Real growth in the Meeker-verse: a dozen thoughts on strategy in today's transforming world
Last year Kantar led a major WPP/industry initiative studying growth at the C-suite level across 73 geographies and multiple industries. Through this effort, now known as the Institute for Real Growth (IRG), we discovered seven key principles of companies that are outperforming the market and achieving real and sustainable topline growth.
In reviewing Mary Meeker’s annual deck on the state of the Internet and the digital world, we were struck by how frequently Meeker’s data and observations resonated with the four key pillars of IRG that deal with business strategy—what companies do and why they do it. Below are a series of 12 observations organized around those 4 key pillars:
- Humanizing growth. Outperformers can see the people behind the numbers, both in the market and within their organizations.
- Taking an abundant market view. Outperformers better define the market in the context of an enormous opportunity, and behave accordingly, instead of resting comfortably with high market share in a narrowly defined category.
- Managing multiple business models. Outperformers are comfortable with different economic and operating models driving success.
- Evolving experiences. Outperformers realize that their products and brands are dynamic and continuous experiences, not static deliverables, and that consumer preferences around engagement are ephemeral and ever-changing, not one-size-fits-all.
The recommendations below serve as a strategic compass to help navigate the thousands of data points, hundreds of slides, and dozens of topics Meeker outlines in her work.
Humanizing growth: The transformation of data into actionable human insight
- Growth is harder to find, but the role and importance of insights are clearer than ever to turn the raw material of data into human understanding.
We know that growth is harder to find and that unlocking the digital ecosystem is an important part of finding it. IRG’s research- and results-backed insights on the proliferation of new approaches and the returns generated by Humanized Growth shed critical light on the evolving role of data for winning business.
Indeed, we now turn to more digital data and insights for improving CX. But growth leaders are 15 percent more likely to be focused on the people they serve than underperformers—and, they are thinking beyond CX to embrace HX, the human experience. Their data is more human and whole-brained than ever, encompassing everything from cultural and societal context to psychographics to get deeper insight. They are basing their strategies around the “who" and “why" behind the “what” (instead of the myopic historical focus on pure demographics). As Kantar CEO Eric Salama noted at Cannes, “Data and insights are at the heart of everything—every single advertiser wants a data-driven and insight-driven marketing platform.” Indeed, since 2014, leading holding companies have spent over $12 billion to acquire partners and expand their big data capabilities. But mastering the data and having a relationship with the people behind it is incredibly important. If data is “the new oil,” insight generation is the refinery: the process that turns sticky, overly-abundant, often useless goop into the fuel that powers the world.
- Privacy concerns continue applying pressure—but are waning as the value exchange becomes clearer and protective forces emerge.
Oil isn’t just useful, but dangerous, as anyone who owned a TV in 2010, when footage of oil spilling from Deepwater Horizon into the Gulf of Mexico ran for months, can attest. Kantar’s 2019 MONITOR research finds that in a list of values measured by importance, privacy (e.g. keeping my personal life, data, and information concealed) was rated as extremely or very important by 78 percent of Americans. When ranked against all 40 values, privacy was fourth only to honesty, family, and authenticity. Still, Kantar’s Brand & Marketing Chief Knowledge Officer J. Walker Smith observes that privacy is a negotiable commodity. People have always been willing to trade privacy for a price, but what's happened recently is that companies have taken advantage of the situation, and consumers are increasingly informed and pushing back. It has been assumed that winners in the marketplace will know more about their consumers than anyone else: perhaps the purpose of data in a privacy-balanced world is to present companies in such a way that consumers know them better, and will willingly invite them into their self-defined and deeply human worlds.
Abundant market view: redefining the world to have a small share of it, and behaving accordingly
- At 15 percent of retail sales and a faster pace of growth than the rest of retail, e-commerce is surely growing—but also slowing.
Kantar’s Retail Chief Knowledge Officer Bryan Gildenberg observes that e-commerce is a big change more than a fast one. Its growth is linear, not exponential, and continuous over the long-term, not a short-term phenomenon. Its growth is also relatively slow: as a share of market, e-commerce gains about 1-1.5 percent market share of retail every year. Forecasts from Kantar’s Retail team find that while overall US retail is growing at 4.4 percent a year and brick-and-mortar at two percent, online is growing at 14 percent. Importantly, Gildenberg explains that about half of all US online growth will come from Amazon, and most of the rest will come from .com arms of brick-and-mortar operators. Unsurprising, considering that no company behaves more abundantly than Amazon. They never talk about being 50 percent of US e-commerce; they describe themselves as being less than one percent of total global retail.
- Gaming may very well be the most underrated consumer of human attention in today’s world—and as a big market with critical social elements and a lot of opportunity, retailers can learn something from it too.
According to MONITOR, only 17 percent of the US population was playing video games in the 1990s; in 2018, that number more than tripled to 60 percent of Americans. This phenomenon extends beyond the stereotypical gamer profile, too—especially on mobile, where data shows 74 percent of mobile-only gamers are female. And while MONITOR finds that 40 percent of gamers are millennials and 82 percent of sub-40 Americans are gaming, this has increasingly cross-generational implications on audience development, as aging gamers pass along the tradition and nurture the next generation of loyal players. MONITOR data shows that 53 percent of all sub-40 gamers watch others play video games through live streaming, regardless of whether they themselves play video game—they’re interested purely for the entertainment! The power of gaming goes beyond player volume and the games being played to the depth and intensity of engagement, so much so that the World Health Organization now recognizes “gaming disorder” as an official disease.
Kantar’s gaming expert Mike Carlucci also emphasizes that “Amazon-owned Twitch, the most notable platform in this space, has emerged not just for entertainment, but also as an intimate and authentic environment which has very real implications for shopping—especially since people who are perceived as peers have real influence over shopping decisions.” Virtual gamer friends are the next genre of Instagram influencers. In part because 64 percent of gamers are willing to watch videos to get rewards out of and even avoid paying for their games, these platforms are slowly becoming more shoppable. Kantar e-commerce and omnichannel retail expert Meaghan Werle highlights Amazon Blacksmith, in which players can detail their product recommendations (all shoppable through Amazon) in true influencer fashion. She also speaks to Amazon’s incorporation of Twitch into its Prime Membership. By tapping into the platform, it builds familiarity with and affinity for the Amazon ecosystem, and a relationship with the next generation of spending power.
Twitch’s 2019 purchase of social networking platform Bebo speaks to yet another opportunity for gaming. In a genuine, human-centric insight, Carlucci points to data that shows that gamers are actually more social than non-gamers. This suggests that bringing these communities together and creating a social experience, whether through physical opportunities with gaming cafes or otherwise, offers huge opportunities for brand partnerships. But Carlucci warns that an understanding of the unique profile of this audience is critical for ensuring campaigns and integrations resonate. As already seen by Red Bull’s strong and highly relevant integration into this powerful global community, brands well-versed in this world and authentic in how they present themselves on these platforms have potential for great success. It remains to be seen how EA’s new cloud streaming platform Project Atlas, Sony’s newly-acquired Insomniac Games, Google’s Stadia service, Microsoft’s Project xCloud streaming service, and even Apple Arcade will fare in a world where the Fortnite World Cup now exists, and the esports segment now rivals the NFL and NBA.
- Healthcare is steadily becoming more digitized, democratized, consumerized—and even Amazonified.
Healthcare is facing a sea change with the creation of transparent marketplaces for access, the onset of live and ongoing data on behavior, and the treatment of chronic conditions in new ways, like through PillPack’s bundled prescription renewal service (Pillpack is also owned by Amazon). With this sea change comes an increased ability to leverage wearable data to understand patient experiences, inform communications and the development of support and wellness programs, and identify other unmet needs—especially as relates to content and engagement with care providers. To help providers capitalize on this massive opportunity, Kantar’s Health division recently introduced a breakthrough approach to real-world data analytics with Claritis, which links patient-reported outcomes data and clinical data to build on the growing role of patient input in healthcare decisions.
This isn’t surprising when considering Amazon’s entrance into the space. Kantar’s health, wellness and drug channel expert Brian Owens predicts this means it will only be a matter of time before meaningful solutions that align with customers’ preferred way of doing things emerge, since that’s Amazon’s modus operandi. He also sees this move pressuring competitors to concentrate less on profit and more on patients. All of this, combined with three companies from three vastly different industries (Amazon, JPMorgan Chase, and Berkshire Hathaway) uniting to form Haven Healthcare, confirms that there’s a massive need to transform healthcare today. There is also high demand among shoppers for health-related products and services, and a very real opportunity for more than the traditional establishments to play in—and transform—this space.
Multiple Business Models: Winning through different economic and operational footprints
- Seven out of 10 of the world’s most valuable companies by market cap are tech companies—and US and China dominate.
The 2019 BrandZ™ Top 100 Most Valuable Global Brands ranking confirms this, with all but seven of the Top 100 Most Valuable Global Brands coming from the US or Asia (Chinese brands hold 15 of the top 100 places). The same holds in the Top 20 most valuable Technology brands ranking, where all but one hail from the US or Asia. Further, four of the nine newcomers to the Global Top 100 are tech brands, and Technology was the most-represented category among the Top 20 Risers in YOY brand value. However, the ranking also contextualizes Meeker’s commentary on the prevalence and risks of privacy abuses and regulatory pressures: the data shows that the combination of these two forces is hindering the growth of Technology as a category, which grew only 4 percent YOY vs. 28 percent year prior. It also reinforces that the size of technological change rather than the speed is the fundamental challenge for legacy companies adapting to this new world.
- The power of data is not bound by business model, platform, or even geographic boundaries—data, in all its many forms (digital, analog, and even qualitative), is still the hybrid oil powering today’s fastest growing, quickest innovating, and most successful companies, in the US and beyond.
BrandZ™ finds that where Western companies have an advantage in appreciating the emotional power of brands, Chinese brands have an advantage in understanding the power of data. For instance, Meituan is a massive ecosystem of services rooted in last-mile logistics that uses residual data and forged relationships as it expands into other services strategically marketed to shoppers. Its debut on the BrandZ™ Global Top 100 for the first time this year reiterates China’s leadership in providing online-offline customer experiences, including rapid delivery and cashless payment. E-commerce behemoth Alibaba, (ranked #7 in the Global Top 100) as well as Xiaomi (#74) and Haier (#89) with its IoT ecosystem are among a host of other Chinese brands perceived as being innovative and cutting edge by young consumers all over the world.
Gildenberg also comments on the supply chain and business model implications of this data-driven ecosystem approach, noting that models that outsource the last mile are getting more sophisticated and complex, and that finding multiple revenue streams to optimize cost, as well as consolidating deliveries across multiple platforms, is increasingly key. He predicts that proprietary ownership of the last mile won’t make sense for most retailers; therefore, these emerging providers will increasingly be a critical part of the omni-channel ecosystem, particularly in markets where there are so many small and traditional retailers and restaurants like China, Indonesia, and Latin America.
- The Internet isn’t just impacting what content and ads we see, it’s also impacting what we do—specifically, how we buy, and how we work.
How we buy
Smith points out that power of on-demand lies within the convenience factor and removal of inefficiencies (the most important driver of consumer demand), the change in pricing models, and a shift in operating economics—that is, time and attention—all of which are difficult for companies to pass along as higher costs to consumers despite the benefits delivered. Indeed, MONITOR data show that consumers’ use of an on-demand transportation service grew from eight percent of the 18+ US population in 2015 to 32 percent in 2018, and that of non-traditional hotel rooms like Airbnb from 16 percent to 23 percent. While growth is clear, Smith suggests that cannibalization effects have yet to be broadly felt in legacy industries. That is, while taxis have taken a hit, demand for buying a car or staying at a hotel have not dramatically waned. A key consideration is whether this tipping point will ever happen—or, if on-demand vs. traditional options is not necessarily a binary trade-off. He also highlights that in this space, much like in advertising where reach can often mistakenly be prioritized over life-time value, number of trips or number of orders is a more telling KPI than number of customers, as the former is where revenue decidedly comes from.
How we work
Similar nuances and complexities exist within the now-prevalent gig economy. The measurement of this sector presents two key challenges. First, Gildenberg highlights ambiguity around how gig workers report their employment status, and therefore the impact it is having on unemployment. Unclear definitions around this new format of work could shed light on why US unemployment is so low without wages skyrocketing; marginal new jobs closed to full employment being created in a transparent, dynamic labor market could explain why price pressure hasn’t translated into the broader market. And while MONITOR research finds that 16 percent of the US population has worked as either an independent contractor or a freelancer over the past year, this confirms side gigs more than the bona fide gig economy, a very different notion. The MONITOR data indicate that this type of work is the main source of income for 40 percent of those 16 percent, so less than 7 percent of the total population, and attempts to quantify it by economists and others are inconclusive.
- Underpinning freemium’s success is the power of knowing what customers actually want, and the discipline to smartly leverage and act on data—attracting them initially, but also forging stronger, happier, more personal relationships with them over the longer-term.
Spotify’s Barry McCarthy’s observation that investing in a better user experience is among the highest ROI strategies, given its ability to translate to recommendations (and therefore virality) and conversion, is validated by looking at three fast-rising categories in BrandZ’s 2019 Global Top 100: retail, fast food, and entertainment. Each is pursuing data-driven improvements in CX and personalization, with companies like Chipotle in particular benefitting from the increased convenience. The 98 percent YOY growth of this year’s fastest-growing brand, Instagram, was also driven by positive customer experiences. Though not a freemium model (it monetizes through data rather than user payment), the platform leverages its data sophistication and audience interests to evolve the product and deliver an ever-improving—and recommendation-worthy—experience. It’s important to note that the variable tech capacity available through cloud computing is directly tied to the rise of freemium, as this allows new business models to focus on designing the experience without needing to worry about the fixed cost of the infrastructure to support that experience.
Evolving experiences: changing “marketing” from a noun to a verb and from discrete point-in-time deliverables to dynamically changing targets and executions
- When it comes to digital advertising best practices, Meeker’s recipe for Ad Share Gain becomes even stronger with a few additions: targeting tools, context-driven creative and relevance-driven relationships all power conversion in commerce.
Kantar Media & Digital expert Tristan Gaiser provides critical context on the best practices behind each component of Meeker’s ad share gain driver equation. Better targeting is achieved by leveraging new tools that connect advertiser insights (segmentation, campaign measurement, etc.) with programmatic audiences for real-time optimization. When developing new creative, success across all forms of digital advertising requires tailoring creative to the content (display vs. video) and device (mobile vs. PC) in question—but also the context (traditional digital, social, native). This is critically important because creative best practices differ across each of these areas, based on differences in user mindsets, demographic groups partial to each, and, of course, the ad-receptivity problem endemic to digital, particularly among younger viewers. Kantar’s Digital Creative Best Practices research finds that high relevance and conversion in commerce are strongly related. However, Kantar’s Getting Media Right research finds that nearly a third of advertisers and media aren’t confident they understand the impact of context on creative executions. Interactivity, offers, and calls to action, when effectively integrated with the right digital ads, enhance behavioral response, brand outcomes and business impact around digital campaigns, but with many currently missing the mark, the game is yet to be won.
- Images aren’t just the foundation of communication—they’re the key to commerce, and e-commerce especially.
Deepak Varma, Kantar’s Global Head of Neuroscience, cites troves of research, data, and specific campaigns that demonstrate that powerful storytelling creates genuine empathy and emotional response. A recent study found that even among ads considered universally enjoyable, those with a storyline generated more positive facial reactions—an implicit response, indicating a deeper emotional connection—than more inspirational, vignette-style ads. This theme extends beyond campaigns to entire channels: Gildenberg notes that Google’s struggles with e-commerce stem from it being above all a “words” company not an “images" one. He suggests that this is precisely what makes Instagram and Pinterest more interesting e-commerce plays. They already know how to sell visually; their design and experience challenges lie in enabling a transaction.
- Mobile has passed TV in terms of non-de-duped hourly usage and percent of advertising spend: the world has gone vertical as less media is consumed horizontally.
When it comes to growing Internet ad spend and where dollars are being allocated, Kantar’s Media expert Jon Swallen explains that marketers are directing more resources towards lower funnel activities (e.g., consideration, purchase, loyalty), which benefits digital advertising. Paid search is the leading digital ad format, accounting for about 45 percent of US digital ad spending, but Google’s dominance in paid search is being challenged by Amazon. Nearly 50 percent of all product searches begin on Amazon, enabling Amazon to sell ads against these queries. Furthermore, the company is inserting competitive ads for its own private label brands into search results as it tries to win consumer purchases and expand its monetization of e-commerce traffic on the Amazon platform.
In terms of next-generation digital interface, Kantar’s Futures expert Jeff Howanek corroborates Meeker’s observation that connected devices and voice are on the uptick. But he notes that while Amazon Echo ownership and skill totals are experiencing rapid growth, the broader marketplace potential of smart speakers and digital assistance is still largely untapped. Most of today’s skills are for completing basic tasks, and purchase behavior on these platforms still lags. When the technology—particularly natural language processing—reaches its tipping point, voice will quickly become a powerful and disruptive access point to the marketplace with a new set of rules for marketers.
… but this digital media diet may have reached its peak as concerns surface and cutting back commences.
When it comes to concerns about Internet usage overload, the critical element behind this phenomenon is how that overload is manifesting with consumers. Howanek cites extensive trends research that shows they’re not reacting to over-usage by disconnecting, they’re taming digital—rewiring and recalibrating their relationship with technology to better coexist with it, not reject it outright or be subordinate to it. The result is a reenergized appreciation for the analog—for a marketplace which operates at human scale, and how it can work in tandem with digital technology to fit more seamlessly into our lives. Smith often refers to the digital world as a tool that allows brands to operate at “Human Scale.” As this trend confirms, reinfusing flesh and blood back into phone-screen centric experiences is increasingly instrumental for doing so.
The smash musical Dear Evan Hansen has a signature song titled “Waving Through A Window” that captures the isolation that the digital world, unaccompanied by genuine human contact, can foist upon someone today (it refers to people “tap, tap, tapping on the glass…while I’m watch, watch, watching people pass”). Brands and marketers need to harness Meeker’s world, not be swept away by it, and use the tools at their disposal to create human connections that matter.