A recent report from Owl & Co projects that the global vertical video market, excluding China, will reach $150 billion in revenue by 2026, marking a 42% year-over-year increase. Of that total, advertising accounts for $131 billion, while consumer payments and shopping-related transactions contribute $10 billion and $9 billion, respectively. The market is overwhelmingly dominated by Meta, ByteDance, and YouTube, which together control 94% of revenues. Notably, dedicated microdrama apps make up less than 3% of the market despite nearly 2,000 competing apps worldwide.

The report highlights distribution as the critical challenge in this space, not content production costs. Paid microdrama apps face steep user acquisition expenses, often dedicating over 70% of revenue to gaining new users and paying app store fees. This model, resembling mobile gaming more than traditional TV, forces these apps to continually buy audiences for each new title. In contrast, platforms like Meta, ByteDance, and YouTube leverage their existing massive user bases, enabling sustained audience engagement without starting from zero with each content release.

Although AI-generated content has increased output, it has not translated to higher viewer engagement. The number of new series expanded by 25% in early 2026, driven largely by AI productions, yet total viewing time decreased by 4%. Live-action series still outperform AI-created content, averaging more views. This underlines that lowering production costs alone doesn't address the more complex issue of capturing and retaining viewer attention.

Streaming services are joining vertical video with different objectives, focusing on audience engagement and reducing churn rather than direct monetization. Peacock, ViX, and JioHotstar have invested in original microdramas to enhance their mobile offerings, while new concepts like Character.ai integrate interactive elements to keep users connected beyond episodes. Overall, the report confirms that owning an audience before marketing content is a superior strategy in this booming $150 billion vertical video economy.