"If delegation needs to keep increasing to keep the app growing that means that the business model is flawed"

Of course, it doesn't actually need to have a business model, if the mere existence of the app is the end, rather than the means.

For example, the UK Government subsidises the National Theatre, in London. That Theatre puts on risky shows that commercial producers are frightened of, and won't finance. But once in a while, the Theatre produces huge hits, like "War Horse," "The Man with Two Guvnors," "The Curious Incident of the Dog in the Night Time," which then transfer to the commercial West End and Broadway, and send back immense revenues to the National Theatre. End result: the subsidised theatre ends up paying for itself.

By the same token, if DTube, DLive, etc, etc stimulate new users in to the Steem ecosystem, such that Steem itself grows more than the value of the delegations (ie Steem is purchased by new users in order to participate in DTube and DLive), then effectively the cost of delegation has been returned with interest to the Steem delegators, by the flourishing of the Steem price.

"Many are likely to forgo the beneficiary fee altogether and sell advertising instead."

Is this how DLive make money? Do DLive make any revenue at all, or are they completely subsidised? And how does DTube continue to exist, given that DLive is so aggressively offering much more favorable terms to the user?

I actually find this post of yours particularly fascinating, and hope others can shed light on how all this works.