Innovation Copilots
Uber is intended to hit the stock market at a valuation of $82.4bn. Here’s a few things to keep in mind:
The target valuation was initially $100bn, but since Lyft was introduced on the stock market on March 28 and lost already 27% of its initial valuation, Uber had to be more conservative.
Since 2016 (a bit more actually), I’ve been pushing this simple concept: Digital is over! Being back in Shanghai right now, is among many things a perfect opportunity to check how far digital has been integrated in the every day life of this massive consumer market.
Remember, last year when I was especially impressed by how Alibaba and Starbucks did partner up to build flagships vision of the future of retail? By now this snapshot has consolidated into a full-fledged retail operating system (IT, big data platform, social web marketing, and supply chain all rolled into one “as a Service” retail mainframe) for every corner shop in China.
That’s the reason why, this year I was really excited to understand on site what Alibaba was now doing with Hema Market.
We have all witnessed how digital has transformed the retail market all across the planet. At first e-commerce, then Amazon and Alibaba platforms, then even more new entrants, more recently everyone is trying to jump in social media such as Instagram (courting young trendy « influencers »), etc. The consensus was that eventually this was not about being a prominent online force anymore nor about offering a fantastic offline experience, but both. The 2017 mantra was O2O or Online to Offline and pretty much everyone agreed to the vital necessity of being able to smoothly drive customers back and forth from an ‘O’ to another. This was all fine and (maybe unexpectedly) I agreed 100% with this trend. But to be self-critical with the idea, what started to surface is that we have maybe missed something far more subtle and game-changing. I call it Chic and Mortar Retail.
We discussed on the previous article the idea of the weak singularity, where all connected devices tend to be harvested by a few massive platforms, as a global sensor network targeting us for ads (or broader influence strategies).
The follow up of this trend is what we call Platforms’ Dark Patterns, which refer to how the GAFA / BATX are evolving to deal with growing concerns about privacy, while still sustaining their constant push for pervasiveness in our daily lives.
The notion of dark patterns in web design has surfaced in 2010 with the eponymous website darkpatterns.org. It describes all the shady strategies that websites deploy to trick users in clicking on options that will allow data collection, prevent unsubscribing, or generally bring them money. Amusingly enough (not), you have witnessed unrivalled use of dark patterns in the recent GDPR messages that you’ve been bombarded with these last few days.
3 things to keep in mind before you design for GDPR (explicit consent FTW BYE BYE dark patterns and auto-checked checkboxes)https://t.co/TG00NaNPgI
and some GDPR lol https://t.co/W7IqA4w35J :D— Stéphanie Walter 🦊 (@WalterStephanie) May 28, 2018
For the major web platforms running in the background of our lives, a few things have changed regarding privacy. Even if they were not all confronted with a Cambridge Analytica disaster, the scale which Facebook had to deal with, enough data leaks, abusive terms of service and general discomfort have built up in most countries. Platforms now have to acknowledge what they danced around for many years: privacy is a currency that consumers have to spend to get their services.
This seems trivial but this is not an easy acknowledgment.
One should ask though, what do they have to fear? Not enough of us really unsubscribed from Facebook or Instagram to make them pause. You haven’t stopped using Gmail for fear of divulging too much of your life. Let alone stopping using Google Maps. What is it then? Do they fear GDPR?
Well, despite all the political credit that we can give to Europe for GDPR, platforms know that enforcing a 2% worldwide annual revenue fine is at best wishful. More realistically, in the US they are concerned about Trump getting in the mood of anti-trust talks. If it means media coverage instead of anything Russia-related, Trump could jump on the idea overnight. In China, Alibaba or Tencent (WeChat) can only be afraid that Xi Jinping would decide to exert some control to ensure political stability (getting too big and appearing immovable is painting a target on yourself).
Whatever the reason is, we are at a point of no-return where the Google of the world are adapting to more scrutiny and the need to protect their size and invasiveness.
This is the sense of what I call platforms’ dark patterns. Nothing to do about web design really, but everything to do with the strategic manoeuvers that platforms will rely on to soften or disguise how they intend to sustain growth.
The simplest example of such trend is how Zuckerberg said to the face of the US congress that he could work on a paying version of Facebook where ads would be removed. Why would he do that? It would mean that Facebook would remove its richer users out of the reach of companies wanting to target them more than any other users on the platform. This makes no business sense. But if limited enough (some « selected » ads could come through them nonetheless) then it would be a powerful strategic diversion, a smart trick to relieve pressure of the platform.
In China, seeing how WeChat will have to keep on growing while ensuring they « play ball » with the government will be both frightening and fascinating. The reality of social scoring and facial recognition is there to stay « for the benefit and the safety of everyone ». The rule of « if you have nothing to hide, you shouldn’t be afraid » will prevail.
Why is it important to understand this trend now?
The GAFA and BATX are shaping larger and larger parts of the world economy, the way they’ll sustain growth in the next two to three years will have a direct or indirect impact on your business. Whoever you are.
For instance, the push toward mobility (self-driving cars, electric scooters, dockless bikes) makes a lot more sense for companies that want to get more and more personal data from us, but also don’t want to appear doing exactly that. « We’re building cars. » doesn’t sound anymore as « We want to know when you go to work or when you go to the movies! ».
This is also about the fight of all platforms selling ads not to be classified as media, but only tech companies. Media have responsibilities on their content, tech companies are allowed to be dumb pipes that collect anything that is lying around. Imagine how would Youtube curate 300 hours of video uploaded per minute? The current answer to that is the magic poney called artificial intelligence. Not going to happen anytime soon.
That being said, part of these dark patterns strategies are investing massively in AI. Just like cars allowing to grab more and more data, AI will undoubtedly help these platforms scale more. But AI is also a political investment. When every government on the planet reckon that AI will shape the next stage of human history in an irreversible way, being a forerunner in this revolution should guarantee you some regulatory piece of mind. This is essentially applying the military industrial playbook. Since the cold war, not a single defense corporation has been hit by anti-trust laws. The bigger the better right?
Understanding this trend is also understanding that the GAFA and BATX are not startups by a long shot. They have become incumbents; they don’t move fast and break things anymore. And although Apple could be facing less problems regarding privacy issues, the company could just be the next Nokia or Kodak in waiting (if anything there is no shortage of analysts predicting Apple’s fall every year).
What to look for in the next months?
For the many reasons we started to list, ad monetization, the way media are organized (Disney, Time Warner) and essentially how information is made and shared, are directly in the path of these market changes. And by the way, in case you haven’t noticed, net neutrality is over. Any part of your business connected to internet will be impacted sooner than you expect (which is like saying any part of your business connected to electricity).
Also, we all have seen that mobility is changing: Mobility as a Service is now a tentative business model for automakers, new forms of urban transportation explode overnight, energy markets are in turmoil, etc. Most of these moves are made by digital platforms and you will have to read them through two lenses: Do they make business sense? Do they help these companies create dark patterns that will protect them in the long run? And question number two might be the most important one.
But what I’m very curious about, are actually the moves that we don’t see coming yet. For instance I’m thinking on how there could be real China / US crossovers between the regional mega-platforms. This has been circumvented for geopolitical reasons up to now, but this actually could change…
[ Update Jun.19 ] Google to invest $550 million in China e-commerce JD.com
[ Update Aug.1st ] Google preparing to push back in China market by embracing censorship.
[ Update Aug. 7, 2018 ] Facebook wants to trade users for data with banks.
After discussing platforms at lenght, the next trend we’ll adress is how retail is seeing a wave of highly profitable new entrants (and a few incumbents) that are not just good at « digital », but that have engineered different approaches of what we call chic and mortar.
As I did mid-year 2017, I will start today a discussion on what I have on my innovation radar. This is what I believe will shape both B2B and B2C markets for the next two to three years. Unlike last year, I will split it up in six parts to avoid getting in another mega-article! But very much just like last year, I won’t go for the easy answers and discuss artificial intelligence, virtual reality or self-driving cars. So that may be a good reason to read on. : )