When I began my marketing and communications career in a well-known agency in London, our business was simple: there was research, there was media, there was creative and there were promotions and point of sale. Today, it is still simple: there is data, there are platforms, there is content and there is commerce. The ‘what’ is very similar, but the ‘how’ is a little different. The players are different too.
We can see the decline of the big advertising agency holding companies. In the last three years, the market cap (monetary value) of WPP and Publicis has fallen between 30% and 40%, while the Dow Jones Index has risen by a similar amount – an unprecedented reversal of patterns from previous economic cycles. In Asia too, Dentsu and Cheil are struggling to maintain revenue from their agency acquisitions and Chinese titans like Blue Focus, HNA and Leo Group are rolling back their international expansion plans.
So let’s look at our business from the perspective of these four key elements: data, platforms, content and commerce – and ask ourselves who is winning today and who will win tomorrow.
DATA: Data comes from multiple sources: Apps, like China’s amazing unicorn, Luckin Coffee; personal devices which infer activity and purpose from geolocation tracking and money transactions; IoT in cars (for example) where driver behaviour is transforming the insurance industry (homes are next) – and the combination of these and more, to assess personal social credit scores as well as business credit scores.
There are two clear leaders in data capture and analytics: China and the USA. Right now, China is probably just in the lead by a small margin, as the western world is held back by more restrictive personal privacy regulations.
The big consumer play this month is facial recognition; Facebook is strong but China is stronger. We have all seen the videos of China’s new OMO (online merged with offline) retail; stores where you simply walk out with whatever product you choose because cameras recognise your identity and your WeChat account is charged immediately. Last month, at the big surveillance tech expo in Shenzen, Huawei and other leading players were showing off their latest technology: identity recognition plus emotion recognition. The security implications are obvious, but the marketing implications cannot be far behind: serve your customer messages according to their mood state, not just who they are and what time of day it happens to be.
PLATFORMS: In China, TenCent (WeChat’s parent) and Alibaba (both quoted companies) are having huge success in revenue growth – from commerce and advertising. Most of Asia is dominated by American-owned internet platforms: Google and Facebook in particular and, increasingly, Amazon. Despite relatively low smartphone penetration, India is already Facebook’s second biggest revenue market after the US. Unlike the Chinese platforms, the revenues of Google and Facebook are almost entirely driven by advertising – both from their main platforms and from their flagship acquisitions such as YouTube and Instagram. Right now, these are the big winners. Unlike the advertising holding companies whose value is falling fast, they have understood the 21st century mantra that access is more important than ownership.
Their low level of investment in the production and ownership of content (most Google and Facebook content is user or customer generated) has allowed them to generate huge profits, much like the press barons of the American past. Today, they seem all-powerful, but for how long? They are so large and so rich that they will inevitably run into problems with government relations (as Huawei is discovering) and consumer citizenship expectations. Privacy legislation, like European GDPR, is only the beginning, and may soon spread to Asia. And because their IP is based on technology rather than humanity, they are vulnerable to the rise of new platforms – TikTok being the big example in Asia. And where does TikTok come from? China, of course.
CONTENT: There is plenty of action here and for now the West is in the lead. Content is the new creative, bringing together the once separate disciplines of advertising, branding, promotions and PR. Unlike traditional advertising and PR services, it resists the encroachment of ‘in-house agencies’ into the external agencies’ space. Because the best content relies on human ingenuity and originality, it also needs perspectives and ideas external to the company. Graphic design, product development, user experience and service design flow from this too: the best examples resist the typical formulaic approach of in-house departments.
Because speed and agility are essential today, we see the rise of independent agencies from smaller countries such as New Zealand, Thailand and Vietnam; their high levels of natural creativity, despite their lack of financial resources, enable them to challenge the big players and take on a growing number of international assignments. Relatively small companies like Netflix are able to challenge the status quo and are now being followed, rather than crushed, by giants like Apple and Disney. Only last month, Apple entered the content streaming market – as with the app store we see the company moving from ownership (although Apple never owned factories) to access. And in the US, Apple’s TV+ subscription is just $4.99 a month compared to $13 for Netflix’s most popular plan. Watch this space! There is only so much TikTok and Finstagram (fake Instagram) that consumers can take in their search for authenticity.
COMMERCE: Is this where Asia finally wins the game? Alibaba is immensely strong and successful and continues its growth; sales and profits were up 40% year-on-year in the last quarter (and without 11/11). As Asia’s vast rural population goes online (whether through cheap Huawei smartphones or the mediation of the local storekeeper) there is colossal growth potential in the region. WeChat continues to pioneer the newest developments in social commerce –“she’s wearing it, I buy it and it’s delivered in time for the party this evening.”
These and other companies seem to have cracked the code of government support without onerous control and are clearly flying high. But so too is Amazon. Voice commerce is growing rapidly and Amazon’s Alexa is familiar worldwide, with performance continually improving as the applications of machine learning and AI gathers space. And for now, at least, Amazon seems to have escaped the regulators’ scrutiny focused on Facebook and Google. VR, AR and MR (mixed reality) are moving rapidly from novelty entertainment to commercial sales tools. And these multifaceted new players – Alibaba and TenCent as much as Amazon – benefit from advertising revenue opportunities but are not dependent on them. Their wealth comes from commerce.
So it’s all to play for. At the end of the day, commerce will decide the winners. As the head of one of the world’s leading content creation agencies said recently: “Sometimes the CCO has a seat on the board. Sometimes the CMO has a place on the board. But the head of sales always has a seat at the top table.”
Which will win? The strategic, long term, brand management approach of the West? Or the agile, digital, mobile, incremental, commercially-driven approach of Asia? Place your bets.
But perhaps the most heartening factor of all is that once the platform technology is established and quantum computing makes the machine-based data analytics all-pervasive, the only differentiator will be the human factor: insight, creativity and original thinking. Larry and Sergey, Zuckerberg, Steve Jobs, Jeff Bezos, Jack Ma and Pony Ma… all began relatively recently as independent entrepreneurs. Whose company will be the winner over the next 20 years? Wouldn’t life be dull if we already knew the answer?
Julian Boulding is Founder & President of thenetworkone, the world’s largest network of independent marketing and communications agencies. firstname.lastname@example.org