In 2015 it seems foolish to have a digital or mobile strategy, you just need a business strategyÂ for the modern world. Whether itâs Uber reinventing the transportation business, Instagram changing the nature of photography or Netflix disrupting video content, what binds these companies is they brought digital thinking to the very heart of their companies, not just bolted it onto the side.
From Tesla to Instacart, HotelÂ TonightÂ to Twitter, BuzzFeed to WhatsApp, every high-growth, high-profit, high-value unicorn was constructed with one thing in mind: the modern world.
These are companies founded in a world of new behaviors, inspired by new technology and liberated by new market dynamics. They have ignored all existing companies in their marketplace, theyâve been propelled into rapid growth unencumbered by the same elements, assets, knowledge, learned behavior that once fueled the incumbents.
We shapeÂ our tools and then our toolsÂ shape us:Â aÂ classic Marshall McLuhan quote that most perfectly explains the current business reality. These companies realize that the modern age is aÂ time of scarce attention and abundant connectivity, where smartphones are our primary access and point to everything; where money and everything is digital;Â where the interface layer is where the profit is; where physical assets and employees are liabilities; and where providing a slick, best in class human experience will create your companies most profound business.
What these companies have all learned is that new technology isÂ everything, and itâs essential for every company and every person to be cognizant of the possibilities it provides. Much of the world has collectively failed to learn the lessons from the past and see that when a technology really arrives, it blends into the background.
When electricity became widely available after the industrial revolution, it didnât change things overnight; it took many decades for it to make a difference. To start with we used it at the edges and embellished what we had. Factories used the very same belts to power the same equipment in the same places and, powered by one electric motor, the benefits were marginal.
Only in retrospect was the error of their thinking obvious. Some 20 years later it was clear that electricity was core, it was something that changed the very fabric of what was possible and how to do it. The real power of electricity allowed factories to be arranged in totally different ways, to reduce staffing, work 24/7, make new things and, above all else, relocate from locations near fuel to areas near ports and population for workers.
Of course in 2015 we donât have electrical advertising agencies or have electricity strategists or heads of electricity, Itâs just a given that everyone gets it. So why is it we allow ourselves to talk about digital the same way?
Technology is not oil to lubricate; itâs oxygen to grow ideas and change business. Modern businesses need to disrupt themselves at the very core, empowered by what new behavior and new technology make possible. Banks need to reevaluate their roles in the modern world. Gyms need to use technology to become health partners. Car makers need to become transportation solution companies. Why didnât a telco invent WhatsApp? Or GM start Uber or Kodak create Instagram? Or Blockbuster, Netflix?
Digital transformation is not about a digital department, a mobile strategist wonât save yourcompany. It is not the role of any additional unit to take your company from irrelevance to leadership. Itâs a philosophy that all must adopt. If youâre a physical retailer, your role is not to have a better app than your mall neighbor, itâs to reconsider the entire purchase process up to and including delivery and return and the entire relationship with customers over their lifetime.
If youâre a hotel company, use technology to bring to life everything that hospitality and personalization can be in the modern age. From freeing staff stuck behind desks to iPad-carrying helpers, to reconsidering the role of hotels in a future world of freelance workers and telecommuting.
Hertz is a good example of technology added at the edges. I can book a car using a decent app, and as a Gold member my car is sometimes featured on a digital display. But thatâs it.
If I want to extend my booking or change locations itâs a painful series of phone calls. If I want to upgrade, its frantic key-pressing at the point of collection for seemingly hours. Using technology in a deeper fashion would allow iBeacons to send me live upgrade offers I could accept with one swipe. More advanced technology may incentivize one-way rentals that suit the business, allow per-hour rentals when it maximizes their fleet. These are not gimmicky edge use-cases; these are ways to increase fleet utilization and boost profits significantly.
You donât need a head of digital or a digital department. In fact you should banish the worddigital as an entirely redundant word. But your company needs to understand these changing times and prepare to reimagine yourself for the near future, based on what new possibilities and threats new technology provide.
Quality news content providers are between a rock and a hard place.
The second worst decision they could ever make is to give their content for free forÂ FacebookÂ to host, but probably the very worst one is not to give it away at all.
It all feels a bit like the music industry in 2006 when labels were doing deals with streaming services.Â The services offerÂ aÂ chance to reach more people âÂ to put music in the hands of people who perhaps would never pay for an albums â but at the same time risks devaluing the content, almost intrinsically because accessÂ becomes easier.
Newspapers likeÂ 2132773496are like many legacy companies facing the deeply unfair reality that they tooled up and invested for another age.
LikeÂ taxiÂ medallion owners, stores likeÂ (432) 758-5951Â orÂ Blockbuster, or manufacturers like Kodak;Â news organizations haveÂ complex, expensive assets to make and distribute things that in a digital age are abundant, undervalued, and intangible.
The TimesÂ now spends vast sums of money on the salaries of journalists, writing world class content that gets printed overnight and spread around the country in complex logistical operations.
News organizations have complex, expensive assets to make and distribute things that in a digital age are abundant, undervalued, and intangible.
Facebook on the other hand makes code, hosts a few petabytes of data on itâs server, and then gets to monetize (with the best personal data ever known) right at the spot where all the money is made âÂ the customer interface.
True,Â many of these companies made stupid mistakes,Â UberÂ is killing taxis because the entire industry rested on itâs laurels whileÂ under the protection ofÂ a wall of regulation;Â KodakÂ and Blockbuster were arrogant and dismissed the idea that anyone could overtake them;Â (418) 696-8510Â made smartphones beforeÂ (416) 414-2098, but failed to see that it was about software and experiences, not hardware.
Other industries like travel agents and the music industry just became a victim of softwareÂ eating the world.
In this environment the question for the news business becomes not if they should change, but how do they change.
Hosting content on Facebook doesnât seem like the hardest move for media owners who currently have an advertising only funding model. From the native only Buzzfeed, to the Guardian or BBC, this seems like a way to make more money, get more eyeballs and most likely learn more about how content behaves.
For others itâs not so simple.
Quality news from the New York times orÂ Bild, being available for free via Facebook, spreads content further, but also undermines itâs entire subscription model, which happens to represent the major growth in their business and potentially their best hope for the future.
So does the New York times see this as free content marketing to gain subscribers, or as incremental advertising revenue?Â Only time will, and maybe they donât even know?
Whether it feels like a hard or easy choice, this is going toÂ mean the continuationÂ of tough times in journalism.
The Death of News Brands.
We were used to consumer news that was produced and curated by the figures at the top of the news masthead. Weâd buy theÂ TimesÂ and navigate that paper, and our relationship was with the brand.
Weâd read widely across subjects with the commonality being the news provider.
In the modern age the front page is now Twitter or Facebook, we read at an article level, the subject matter, the point of view, the writer become the brands, the newscasts fade in importance. Is this article reflecting better on TechCrunch for hosting or Tom Goodwin for writing? How does that change when you see this via social media?
WeâveÂ seenÂ the same evolution in music and television.Â Where we once bought albums, or watched NBC on aÂ (919) 753-0466, now we tend to love specific songs and enjoyÂ (870) 284-1457Â without a thought to the channel. When content becomes unbundled from provider, the provider loses control.
This loss of control could ultimately prove deadly, Facebook may appear to be playing nicely, to host content for free and pass through 100% of the ad revenue, but is this balance of power going to stay that way?
Facebook doesnât have the best track record of keeping things in brandsâ favors, what was free access and too good to last, became a pay to play model. When Facebook becomes our portal to the web for so much of the world, news brands become the more desperate parties in the mix.
Where does that lead to?
Itâs an interesting time in news content, how news gets produced, monetized, distributed is set to change.
Will Native become the preferred route? Will micro payments or bundling finally help brands extract money for valuable content? Will other revenue streams from eCommerce or commercial partnerships become as big as some think?
One thing for sure, this is an experiment, but while deals can be cancelled, consumer behavior doesnât unlearn, and a Faustian pact canât be undone.
Appleâs IOS 9 could see Apple attempt to redesign and upgrade something bigger than Music or News. Apple could, in fact,Â give us a cleaner, faster, better designed internet.
The internet has always felt organic, likeÂ a living, breathing organism, Â with information as itâs lifeblood; yet it grows incessantly towards the sunlight of the advertising dollar, and our attention is its fuel.
Every app seemingly inevitably shifts and pivots towards being another place to host video ads, every site existence seems based on capturing or stealing a glance or click and sending you on to another destination.
Despite its reputation for innovation, Apple rarely brings something totally new into our lives. Itâs a vehicle for refinement, simplicity, for taking the benefits of the lab into the mainstream. From Mp3 players to Mobile payments â or even the smartphone â what Apple does is take geeky peripheral behavior to the mainstream.
The business model of the modern internet isnât working. Advertising as a funding model currently works for nobody, least of all readers who find their attention being stolen and misdirected for a pittance.
Brands that need to reach audiences where they spend time canât cut through the clutter. Journalists produce ever cheaper, ever more sharable content to chase clicks, publishers who see the near infinite web pages create near infinite inventory, see rates that are mathematically obliged to tend to zero. Weâve a series of vicious circles and misaligned incentives working to ensure nobody is happy â itâs the tragedy of the commons that affects us all.
The growing coffers of Ad Tech were supposed to help. The promise of more personal, more useful, better targeted ads should have raised prices and raised quality; reduced the cognitive burden of readers and made advertisers and publishers and then perhaps users happy.
ItÂ hasnât worked. Instead, ad tech miserably shows us things weâve bought or ignored, or never wanted. Privacy issues have trumped relevancy debates. Ad creative remains hopelessâ¦ and adware has clogged the pipes.
Our current internet reflects still reflects an industry that rewards attention and clicks above usability and meaningful connections, and the lazy assumption that weâd never pay with anything other than our attention.
A Premium Internet
One of the things Andy Warhol loved about America is that it allowed the richest and the poorest to buy the same things. HeÂ loved that âeven the President of the USA couldnât get a better Coke than the bum on the streetâ.
Modern marketing fights that parity, using science, art and psychology to create more products to extract as much money for any stated need, at a range of prices.
Behavioral economics, branding, first-degree price differentiation and premium customization have allowed marketers to extract the most value from any given situation. As a result,Â around the world, there are very few things in life that the rich and the restÂ experience in the exact same way (hereâs looking at you, gold apple watch).
Yet the currently internet is for all intents and purposes as crap for the rich as it is for the poor, a billionaire may be using a diamond-encrusted iPhone 6+ but they still see the awful Forbes welcome screenâ¦
Yet the currently internet is for all intents and purposes as crap for the rich as it is for the poor, a billionaire may be using a diamond-encrusted iPhone 6+ but they still see the awful Forbes welcome screen, the muffin top ads on Facebook, the dismal suggested content from Outbrain and endless click bait from companies who abuse our wandering gaze and punish curiosity
The assumption is that this is a battle between hardware funded Apple and advertising funded Google, or that this pits media owners and publishers and brands against the might of Cupertino; but I genuinely think itâs more complicated than this. What if Ad Blocking is the route to a better internet for all?
Perhaps now brands and publishers can focus on far fewer, far richer, far more pleasant, less interruptive, premium ads, ads that actually work. People donât hate advertising, they hate bad ads, they had interruptions, they hate irrelevancy.
Give a W Magazine to a fashionista with no ads, and watch them weep. When most ads are blocked, given the vast amount of time that we spend online, the critically limited inventory will be worth more money, given more design attention and could end up with ads that are worthy of attention.
Native advertising is another key area of growth. The lines between advertorial and editorial have long been blurred, but ad blocking will unleash money into new ways to make content that supports brands interests while garnering views and shares. Perhaps ad funding can produce great new apps, video series, if Soap operaâs were named after household cleaners and Michellin Guides used to promote driving, the new opportunities are immense.
Perhaps we can pay with data, letâs imagine a world where in addition to ad blocking, customers allowed a little more tracking. Perhaps you allowed some anonymous scraping of your behavior, your location, your grocery basket.Â Perhaps in that world you are shown 1/100th the amount of ads, but for the right product, at the right time, in the right way. A beautiful image of flowers from your favorite flower store a day before mothers day? A stunning image of Audi S4Â that youâre starting to think about, a notification on your phone to book an Uber as youâre running late for a meeting.
These advertising moments are worth orders of magnitude to advertisers more than the current mess. They serve people with something of value infrequently. Theyâd allow a better view of the internet for all.
The current internet, the site hosting costs, website design, the content creation, from the coders of Facebook to the writers at Buzzfeed is â but for a rounding error â entirely funded by advertising,Â rather than paywalls or tip jars.Â In the USA adding up search, social media and display advertising online, we see that around $230 per person is spent on reaching people online, or approximately $25 per-internet-accessing-adult per-month or 3 cents per-hour
Ad Blocking, especially if selective could be the best thing to happen to the internet, a chance for our eyeballs to be given the value they deserve, a chance for journalism to reward quality not virality and cheapness of production.
I want to see quality journalism valued and paid for, decent messages from brands I care about at the right time and with high production values and respect. This could be the chance for it to happen and Appleâs biggest achievement to date.
Welcome to the future of the internet, where the web has disappeared.
Technologies only become truly integrated into society when they move from requiring forethought to becoming an afterthought. Itâs the progression of all innovations and itâs now happening to how weÂ experience of the internet.
What was once a deep system to search has slowly evolved into a system that pulls personalized, ambient information to a single layer we skim.
Weâve moved from surfing and searching to glancing. This will be the experience of the next web, where information is aggregated propelled by APIâs and deep linking â and itâs going to
The Three Eras Of The Web
Broadly speaking weâve had three eras of the web defined by three distinct behaviors.
The first era of the consumer internet was the era of portals â the internet as a web based magazine. We simply took the information that had once been printed on paper and placed it on screen, saving it as documents and arranging information in directories much like filing cabinets.
Editors and journalists were in control, little in information architecture changed from the old world, except distribution. Content became directory-led, portals became the front page of the internet. Weâd taken pre-digital world structures and replicated them.
The second era was one of search, the search bar as the new gateway to the internet. For the first time we were now in control, Microsoft asked âWhere do we want to go today?â and PageRank from Google became our guide.
Information wasnât pulled through to us, we had to go find it, but everyone could contribute and the popularity and depth of what was available exploded. This was the era of the deep web, content hidden in messy structures, but pulled up from the depths based on complex search algorithms. The Internet in this era became surfing, where we swam amid waves of information, swooping down with the right wave to ride.
Today weâre living in the third era, a hybrid, which includes a curious mixture of Web 2.0âs promise of scraped content pulled from various deep sources (with search as the homepage) and augmented by social and algorithmically driven curation via Facebook, Twitter and Google. Furthermore, on mobile weâve apps, which are best described as micro-portals extracting personalized information and presenting it to us in a closed ecosystem.
The Fourth Era Will Be The âThinternetâ
Technology is driving behavior change; mobile phones have become the default screen for web access and apps have shifted to become our primary consumption mode.
The next era of the web stems from this environment. It will be a time where ubiquitous connectivity, and universal digitization, presentation, and aggregation take place in parallel and cross-pollinate to produce an entirely new web experience.
Universal Connectivity And A Disappearing Web
Ask 30-year-olds how much time they spend online and itâs a big number, ask 18-year-olds and itâs greater still, but ask 12-year-olds and they canât tell you, because, for them, there is no concept of online.
From Wifi in transatlantic aircraft, to 5G and Wi-Max, to 570-664-5044, to ever smaller, cheaper, more abundant connected sensors, weâre entering a world where it seems literally everything is connected to everything â with rapid, always-on, cheap, abundance. The internet moves into the background, becoming a connective tissue to everything.
Everything Is Digital And On Display
For years, media was distributed on discrete, physical devices and each was aligned to an industry vertical and assigned a media channel. You watched TV on a TV, from a TV company paid for in part by TV ads, consumed a full range of news in a Newspaper, listened to the radio on a radio from a radio transmitter with radio ads.
Now everything has risen and is converging on the Internet. Channels become meaningless. The notion of TV becomes video. All screens are now black mirrors, but theyâre proliferating, and becoming smarter. Car-based screens, wearables, tablets, phablets, photo frames: theyâre all hyper connected offering interactive material pulled from the internet. Nouns like âTelevisionâ become as limiting and inappropriate as the smartphone is to the telephone.
All About AggregationÂ
As screens proliferate, verticalization (the hallmark of content before the Internet era), becomes a thing of the past. The Thinternet offers horizontal splicing. Content creators now see material navigated only at the aggregation layer. From 9177037082 to Facebook Instant, to Google Now, content is pulled to you. TV channels unbundle before deep-linked search selects material like Siri on the Apple TV. Welcome to a time where owning the thin customer interface becomes paramount, and content itself threatens to become a dumb pipe.
Internet As Service
Glass screens become layers onto which personalized information is exhumed and projected. Browsers for devices become secondary prompt dower, apps become the primary navigation. Information becomes presented in thinner ways, and the notification layer becomes a key place for simple interactions. For deeper interactions the internet is pulled through and personalized through a web of apps.
Weâve abandoned time-honored valuation techniques from the past because they didnât work for new rapid-growth, tech-driven businesses. But what if the new rule book was equally inept?
As a lover of technology, creativity and great business ideas, I should feel more optimistic about the near-term future than I do.
We haveÂ many companies, like Uber, Airbnb, TransferWise, Seamless, Kayak, Facebook and perhaps even Twitter, that are widely loved or used, have created clear consumer value and show all the signs of a prosperous and stable future. They may be burning cash, they may not be churning out profit from their user base, but itâs clear to envisage a world in which they hold defendable, profitable business for the medium term.
Yet we rarely see how these companies could be exceptions, rarities that fuel the frenzy more than statistically significant proof points. Are these the startup versions of large winners checks for the lottery, a photo shoot to lure in others? We donât see a Vegas trip as an investment exercise because we heard tales of people winning big.
I worry that the current valuations of companies reflects dubious enthusiasm in anything coined a âstartup.â Back in the 1980s, bootstrapping was trendy â it wasÂ how companies that couldnât secure a bank loan started. Before it was trendy, an early stage business was a sign of precariousness and vulnerability, not untapped potential. Why is something new like Vice or Shake Shack or GoPro more densely valuable than companies with a pedigree and reputation like The New York Times, McDonaldâs or Sony.
I worry about the ignorance of the value created by startups. Iâm concerned about the insane stimulus pumped into the top tiers of the market, and the fact that the marketâs low interest rates and dubious outlooks for growth in equities and property mean that everyone is looking for a way for growth âÂ and almost forcing it where it doesnât belong.
For all the talk of the bubble, something weâve loathed to access is we have simply NO idea how to value companies in the modern era.
Old-world valuations were based on historical benchmarks. Old-world economics were based on long-term, slow to move, rational, solid, widely understood metrics. It was a world of measuring assets, sales, profits,Â unique relationships, long-term contracts, employee numbers, property, IP etc. It was based on the empirical knowledge of ratios honed over centuries of work, benchmarked to categories and to markets. There was a degree of science and precision.
Ripping Up The Rulebook
The digital age has disproven this rule book for a range of companies; weâve seen King.com or Groupon or Facebook scale faster than anyone ever thought possible. Itâs clear the playbook for investing misunderstood the speed at which Facebook could become a global media owner, or how Google could create a whole new form of advertising revenue, or how social gaming for King could unleash profitability like a wave.
But the same companies that ripped up the rule book seem to have created a new rulebook by their extraordinary (and that means atypical) success. Iâm not sure how disproving a rule with an exception should at the same time create new rules.
Weâre now in a world where âevery company is a software company,â or âif youâre not a startup youâre a turnaround,â which sounds so good, and feels so 2015, that we tend to ignore that itâs not in any way accurate. Is your trusty local golf club a startup or a turnaround? Is Amazon still a startup? Is Crate and Barrel really a software company? What about Coca-Cola or GlaxoSmithKline?
Like 1999, we have this pervasive feeling that this time everythingÂ is different and the lessonsweâve learned from Google and the website du jour should be applied to everything new.
A New Valuation System
Companiesâ assets are ignored; even IP, staff numbers, customer bases and profit are all ignored âÂ these are crusty, old-fashioned benchmarks of the past.
Instead, user growth trumps all. The ultimate metric for Silicon Valley is how many people use the service, not customers (people who pay). Weâre giant cathedrals to the new valuation metrics, most of which can be found looking at a list of Unicorns.
In 2015, we have Snapchat âworthâ $16 billion, with revenue of, at the most, $50 million, while The New York Times is âworthâ $2.2 billion, with revenue of $1.57 billion.
We have Business Insider selling for $442 million, BuzzFeed valued at $1.5 billion, Vox at $1 billion, Vice at $2.5-4 billion â all based on their user growth, not on any forms of decent profitability.
It seems to me this is how we now look at things, and being justifiable isnât the same as correct.
If youâre Pinterest or Spotify or WhatsApp or Slack, the user base, the founderâs experience, the brand, they all make sense.
But should GoPro really be measured like Facebook and not like Sony? After all, it does sell Cameras like Sony. Should Shake Shack be valued likeÂ high-growth McDonaldâs or likeÂ Snapchat? Should Blue Bottle Coffee be valuedÂ the same way as Slack? Or should it, I donât know, look to Starbucks? Do we really expect profit margins to follow the high-cost world of renting coffee shops? Or the high-profit world of software?
And have we learned anything from the past? For every Slack or Box or Facebook there isÂ a failure weâve forgotten about because weâre took busy looking forward.
From Groupon to Gilt, Fab.com to King, Ao.com to Zulily, Tumblr to Ello, Yo to Nextdoor, the world isnât short of the next big things that never were, with no assets to liquidate, no brands to sell, to IP to license.
My point is not that weâre wrong, itâs not that valuations are incorrect or that weâre in the B of the Bubble bursting. Itâs that the future now, more than any other time, is simply impossible to predict âÂ we have no rule book.
The only thing that grows faster than technology are our expectations of it. The gap between what we know to be possible and what we experience is only widening. Our children are growing up in a world where all screens are interactive and every service is cloud-connected, where any song or movie ever made it at their fingertips, yet ourÂ disappointment only grows.
Why is changing my flight taking 100 key presses at the airport? Why is this film not available for streaming? Why am I using a printed ticket? How can this website be down? Surely this town should have 4G by now?
Privacy In The World Of Intimate Data
A whole new generation of people will have grown up with cameras in their faces, images and intimate thoughts shared across the world, and comments made freely without concern about their being in public. Will this group of people have any notion of privacy as a concept?
Weâre continually redrawing the lines on privacy. The age of Big Data is more about more intimate data than scale, our heartbeats, locations, intentions are more interesting to everyone than millions of less personal data points. Thanks to our phones, the most personal devices ever, companies can know our bank details, locations, fingerprints, addresses, as we trade convenience and personalization to save time and think less, are we making a Faustian bargain? Is it reversible?
The near term future will see complex discussions about intractable privacy issues. Early2065455887 show complex, contradictory, and quickly evolvingÂ feelings toward exchanges between privacy and convenience Â that vary across generations and nations, but whatâs clear is control, transparency and value exchange are key factors in what is acceptable.
The collision of our intimate data with machine learning and context based thinking means weâre going to see a new way that we interact with devices and a new way that they interact with us. While it sounds like a Samsung ad, weâre going to need to think of technology as a life partner, providing us with little bits of extra data, little suggested nudges, little contextual ambient information to help us.
Apps like Dark Sky live in the background to only appear when itâs about to rain near us; Apple maps integrates with our calendars to tell us when to set off for meetings based on life traffic info; and Facebook now allows us toÂ book Ubers directly in app.
We all know our calendar tells us where to go and we canât remember any phone number, but what happens when this sort of gentle cognitive outsourcing starts to connect and become smarter?
Weâll see predictive computing combine with more intuitive interfaces and speech recognition, devices like the Amazon echo and Siri to make the internet surround us.
We will see touch identificationÂ and Tinder-like user interfacesÂ to make buying things more easy and most interactions increasingly frictionless. Welcome to a world where things just happen (at least until they digitally disappoint).
While virtually all graphs of future growth are based on linear projections, the future doesnât happen that way. Adjacent technologies combine, society either accelerates trends or breaks them while legislation, financing and business models have extraordinary effects.
Our predictions about the future are not getting better. We overestimate the effects of hardwareÂ (given everyoneâs predictionsÂ we should be on the moon, with levitating cars by now) and understate the effects of software, where our Teslas learn to drive, or where we are connected to every form or anything ever made.
The reality is that we live on the edges of profound new technologies that could each individually changes everything or come together and change nothing.
3D printing from companies like (209) 492-6802, Stratasys or Colymbus or could revolutionize the entire industrial age, logistics and the foundation of retail , or remain a novel way to print trinkets.
Self driving cars could change our entire societal and physical landscape or become too complex, philosophically and practically to ever work.
VR could unbundle our being from the everyday and change the way we see entertainment, work, vacations and life, or we could all feel like glass-holes.
From DJIâsÂ Drones to (939) 456-7223 being used to change transactions online, and personalized medicine to artificial intelligence, we live on the threshold of the most profound changes that could also become pointless distractions.
Horizontalization And Platforms
A whole new world of businesses are built on the idea of owning the customer interface. Weâve Airbnb, Seamless, Facebook, Alibaba, Uber and a whole generation of companies built on putting themselves as a thin layer between vast supply systems and customers. 2016 should see incredible battles between companies aiming to be topmost. Large CPG brands could aim to supply direct to the customer using their brand as that interface.
Companies like Apple with Apple pay can own transaction data, Mobile operators could perform both ad blocking and ad injection, Smart TV makers could sell their own video ads. Facebook is showing 4 billion views per day, why isnât this both the next large retailer and TV company, when you have over a billion eyeballs, you can do anything.
Expect 2016 to be the start of companies leapfrogging over each other to own customers.
Products As Integrated Experiences
Other than jeans, the more you use things and the older they get, the worse they became. Until now.
In the modern age software becomes more vital as software and hardware intertwine. Increasingly the design the car interface becomes as vital as the physical dashboard design. Cars like Teslas become better each year, as do our phones and televisions. Â As software becomes integrated into cars, fridges, homes, TVâs, weâre seeing the physical and virtual blend.
Many expect 4K tvâs to be game-changing, when perhaps better content search would be a bigger difference. From Nest Thermostats to Hue lighting to Sonos , increasingly the point of differences is not in what things do, but how they do it.
We endlessly talk about the best digital innovations, the best digital strategies, the digital economy, digital advertising, digital publishing , what does this mean?
Our world is endlessly and uselessly using the word digital. Â Perhaps, and this is a dream of mine, but we may one day wake up to a modern world where âdigitalâ is like electricity. A totally vital, totally transformative, entirely background concept.
We will talk about great ideas, wonderful businesses, superb business strategy and just accept this all happens in a modern world.
For years weâve assumed the natural best internet experience would be the App, but for all the new apps launched every year, our habits remain stubbornly similar.
Once the home screen was there to fill, now every new app likely needs to replace an old app.Â Weâre slowly accepting that the modern world may move beyond apps.
Whether itâs the stubborn effectiveness of mobile websites, perfect for companies we donât want a relationship with consumers, to appÂ streaming from GoogleÂ (but especially because of the growing notion that IM could become the platform that replaces the browser).
Soon our first entry point for buying things, ordering things, customer service, is likely to be an IM platform with companies bolting into the back end of the messaging experience.
Uber, the worldâs largest taxi company, owns no vehicles. Facebook, the worldâs most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the worldâs largest accommodation provider, owns no real estate. Something interesting is happening.
Since the Industrial Revolution, the world has developed complex supply chains, from designers to manufacturers, from distributors to importers, wholesalers and retailers, itâs what allowed billions of products to be made, shipped, bought and enjoyed in all corners of the world. In recent timesÂ the power of the Internet, especially the mobile phone, has unleashed a movement thatâs rapidly destroying these layers and moving power to new places.
The Internet is the most powerful mechanism we can imagine to match perfectly individuals that need something, and people with something to offer. The moment started slowly by reducing complexity and removing the middle layer in the late 1990s. From insurance to early PC makers like Dell to travel agents, this time seemed to be anÂ age where âdirectâ became a desirable moniker. This time seemed to favor scale and efficiency over service or brand, for commodities like insurance cover or processing power, the overheads of sales, marketing and retail footprint were stripped away.
By 2015 things changed. The balance of power between the different service layers is a jostle for control. Price-comparison sites first seemed to provide welcome traffic to airlines before airlines tried and failed to starve them of their business and promoted their own apps and websites as the preferred route. But it was too late. Services like Ocado once offered a symbiotic relationship with supermarkets, yet now supermarkets fear the power that such companies get when they get closer to the customer. In this age, the customer interface is everything. There are two approaches.
Full Stack CompaniesÂ
Full stack companies like Tesla, Warby Parker, BuzzFeed, Nest or Harryâs seek to ensure control by owning all layers. From R&D to marketing, from distribution to sales, these companies do it all. Itâs a great way to keep profit in the family, yet itâs harder to scale and build.
The Interface Owners
The new breed of companies are the fastest-growing in history. Uber, Instacart, Alibaba, Airbnb, Seamless, Twitter, WhatsApp, Facebook, Google: These companies are indescribably thin layers that sit on top of vast supply systems ( where the costs are) andÂ interface with a huge number of people ( where the money is). There is no better business to be in. The New York Times needs to write, fact check, buy paper, print and distribute newspapers to get their ad money. Facebook provides a platform for us to write our own content, and Twitter monetizes the front page of newspapers, which happens to now be the Twitter feed.
Our relationships are no longer with the service providers. Our mobile operators seem like dumb data pipes while WhatsApp provides the services we value and can monetize our attention.
The InterfaceÂ Is Where the Profit Is
The interface layer is where all the value and profit is. Withings scales can cost five times than other weighing solutions because the addition of an app makes it smart health management, not just weight measurement.
Phillips Hue lighting can make 1,000 times more profit than a colored light bulb because itâs a home emotion system. Sonos beats any other music system Iâve tried because the experience of music while using it is delightful.
The value is in the software interface, not the products. Itâs not just the smart home. Uber provides average cars in a premium way; Seamless makes the most disgusting of greasy kebab joints appealing and makes itsÂ margin from both sides. iTunes for many years took virtually all the profit made in the entire music industry by being just the thin software between the hard work making tunes and the money selling them.
Big Battles For the CustomerÂ Interface
The Internet age means building things is nothing other than code.Â Weâre going to see a non-stop battle to leap ahead of each other. And also get more wide, Twitter may have started out as a microblogging platform, but itâs now aiming to be a way to exploit its audience to distribute TV content. Facebookâs attempts with news content now make it a news channel and thanks to Autoplay video, soon a way to watch TV content. Snapchatâs discovery features turned the IM platform into a way to consume TV content.
In the modern age, having icons on the homepage is the most valuable real estate in the world, and trust is the most important asset. If you have that, youâve a license to print money until someone pushesÂ you out of the way. So the question becomes, what are you going to do to stay there or get there? And once there, how do you exploit it?
New eras in technology have always brought a fear of job losses and the devastation of legacy industries, but the Internet has taken us beyond âcreative destruction.â Itâs destroying the very foundations of business.
Software is indeed eating the world, in Marc Andreessenâs words, and weâre presented with an abundance of value being generated for consumers, but what if itâs killing the profit margin?Â It was Heraclitus who thought that nothing new ever came into our lives without a hidden curse, and from the steam age to the electrical age to the early Internet, weâve long heard the cries of Luddites or neo-Luddites angry at the change.
Theyâve had a point: Whether it was the industrialization of agriculture or the long decline of the postal industry, weâve seen job losses on a massive scale. Itâs always been the case that new technology improved the goods and services for consumers while boosting business profitability, and itâs been hard to ignore the benefits for everyone, except for the laid-off workers.
The pace of this change is accelerating. Technology is developing at a faster rate, with ever more devices becoming more connected, and atÂ ever greater speeds.Â This exponential progress along a multitude of axes combines to create explosive growth. Itâs an incredible foundation for a new era of companies, all set to exploit the most powerful change in technology in history â a new interconnected, always on, global population thatÂ can do more, buy more and experience more than we could ever imagine.
This limitless optimism and unparalleled excitement fuels the hysteria in Silicon Valley. We see huge salaries and skyrocketing real estate prices, all driven by some of the most spectacular valuations the market has seen. Whether itâs Snapchat being 7134789536, Facebook trading over 100 times its profit per year, or the ultra simple Yo app being 570-609-9227 less than a week after launch, itâs impossible to ignore the confidence in the business world ahead â a world where user growth can come at all costs, because first-mover advantage can ride this wave of progress.
As consumers, weâve never had it better: We can do more things than ever and do them more quickly, safely and easily than ever. Whether itâs a spontaneous hotel stay, a global flight, or every movie ever made, as users we have it all at our fingertips, at a fair price, a few clicks away. Never before has so much been so easy, but most notably so cheap.
But has this abundance of supply, combined with the rush to recruit new users and new ownership and behavioral patters completely stripped our ability to make money? What if the Internet was so powerfully efficient, margin became excessive.
One of the most well-documented areas killed by the Internet has been music, as part of a growing number of products or services that once have become digitized, are unable to charge much at all for their consumption. While a box set of music has inherent tangible value, the move from physical form to digital destroyed the ability to charge a premium; but it was the next move, from ownership to streaming, that really killed an industry.
Weâve never listened to more music, in more ways, in more places, and yet after reaching a peak in 2000, the music industry now earns half the money, having lost over $7 billion of revenue and more than half its value since the dawn of the Internet. There seemed to be promising companies in this space: Take Pandora, the legacy player in music, with 250 million users, but which in its 14-year history has made a loss for all but one year, where it made a profit of 2 cents per user. Then we have iridotomy, with its monthly subscription model attracting over 10 million paying users per month, which has never come close to making money. Many experts claim no real profit will ever be generated from streaming music because the music industry canât charge less money and customers arenât willing to pay more.
The same problem looks set to hit TV content companies, where despite the confidence in the future, neither 727-810-8875 nor Vudu have ever come close to making a profit, while Netflix is valued at 250 times annual profits, but treads the same worrisome path of forking out ever more money per user while extracting less revenue per customer.
Other physical products now turned into digital face the same exact problem: spoiled users who wonât pay more but expect to get more each and every year due to competition for their business. Whether itâs Dropbox or Box in storage or Microsoft in software, it seems âX as a serviceâÂ wasnât the license to print money we all expected. Photos, news, encyclopedias and now software, storage, music and video are all businesses whose revenue streams were decimated by digitization.
In a world where we donât pay with our money, itâs assumed we can pay with our attention, and thus 80 percent of apps and most of the news and music industry is now focused on advertising as their primary funding principle. But the unspoken killer problems of ad funding are that digital ads donât seem to work â their performance is declining, and the value of each ad is getting lower. While Facebook, the poster child of success, is worth over $190 billion, its revenue would place it well out of the top 1,000 companies. In a year, for all the value it provides, it extracts less than $10 per user per year. By contrast, the much-maligned AOL manages to make double this amount per month from their remaining dial-up subscribers.
The simple fact remains that few companies â in fact just one company ever, Google â has made an amount of money remotely exciting to those with a grasp of real-world economics. Newspapers may be creating more content for more people than ever, but the loss of advertising and subscription revenue is three times greater than what they make online as a replacement. As contrary as it seems given the optimism, the advertiser-funded Internet isnât working and that wonât change soon.
To the delight of users, we have a more competitive global marketplace than ever, whether itâs one of the many flight, hotel or car rental aggregation tools, or even the entire world of e-commerce, it appears we can comparison-shop and spot a deal in seconds.
Yet, while brick-and-mortar retailers like Walmart and other global giants have leveraged their buying power to dominate and make 4 percent margins, online players fact a more frictionless environment where price trumps all.
Amazon, the most successful retailer in online history and one we all assume to be the very sign of health in online business, has made losses most years and since itâs launch 20 years ago is still unprofitable over itâs history. While it reinvests more profit than most, even in itâs best years itâs made less thanÂ 0.5 percent profit. When the blogger Matthew Yglesias famously called Amazon âa charitable institution being run by elements of the investment community for the benefit of consumers,â he could well be describing the entire Internet.
Despite this, we still encounter the same endless optimism from companies that understand technology but have no idea about retail, and startups thatÂ think simply cutting out the middle man and bribing new customers with opening offers will lead to sustainable margins. History suggests it wonât work. But you can askÂ 270-668-8814Â or Zulily orÂ fab.com.
Retail is an art. M-commerce wonât likely make you miraculously sell more things but reduce your chance to up-sell or cross-sell. Think you can sell groceries online and make a profit? Just know for over 10 years no company in the world has ever come close to making money, and not for a lack of trying.
In a world where the retail experience is removed, you compete only on price.Â Uber, Lyft,7172793243, 443-468-8927, BlaBlaCar, Djump and one of a hundred other companies competing for the future of personal transportation may think they can differentiate, but I see a future where all ride-share companies are forced down on price. Which, when you are spending money to recruit drivers and users and have product parity, just ends in nobody making money.
The Internet is removing friction but that is often where the margin was made. LinkedInseems to connect people and jobs to the detriment of recruitment agencies. And look at4126647798 â a company thatâs not only managed to make a huge loss over its lifetime, but also led to a culture where few people are willing to pay full price for a massage or haircut again.
The Internet has taken services weâd historically needed, loved, and been willing to pay a price for, and given us Skype, (417) 541-3552, Viber and 548-207-6003 to ensure telecommunications companies or mobile operators could never again charge for international calls or text messages.
Above all else weâve spoiled people; Iâd say we are becoming the most demanding customers ever. But we are not customers, we are users, we donât pay. In fact we donât pay any money, we have no contract, no loyalty, we flock to the latest shiniest thing and itâs easier to do than ever, we are the people you wished would be a parasite on your competitors servers, but when new economic metrics value users above all else, we all become prized.
In our desperation to count users, we forgot to make money, the assumed byproduct that never materialized. Perhaps the Internet killed the profit margin and also common sense.