Three Companies Take 94% Of A $150 Billion Vertical Market

TikTok, Meta, YouTube positive different Social Media Applications (Photo by Anna Barclay/Getty Images)

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Owl & Co released its first "Vertical Economy Report" this month, putting vertical video gross extracurricular China astatine $150 cardinal successful 2026, up 42% successful a year.

That is the number astir apt to travel. It whitethorn beryllium the slightest absorbing one.

The much useful number is 94%. On Owl & Co’s estimates, Meta, ByteDance and YouTube seizure that stock of the marketplace betwixt them. Advertising contributes $131 cardinal of the total, against $10 cardinal from user payments and $9 cardinal from shopping return rates.

The study puts a value connected a favoritism I person been drafting each year. The surface predisposition is the communal feature. The economics are not.

ForbesWhy Vertical Drama’s Next Fight Is Over DistributionBy Maureen Kerr

The Category Everyone Covers Is 3% Of The Market

Dedicated microdrama apps relationship for astir $4 billion, aliases little than 3% of the total, contempt astir 2,000 apps competing globally aliases regionally.

The costs broadside helps explicate the mismatch.

Owl & Co cites a Media Partners Asia estimate that ReelShort, the starring app by revenue, spends astir 73% of gross connected personification acquisition and app-store fees, and notes the ratio is apt higher astatine smaller apps. That is simply a acold larger stock than these apps walk making the shows.

Free ad-supported apps went from 15% of microdrama clip spent to 83% successful six quarters.

Paid apps run much for illustration mobile games than television. They bargain users, person them done cliffhangers and past bargain the adjacent audience. Meta, ByteDance and YouTube do not commencement from zero each time.

More Shows Did Not Produce More Attention

The study besides contains an uncomfortable consequence for the AI-production thesis.

Across a group of starring paid apps, caller bid releases roseate 25% successful the 2nd 4th of 2026 while aggregate clip spent fell 4%. Releases accrued from 1,659 successful the first 4th of 2025 to 5,145.

Owl & Co attributes overmuch of that acceleration to AI-generated titles. But connected ReelShort, caller live-action titles released successful June and July averaged 4.17 cardinal views, versus 2.74 cardinal for its AI titles.

Cheaper accumulation tin summation supply. It does not manufacture demand.

Owning The Audience Changes The Business

Streamers are entering the format connected different terms. Peacock has commissioned original Bravo microdramas for its mobile app, and ViX produced 145 original vertical titles successful its first year. The study counts JioHotstar among the fastest movers, and gives engagement and churn reduction, alternatively than per-episode conversion, arsenic the streamers’ motive.

Character.ai is testing thing other again: vertical bid built astir characters its users tin support talking to aft an section ends. Jamie Oliver’s Life360-funded comedy runs done channels his business already controls, pinch the marque paying for entree to an assemblage that exists whether aliases not the show does.

Those are different businesses. They stock 1 advantage the paid-app exemplary lacks. The narration pinch the assemblage is already location earlier the adjacent show is marketed.

Owl & Co’s ain figures show the aforesaid advantage astatine the apical of the market. The study puts Meta astatine $253 cardinal successful 2026 gross pinch 27% of it attributed to vertical. By my calculation that implies astir $68 cardinal from vertical alone, much than the $52 cardinal the study estimates for Netflix’s full revenue.

Production costs was ne'er the binding constraint successful this category. Acquisition was.

Generative AI tin make different section cheaper and different 1000 titles possible. But erstwhile proviso expands that fast, attraction becomes harder to buy, not easier.

The scarce plus is still the same: a logic to watch this story, and location to put it that does not complaint you for the aforesaid assemblage twice.