LeEco – Join the dots

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LeEco looks more like Samsung than Apple. 

• LeEco is rapidly assembling the pieces that it needs to create a global digital ecosystem, but it will only become a thriving ecosystem when all the pieces work together seamlessly.
• LeEco is a new player in the ecosystem space which finds it roots in its video streaming service for which it has around 42m active users.
• This is very small compared to Alibaba’s online video service Youku Tudou, but LeEco is aggressively expanding into the other areas of the digital ecosystem in order to increase its appeal to users.
• Last week it continued this expansion by agreeing to pay $2bn to acquire Vizio, adding smart TVs, speakers and home entertainment to its already wide-spread portfolio of smartphones, electric cars (Faraday Future), sports streaming, virtual reality and real estate.
• It also recently spent $250m in June to purchase 49 acres of Santa Clara real estate from Yahoo.
• LeEco used to be called LeTv but renamed itself LeEco (Le Ecosystem) as a statement of intent of how it aims to grow to become a global player in consumer electronics and services.
• However, both at home and overseas it faces fearsome competition but if it is nimble, there is space for it to carve out a niche for itself.
• LeEco is aggressively expanding in North America but it is going to have to compete on two fronts to make it globally.
• This is because RFM research has found that the Chinese ecosystems are very different and incompatible with the ecosystems being built for developed markets.
• This is where the issues begin as ecosystems are fundamentally based upon Digital Life services and when LeEco is assessed on this, it fares badly.
• In terms of Digital Life services, LeEco has media consumption but it is not a leader in its home market and it has nothing overseas.
• This leaves LeEco looking more like Samsung than it does Apple and in that regard volume is going to be critical unless it can differentiate its products through software and services.
• This is why LeEco must join the dots between its different product offerings and make them work seamlessly together.
• If it can achieve that then owners of a Vizio TV will find value in also owning a LeEco smartphone or even a Faraday Future car.
• That is how LeEco may begin to earn user preference which in consumer electronics is the secret to making good margins.
• I think it will be difficult for LeEco to differentiate in Digital Life services unless there is a major breakdown at Google or the BATmen leaving cross-device as its best opportunity for success.
• This means that it will have to stitch all of these experiences together in an easy and fun to use way such that users like and hence, actively choose.
• This is all about software and cross device synchronisation is very difficult and Apple, Google and many others are still struggling to get it right.
• This creates an opportunity, but also a challenge, leaving me thinking that LeEco needs to sit back and take stock of its hastily assembled portfolio and decide what it is going to do with it before continuing its rush into the ecosystem.
• I see no immediate threat to the BATmen, none of whom are yet really competing in consumer devices but I see the time coming when hardware is an important part of competing in the China.
• Consequently, there may be scope for an alliance between LeEco and one of the BATmen in the near future but overseas LeEco looks like it will be going it alone.
• I continue to prefer Baidu, Microsoft and Samsung for the immediate term with Tencent and Facebook on my watch list for the right signals to enter.