The Internet Is No Longer a Disruptive Technology
The Internet Is No Longer a Disruptive Technology
Conor Sen January 2, 2020
This was not the case a decade ago. In 2009, multiple industries
were in the midst of upheaval thanks to internet-enabled transformations. The
iPhone was only two years old. In the music industry, compact discs still
represented a plurality of revenues, and most of the rest came from digital
purchases. Streaming, whether of music or on Netflix, was still in its infancy.
We were in the middle of the transition from print ads to digital ones; 2009
was the last year the newspaper industry had higher ad revenues than
Google, and the last year Facebook’s revenues were less than $1 billion.
E-commerce was growing, but Sears and Kmart were still large retail chains.
YouTube was known mostly for a handful of viral videos (Susan Boyle, anyone?).
Today, much has changed. The music industry has become the
streaming industry, with compact discs and digital sales becoming less and less
important; today’s industry growth is powered by subscriptions. Beginning a few
years ago, total revenues have started to grow again after 15 years of
declines. The competitive threats to the leader in music streaming,
Spotify, come from well-financed competitors with similar offerings, like Apple
Music and Amazon Music, rather than a brand-new technology. The music industry
may have been the first to be threatened by internet-related disruption in the
late 1990s, with the growth of mp3 sharing and Napster, and is now perhaps the
first industry to have completed its transformation.
The advertising industry has been transformed by Google and Facebook.
Early in the 2010s, there was a popular chart showing that online ad revenues
represented a much smaller share of total ad revenues than internet use
represented for total time spent consumer content. The reverse was true for
print media and print ads. Today that gap has closed. Print and radio now
account for just 15% of total ad spend.
Perhaps no industry has been hurt more by the internet this
decade than physical retail. E-commerce has continued to gain market share.
Many retailers have gone bankrupt. Malls keep closing. Sears and Kmart have
closed hundreds of stores, and their parent company flirts with bankruptcy. Yet
we’ve also seen that Walmart, Target and Costco are more formidable competitors
than the retailers that have disappeared, and all three have stock prices near
all-time highs. Top-tier malls have reinvented themselves by adding
restaurants, apartments and hotels. E-commerce is starting to have its share of
growing pains due to high customer acquisition costs as online ad rates have soared,
and some online firms are finding that building their own stores makes good
business sense. The future of shopping is more complex than just e-commerce
crushing brick-and-mortar stores.
As for video streaming, while it may succeed in killing the cable
bundle, it’s not feeling as transformative as it did a few years ago.
Subscribing to multiple streaming services can quickly cost more than the cable
bundle did. We used to complain about scanning hundreds of cable channels and
finding nothing worth watching; today, we have the same frustrating experience
while scrolling through Netflix struggling to find something to watch. After a
few years of juggling multiple streaming services, we’ll probably throw up our
hands and ask for someone to create a streaming bundle that ends up costing
about as much as the cable bundle did. The winners are likely to succeed by
offering the best content with the most ease of use rather than coming up with
a breakthrough new technology.
Just because the internet has matured doesn’t mean the next
decade will lack for disruption. The energy and automobile industries feel the
way that internet-related industries did 10 or 15 years ago, with solar energy
and electric vehicles likely to take significant market share from hydrocarbons
and gasoline-fueled vehicles in the 2020s. But those impacts are likely to be
more industry-specific, and the business world at large may no longer look over
its shoulder wondering if a new internet-enabled technology might destroy its
company overnight.
Conor Sen is a Bloomberg Opinion columnist. He is a portfolio
manager for New River Investments in Atlanta and has been a contributor to the
Atlantic and Business Insider.
©2020 Bloomberg L.P.
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