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Feudal future

Posted By C21 Reporters On 24-07-2014 @ 1:05 pm In Perspective | Comments Disabled

The ‘walled garden’ is a compelling business model. As they have grown, the internet majors, Google, Amazon, Facebook and Apple – call them GAFA – have each pursued a version of the walled garden in different but equally compelling ways.

Their strategy is all about what brand managers like to call vertical integration. Attract people in and then keep them in. Over the coming decades this business trend in the online consumer space is set to continue. The GAFA companies want to secure consumers for whom their chosen brand becomes an all-embracing solution for the individual’s and their family’s entire life-needs. I predict that these so-called walled-gardens will gradually turn into virtual ‘digital cities.’

Today it is mostly our entertainment, or social media content, that is locked in, but increasingly these companies will develop and extend their online services. What works for content today will work for medical health records tomorrow, aided by the quantified-self wristbands that our insurance companies will require us to wear. Today, the Fitbit, the Up band or the Nike FuelBands are the symbols of the up-to-the minute digerati – tomorrow, they will be the outward sign of corporate enslavement. Which one of the GAFA companies will be the first to move into health insurance?

While not being able to move my music from the Apple cloud to the Amazon cloud may be a minor inconvenience today, not being able to move my medical records may be a matter of life or death tomorrow.

The entertainment industry has been a critical factor in the developing success of these major players. The GAFA companies now seem set to dominate a much broader landscape, not just the entertainment sector. How soon walled gardens will become digital city states is hard to forecast. Some say they have already become so. We may all already inhabit a digital medieval landscape.

Western consumers may be dominated by GAFA, but in the East, Ali Baba, Two Cent, Baidu, and Weibo are similar giants. The competition between city states is to the occasional short-term benefit of consumers (as the giants engage in price wars), but mostly it is at their long-term expense. The companies slug it out in marketplaces but also wage legal battles in court (Apple and Samsung most notably).

While internecine fights dominate the digital medieval landscape, we also see regular battles between digital city states and nation states. Efforts to regulate the new global powers are hampered by the local geography that is largely ignored on the internet.

Digital medieval is not unlike the analogue medieval. The old rule of law has been abandoned, and the moral compass of businesses begins to spin. The experience of the first dotcom bubble was often said to be akin to the pioneering days of the Wild West, but I think the medieval period provides us with a surprisingly useful and applicable analogy to where we find ourselves today.

In the digital medieval environment, everyone experiences a communal sense of rapid and vertiginous change, which brings into question the shared world view of the past. Digital medieval forces the abandonment of old truths before new realities have become fully formed. It creates corporate anxieties that prompt ill-considered acquisitions of companies at excessive valuations. It spawns soothsayers, futurists and internet gurus. It places young, inexperienced executives in charge of social media marketing because they appear to understand ‘these things’ better. The effect is to create a digital economic landscape where no one is sure of the rules and a few players dominate in a wilderness of many independent smallholdings.

Co-existing with the majors in their fortress states, scattered around and about like so many digital serfs (‘micro-serfs’), working on their online smallholdings, subsist the cottage-industry businesses of independents. Some of these develop supplicant relationships with the city states and go there to sell their wares. Others maintain staunch independence, developing a coterie of niche customers for their organic goods. A few harbour ambitions to become digital city states themselves and to scale to enormous size.

Finally, no good medieval landscape is complete without its unfair share of disruptive invaders. It is, of course, no coincidence that just below the surface of the digital medieval lurks the ‘digital media evil.’ It is represented by notorious disruptors such as the anti-heroes of Napster, the marauding Nordic convicts of the Pirate Bay and the Baron Mega-Upload himself, Mr Kim Dot Com. Against these, of course, the major content owners, studios and publishers have no option but to launch their anti-piracy crusades.

The advertising model that underpins the activities of both Google and Facebook has much in common with traditional media businesses, but their use of data is way more advanced. It’s that analysis and targeting that is essential when attracting consumers into their gardens and keeping them there. TV has undoubtedly experienced an encouraging resurgence, and for many media companies facing the internet giants’ level of dominance and sophistication, anti-piracy may have been the right mission for the early crusades, but creating new more compelling, consumer-friendly data strategies may well be the more important strategy for the future.


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