE is a portfolio company of Vertex Ventures Southeast Asia & India. He also recently started the fast-growing Next Apple News media platform.

Prior to this, he founded Paktor, a pioneering dating app that has expanded beyond Singapore to the rest of Southeast Asia and North Asia, to form the largest social dating group in the region.