Why Is Digital Growth More Expensive Than Ever?

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TIMESTAMPS
00:00 Intro
00:25 Digital Markets
02:22 Fish, fishers & lake owners
03:50 Digital Technology

Technology is becoming more accessible, so why is digital growth more expensive than ever?

Something is happening in the global digital landscape that might seem like a paradox. In such a situation, conspiracy theories foster. However, in this case, there is no theory to debunk. So why does growing in digital cost companies more than ever before? To understand what’s happening, we need to take a look at digital markets and technology.

Let’s start with the markets. Before 2020 the number of companies that focused on digital growth was a lot lower than it is today. With physical sales being an option, brands that established their market in the previous decade had minimal motivation to pursue digital growth actively.

Working in the field of digital strategy, I can share that, before the pandemic hit us all, the most frequent question decision-makers put were these 2: Why should we focus on digital? Is the ROI of digital better than what we do today? Since the second quarter of 2020, these questions have changed to: How can we transform digitally fast? How can we achieve similar results in digital like company X, Y, Z? What’s the fastest way to build a digital business model? Do you see how the questions changed? There’s immense pressure to grow in digital.

One of the things that this pressure has done: it made companies spend more on digital advertising than ever before.Here are the stats: Google’s advertising revenue grew 69% YoY (that’s From 29B to 50B) YouTube: grew 84% y/y Snapchat: 116% y/y Twitter: 87% y/y LinkedIn: 97% y/y Spotify 110% y/y Facebook: 56% y/y while, TikTok’s mother company ByteDance grew 110%. While these growth numbers are amazing for them, they are pretty bad news for those who just started focusing heavily on digital growth.

Why am I saying that? Imagine there’s a lake. The owner of the lake sells fishing licenses. The price of a license varies, but the most expensive location is at the centre of the lake, where the most fish are. Depending on who pays more, get the best places.
Before the pandemic, there were 100 fishermen on the lake, now they are 200 hundred, and the number is growing. What does that do to license prices? They grow. More and more fishers want to get to the best places fast, so they try to outbid their neighbour fisherman. But these guys don’t want to remain in the back, and a bidding war starts.

Who wins: the fish, the fisherman, or the lake owner? Well, the poor fish don’t even know which bait to bite on. The fishers are fighting over places and spending more on licenses. The lake owners smile as their pockets get full. While this analogy has some caveats, you can get the big picture of what’s happening. Now you may think, ok Attila, that’s true on the markets, but in the last decade, digital innovations soared, and there’s also a visible trend that technology is getting cheaper. Doesn’t that even things out?

Well, technology is getting better and in some cases, even if not cheaper, but more efficient for sure. There is no doubt about that. And let’s say that we neglect the massive chip manufacturing shortage that the world is facing right now. Normally we shouldn’t do that, but for the sake of this example, let’s take it out of the equation. So, while most technologies are ready to be used, they need an implementation process. And that process requires experts. Unfortunately, the number of experts with hands-on experience is not growing fast enough. Thus the cost of implementation increases. And because this cost is increasing aggressively, some companies try to work with cheaper, less experienced professionals.

This tactic looks really intriguing because, in the short term, they save money. But, actually, in the long term, they burn it because those who are not at the top of their league can’t facilitate efficient implementation and efficient growth. More and more brands realise this and choose only top-level experts, and as the number of these people is not increasing at the required pace, the cost of paying them is growing fast.

So, those who promise you fast and cheap growth in digital usually don’t know what they do and don’t understand the global markets. Of course, it’s up to you to roll the dice. However, I want to guide you with a helping question: What will you lose if your digital strategy fails to bring you the right results in the next 12 months? Remember, the number of fishers is growing, and the lake owners don’t have any motivation to make things better for your company.

Видео Why Is Digital Growth More Expensive Than Ever? канала Cognitive Creators