Internet Trends 2018: what does it mean for You, Platforms and Society
An opinionated commentary, of the most important presentation of the year, from the Platform Design Toolkit Team
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Last week, KCPB’s Mary Meeker released her famous Internet trends presentation, 2018 version. [Full speech available here]
Despite, it seems to me, that this last version of the presentation has been welcomed with relative “coldness”, many saying that there is nothing really new in it, I think this issue brings a powerfully clear vision of what’s happening in the digital[ized] world of today.
In this post, I’ll briefly explain how the internet trends 2018 brings us the vision of a truly challenged global society, one that is living through the definitive crisis of the XXth centuries institutions.
Indeed, the relics of the industrial age institutions are losing relevance, leaving space for a new generation of digitally enabled ones. These centralized aggregators and infrastructures connect everything, bringing opportunities for the expression of an ever increasing human potential.
At the same time this evolution is carrying enormous challenges, causing the rise of the role of the individual in an otherwise inter-connected society, and the fall of the traditional social constituencies.
The relentless evolution of business models.
A substantial part of 2018 Meeker’s presentation shows how the continuous evolution of business models is continuing. Users are increasingly engaged by great user experiences, and have rising expectations of responsiveness and brand performance. This pressure is driving a growing evolution towards subscription based models, giving users accessing to increasing inventories of resources and talent, that are becoming connected and online.
As Hagel warns since a few years (anticipated in his seminal post “The Big Shift in Business Models”), the evolution towards subscription services is just an intermediate step towards business model based on actual value creation, enabled by the proliferating, pervasive sensor networks that now enable to capture all kinds of data.
You may soon be able not only to access live cycling lesson (like you can do with Peloton), but even pay for actual weight loss, or muscular mass acquisition.
On the other hand, not only the consumption of services is constantly migrating to a subscription base, but commerce is digitalizing at an unprecendented speed, together with payments (and money itself, if you think to the boom of cryptocurrency).
Commerce in the age of Platforms and Long Tails
Commerce platforms like Shopify and the likes, combined with advanced payment systems, enable merchants to combine offline and online experiences. The long tail of commerce is increasingly made of small brands, that can easily nurture a deep, direct , real-time relationship with customers who hold a strong connection with the brand, and its mission.
These customers bring, of course, much higher customer lifetime value, and brands on their end, need to nurture such strong relationship with customers as it’s now ever more difficult and costly to actually acquire them: cost per acquisition is growing due to pervasive competition.
Despite the enormous size of their user base, increasingly, Facebook, Google and Amazon are becoming what John Hagel calls, “trusted advisors”: acting in the middle between users and other brands, thanks to the deep and constantly updating user profiles, these advisors are succeeding in helping customers overcome the “marketing” overload. This happens thanks to suggestions that are increasingly more narrow and actionable that these players can also control as they control the user interface to the internet, to the digital marketplace — through voice, automation, productivity.
Beyond the Consumer
At the same time, these users are increasingly also becoming active “producers”. Whether this transition is due to life choices (according to Gallup, 51% of american worker say they would change job for “flexible schedule” motivation), or it is dictated by raising needs to find alternatives to industrial jobs drying out; this we will never really know, but freelancing is growing steadily, and so is doing the so-called Gig-Economy of on demand workers — even if some contradictory data has been surfaced this week.
For a deeper analysis of the different contextual situation one can see in the generic rise of independent, and sometimes platform powered work, I point you out this 2016 report from IFTF: in general terms, though, seems like technology is liberating new opportunities for the independence of workers, especially the upskilled ones.
In this circular phenomenon — as per Mc Luhanish terms — our society is, in turn, shaped by the technological tools and by the economy it’s developing.
Not a fully rosy picture.
The picture of the context of the citizen of the modern, digital, economy it’s not all rosy in any case: while the opportunities to monetize skills, passions, capabilities and to become “entrepreneurial” in the service, gig, making or commerce economy are steadily growing and, while it’s even increasingly easy to monetize dormant assets such as spare rooms, homes, time, all this comes at a cost.
As shown by following slides while it’s true that Airbnb is a giant moneymaking machine for hosts, it’s role in gentrification looks evident, and is more generally a shade of a global process: “Hipsters and artists are the gentrifying foot soldiers of capitalism” once The Guardian wrote. As a result, shelter cost is a rising (and now dominating) share of the overall spending for families across US (and likely the globe).
Further and deeper access to technological capabilities and infrastructures
In the background, the GAFA of the world, are now the highest R&D spenders, and surely an essential driver of growth worldwide, and surely in the US and China.
These giant enablers of economies of interaction and trade, Facebook, Google, Apple Amazon, and the likes (such as their Chinese counterparts), after having connected more than half of the individuals on the planet, through powerful and pocket size access machines, are now increasingly componentizing, packaging and selling the technological and human infrastructures they used in the process of growing to world domination.
Not only the cost of computing is plummeting even more, but one can now leverage and summon the power of data analytics, machine learning, AI, logistics, soon robotics. Just as an example, AWS now offers 140+ services, and cost per machine instance is down >10% YoY.
This process is opening new possibilities for startups and teams to create platform strategies of all kinds, that operate on top of the basic enabling services that the GAFA provide: computing, connectivity, identity, data, intelligence.
GAFA will Eat All They Can Eat.
But the GAFA will not sit there: they’re always ready to capture increasing parts of the market, with their potential to scale.
Google is doing it with everything digital: few examples could be, Google Reviews (that are eating the Yelps and TripAdvisors of the world), Google Flights, … to the recent Neighborly move.
Amazon is basically doing it with anything else: from dutch ovens to home insurance. Being amazoned. That’s how they call it.
The picture that emerges from this year trends — reinforcing that from last year — is a picture where digital giants are capturing, powering and automatizing, an ever increasing share of the world economy:
- on top of a stable, industrialized layer controlled by incumbents operating at the lower cost of business;
- powering a load of startup driven innovation, that they are always on the lookout to eat.
In the Backgound? Simply the crisis of the institutions of the XXth century
The world is evolving in a direction of empowered individuals and small entities, increasingly able to make the best of their passion, talent, energy: in this Hayekian world of interacting individuals, and small groups, there’s often no space for who’s left behind.
This is the world of the “demise of the nation state”, a world where markets dominate policy — and sometimes also get to friction with democracy (as Oettinger reminded us Italians, last week).
Most of the funding members of the EU have now — at least — confused ideas about the future of welfare, and almost everywhere the footprint of the central state is reducing, in the process of creating a thriving service economy.
In this contexts, some see decentralization as a promise of regaining control over data and governance, and question the role of these enormous value aggregators: but this is most likely a mopic view.
Decentralization may well end up in reinforcing the development of an individualistic economy: by granting everyone freedom of speech and trade, thanks to its anti censorship nature, blockchain could further put the role of central authorities into question — when it comes for example to collecting taxation, or privacy enforcement (the blockchain will never be GDPR compliant, or better, the other way around, GDPR will never be blockchain compliant).
Takeaways for Platform Design
In closing this reflection, let’s try to pin out a few take-aways for those like you that are interested in Platforms:
- the availability of on-demand basic infrastructures is increasing the possibility to connect and organize inventories of assets and capabilities at scale, into vertical platforms (specifically targeted at contextualized ecosystems);
- these platforms, will always deal with the risk to be eaten by GAFA: what is the “escape velocity” to be able to resist to the gravity GAFAs and let them to eat your cake, it’s unclear;
- GAFA are pushing incumbents to play in a limited, and cost-driven, part of the economy;
For the individual here’s an increasing capability to play in growing contexts, find new opportunities, express potential in the service economy, commerce, making and creative industries.
On the other hand you’ve to take care of yourself, in a world where traditional institutions of the XXth century, from the state to most of the incumbents, are experiencing crisis, growing irrelevance.
In this context, will be even more true that, as platform shapers we’ll need to:
- embed powerful engines of learning into our strategies, offering a way for ecosystem entities to face continuous performance pressure (as John Hagel says);
- experiment on how to be different from the GAFAs on new territories, beyond pure user utility such as governance, ownership;
- explore the possibility to embrace permissionless business models, that are future-proof and “freedom of speech compliant”;
Side reflection: this picture is, of course, valid in the US and Europe. The world is effectively split in two, huge markets, one that speaks Chinese, another one that speaks English and is dominated by US players .Europe today mostly seems an “extension” of US market, dominated by US bred platforms
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