The time when industries were clearly delineated and competitors were looking alike ended. In many markets, companies from previously separated industries compete for the same customer spending and more intense competition is within value chains. Data is one asset in this competition transformation. What is at stake? What are the key questions to secure leadership?
The example of advertising, media and retail
Advertising, media and e-commerce used to be separate industries sharing a common interest and complementing each other. With digitization and in particular data, the three markets are merging and industry leaders on three markets are challenging the position of their former friend.
The three industries are data soluble and cross-industry competition intensifies. Advertising networks launch e-commerce platforms, see for example Everymile by WPP. Similarly, retailers are becoming significant advertising platforms. Amazon collected $31bn in ad revenue in 2021 and WallMart $2bn. Last, e-commerce companies are becoming more and more media producers (see how for example, how Washington Post’s media producing software is massively used by retailers).
Beyond retail, other digital platforms and incumbents engaging in digital platforms are also becoming significant players in advertising. In entertainment, Disney and The Trade Desk signed a deal to run automated ads across all Disney properties. In telco, the trend started long ago and has strengthened. In hospitality, Marriott launched an ad network to target their guests in their rooms. Even Deliveroo started an ad platform.
If you want a more detailed view on retail media networks, this McKinsey study details the opportunities and possible strategies for the $100bn market they foresee for 2026 in the U.S. (with the overall operating margins in the 50 to 70 percent range).
Data is the main asset in many markets new competition dynamics
The phenomenon we just described is made possible because of the full digitization of the three industries which triggered production of vast amounts of data. But it’s also because software and services have been designed and implemented to automate transactions based on this data (real time bidding for advertising for example).
The same story won’t certainly happen in all markets, however, in nearly all markets, customers are interacting through apps and websites or connected devices are generating data continuously. A similar market merge is observable in utilities and in manufacturing equipment where incumbents see new competitors from the data and software landscape competing directly or indirectly. It’s also the case in financial services.
With abundant data, we could have expected the value of this resource would decrease, being less scarce. As a matter of fact, access to vast amounts of data is still scarce, which makes data quite a distinctive resource.
The first reason for this scarcity is the reluctance from data aggregators to share the data openly, preferring keeping the data for their exclusive use. The second reason is to be found in regulation. All over the world, states imposed higher constraints for trading personal data, which limits the ability of data aggregators to trade them if they want.
In this context where industries borders are blurring, companies face 3 strategic questions.
- What are the opportunities to grow a distinctive data stockpile? Are there partnerships to build to access to valuable data or to distribute our distinctive data?
- What are the opportunities to conquer new markets, outside our initial scope, leveraging data capabilities?
- Which data intensive companies are (or could) enter our market and what could be our reactions (buy, attack, sell)? See previous posts The new value chain of the automotive industry, stakes for carmakers, and Digital colonization: how big tech companies use data to enter regulated markets.