To Marketplace and Back — “Content is King” Again!
In ’96, Bill Gates wrote an essay titled “Content is King”, and it is seeing daylight again not just with streaming wars but a wider set of marketplaces.
Digitisation has been a key driver for some of the businesses during the last decade. This drove much of the development in the last decade with companies like Amazon focusing on physical products marketplace to companies like Expedia focusing on service marketplace. Historically such development needed building capabilities around use of cutting-edge technologies and developing know-how around running and maintenance of related systems. With the technology maturing and development of the model of XaaS (anything-as-a-service) much of the tools i.e. enablers have been commoditised and available for any company to tap into.
This can be seen with explosion of managed services offering like Amazon Web Services, Heroku, Microsoft Azure, Google Cloud and DigitalOcean to name a few. This has helped bring services to millions of users at break neck speed.
iTunes revolutionised music industry with the introduction of un-bundling which led freedom of choice for the consumers. Fast-forward to today and you can see content curation driven by algorithms based on massive data-sets (AI and Machine Learning tools abound). There are multiple plug and play tools available for companies to use from curation to forecasting.
The services piece is becoming more and more homogenised and companies are realising that what now makes a consumer stick is not just the delivery mechanism but the content as well.
The delivery mechanism no longer provides the “wow” factor.
The delivery mechanism or providing services are now part of what is expected by the consumer. Taking example of streaming services - offline downloads, and stream switching based on network are necessity rather than a feature. As these services get absorbed into the Core Product, the content is increasingly the differentiating factor - driving bulk of user engagement.
In 2007, when Netflix launched its streaming services it was a novel product. Focusing on customer experience Netflix perfected its delivery platform but by 2013 started getting into content realising this being the real proposition for the users. Right now we see the content delivery is being commoditised with every major provider coming up with their delivery solution while at the same time focusing the launch on its content not the delivery mechanism — Apple TV+ provides a wonderful example of this.
The commoditisation of service platform will not stop with streaming!
We have seen multiple players come up in services industry mainly by offering an online marketplace like Amazon, Expedia, Booking and Spotify. The marketplaces over the years have had a lot of power over the suppliers given its technological expertise and reach to consumers leveraging the platform built over the years. This led to thinning margins for providers and either extinction or consolidation of many.
The online marketplace model has not only driven content providers out of the market but also offline physical providers like ThomasCook incase of travel.
Now, with the maturing technology and readily available tools which can be scaled to millions of consumers — the suppliers are finally getting the necessary firepower.
I am not saying that companies which have a marketplace model are to go extinct in the coming decade but will face competition much like streaming if they do not cater to needs of their content provider.
But, why haven’t we seen similar scale of competition in other industries.
I assume the reason lies in the size of the supplier - as content providers become big enough they can use the tools available to develop a delivery platform differentiating themselves from the marketplace based on their core product.
Coming decade is going to see a lot more companies enter the digital marketplace.
In strategy speak, referring to Porter five forces - the power of supplier in the last decade has been weak. But with commoditisation of many of the technologies and consolidation of the supplier - we are finally seeing some industry players taking action towards this. We can see this with low cost airline providers who are already running on razor thin margins delivering services via their own platform and in process controlling the experience to consumers (upsell and add-ons are an added bonus!). Companies like Marriott partnering with technology providers to develop offerings which are differentiated based on their experience. This trend will continue and not all the providers will end up launching their own services but will allow them favourable margins for their content. “Content is King” Again!
