Exploiting the Opportunities of Digital

The other week I hosted our fourth Technology, Media and Telecommunications (TMT) Leaders of Tomorrow networking event. This is a unique forum we host for emerging TMT leaders to learn from their peers, build their expertise and network across the industry to help shape their transition to senior roles. For this particular forum the theme was ‘Exploiting the Opportunities of Digital’.


We heard presentations from Hannah Bewley, Senior Research Manager from the Internet Advertising Board (IAB) about digital taking the lion’s share of advertising, our own Ben Matthews about workplace communications and Will Page, Director of Economics at Spotify, about Spotify’s ‘rockonomics’. I’ve briefly summarised what they each covered below:


The rise of digital advertising

Digital currently makes up around 40% of the advertising market, and it’s growing. By 2018 digital could represent around 50% of the market. For 2015 the IAB predicts 3 key trends:


  1. Mobile - A fast-growing part of digital advertising is mobile, representing 23% of digital with the market valued at £1.6bn. 41% of 16-34 year olds use mobile phones to research products and brands.
  2. Programmatic advertising (using data algorithms to plan, buy and optimise media advertising to deliver the right message to the right person at the right time) represented 28% of advertising in 2013. It’s expected to reach 60-75% by 2017.
  3. Content marketing – Content and native adverts to help people to get to the right content they’re looking for should help advertisers avoid users’ banner blindness (now that many internet users are familiar with banner advert locations, they’ve inadvertently learned to ignore them).


Unified communications

A buzzword in today’s information, communication and technology (ICT) marketplace? Perhaps. But I think unified communications (UC) is an overlooked sector. By 2020 we expect that the growing demand for communications will have the following effects:

  • An increase in mobility and portability
  • Business communications will catch up with consumer communications
  • VoIP will be more widely trusted
  • Many organisations will have adopted a ‘cloud first’ policy
  • UC will be more commonplace (e.g. you’ll be able to reply to an email via ‘click to call’ as standard)


Large telecoms companies currently dominate the UC market (87%) with ICT resellers making up 10%. However, net promoter scores for both are quite low compared to that seen amongst UC specialists. As a result I think UC is on the rise as consumers will opt for better service delivery and companies look to build scale and capacity, grow their customer base and increase market penetration.


Rockonomics of Spotify

The digitalisation of music presented the recording industry with a problem – consumption was there but the issue was that nobody could see how to monetise that consumption.


There’s no doubt that the global recording industry has changed with the advent of digital. Streaming is now the primary source of revenue in 37 markets. Revenue is relatively stable at $15bn (with digital worth $7bn). Subscriptions are worth over $1.5bn. And streamed music is now included in the mainstream charts.


Spotify has certainly made a name for itself by disrupting the recording industry with its subscribed streaming offering. And, rather than focussing on stream volume, it’s ‘Discovery’ metric allows it to know where each unique users’ first stream of a song came from, resulting in revenue being routed correctly. Spotify also offers an alternative measure of album consumption via median rank. This calculates the popularity of all the tracks across an album, rather than the transactional data used in an ownership model.


Spotify hasn’t rested on its laurels either. It’s just announced a new suite of other products, services and tools.


‘Spotify Now’ can serve you up content that you might like based on where you are and what you’re doing - "Bamboleo" by the Gipsy Kings at dinner time when you’re in your Benidorm self-catering apartment anyone?! It’s also just added podcasts and videos such as TED Talks.


But perhaps most ground breaking of all is Spotify Running. It detects your running tempo and serves up music at the same tempo.


Who’s disrupting the disrupters?

What struck me about the three presentations was the extent to which disruption has played an integral part in driving growth, diversification and consolidation across TMT. 


What does all this mean for mergers and acquisitions deals? In a world where the likes of Thomas Cook have had their market disrupted by Expedia…that then is disrupted itself by the likes of airbnb how do you create a sustainable strategy to grow your business?


That depends on whether you are the ‘disruptor’ or the ‘disruptee’. Either way, it’s about reviewing your strategy in the knowledge that a teenager in a suburban bedroom could rain on your parade.


To what extent has your sector been disrupted by new entrants? What's your strategy by way of response? Share your thoughts below or schedule a meeting to discuss your situation in confidence.


Nick George | Strategy Partner
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