July 2023
Many companies are trying to circumvent this simple truth, either because they are in denial or just short term opportunists. But the future of commerce (and the internet) is clear: privacy is going to win. And in a world where privacy wins, we will fully enter a new era of business strategy – an era where true customer value, instead of winner-take-all distribution or clever marketing tactics, will be the primary driver of success.
Before the internet era, distribution ruled all. Distribution was the primary input to the business models that dominated our world, whether it was TV, newspapers, retail stores, or book publishers. To succeed at scale in the pre-internet era, you had to crack the distribution equation, no matter how good your product was or how much value you were able to provide to your customers.
But as the internet entered its prime, business strategy fundamentally changed. Shifts in mediums of distribution, the “cutting out of the middle man,” was the x-factor that led to the explosion of eCommerce and the DTC revolution in the 2010’s. In a world where mass distribution coupled with hyper-personalized marketing was now possible and cheap, the best marketers won. You no longer needed to have the gatekeeper’s access to key distribution channels. You didn’t even need to have the best product, or a product that was differentiated in any way at all. To gain consumer attention at scale, you simply needed to have some digital marketing chops and a product to sell.
Under these conditions, the easy money internet era ensued.
But as consumers have caught on to the realities of their lack of privacy and the (often) the poor quality of products that take advantage of it, mediums of distribution are changing once again, and another fundamental shift in business strategy is underway.
Digital privacy as a priority is here to stay. It’s not going away, and it will only become more important over time. While this doesn’t mean that personalized distribution will cease to exist completely, it does mean that it will take a significant step back. This shift will lead to the reemergence of distribution as a valuable input to business models. Distribution will once again be an element that needs to be earned. But this time, the way to earn it will be through product innovation and relationship building, instead of cozying up to middlemen.
For this reason, marketing companies that were so successful in the 2010’s are losing in the privacy age. As are the distribution companies of the pre-internet era. But only if they refuse to adapt.
This is a simple truth, but far too many companies are ignoring it at their own peril. The power is shifting in favor of product innovators and operators, and away from marketers.
But brands in denial are still trying to solve what they perceive to be marketing problems. They’re hiring creative strategists and buying every piece of attribution software available, but they’re only delaying the inevitable. Unless they can generate real value, they are going to die. And rightfully so.
Does this mean that the mechanisms of distribution will reverse course to a pre consumer internet era? Not really. Distribution will still be much more accessible than it was before. But it will never again be as accessible as it was during the 2010’s. The window has closed slightly, just enough to weed out the brands that have no real value to offer to the world. And that’s a good thing – a beautiful equilibrium.
Because privacy is going to win, the days of solving problems with personalized marketing are over. The bar to win is now forever higher. Instead of marketing your way out of a situation, first focus on providing value to consumers by actually solving their real problems.