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Outlook 2018: The End of the Beginning

Four key trends that are driving audience attention and disrupting how we connect with consumers

Adam Simon
IPG Media Lab
22 min readFeb 7, 2018

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Welcome to the IPG Media Lab’s 2018 Outlook. Each year, we round up the ideas that excite us for the next few years: new technologies, market forces, and shifts in consumer behavior that are changing the media landscape. Since 2006, the Lab has worked with our clients and with industry partners who can help them best adapt to disruptive change.

Guided by a forward-thinking perspective, the Lab team explores emerging technologies and their potential to become new media platforms. Our focus on research and strategy enables us to analyze the latest platform developments, understand how they will impact consumers, and advise our clients on how to navigate the disruption they bring. Through a finely tuned vetting process, the Lab team organizes their findings, manages introductions and most importantly, recommends these partners to solve client challenges or bring forward new opportunities.

This Outlook is an overview of the trends and topics that we expect to explode into the market in the next few years, why we’re convinced they’re important, and how you should respond. We hope you enjoy it.

Comments, questions, and opportunities are very welcome. Please reach out to Josh Mallalieu, at josh@ipglab.com.

2018: The End of the Beginning

Last year, we looked toward The Next Wave of Computing, examining the chess moves being made by the major technology platform players to best position themselves as consumers expanded their media time to devices beyond the smartphone. Implicit in that narrative is that we’re on the cusp of another major shift, and this year, we’re ready to call it — we’re at the end of the beginning phase of the internet.

We’re at the end of the beginning phase of the internet.

Until recently, it’s been easy to think about tech as its own industry, as distinct and separate as entertainment or finance. Certainly, as with those examples, their products and services impact other industries, but they were just one influence among many. Today, that is no longer the case: our major platforms — Facebook, Amazon, Google, and Apple — are transforming the global economy. Whereas it was once easy to say that Amazon’s sales, or traffic from Facebook and Google, were additive to traditional retail and publications, they’re now the defining feature of the industries they touch. Their platform changes are bellwethers, moving stock prices of thousands of companies that swim in their wake. And if they’re not touching your industry yet, just give it a few months — disruption is coming to every corner of every industry. It’s being driven by tech companies and the internet, but the effects have little to do with technology itself and everything to do with consumer behaviors and expectations. We can start to see the shape of the 21st century, and it looks fundamentally different than the 20th: it’s driven by overabundance rather than scarcity, demand rather than supply.

The economy of the 21st Century is driven by overabundance rather than scarcity, supply rather than demand.

Two events of 2017 have pointed to this shift towards a more mature phase of technology empowered disruption. The first was Amazon’s acquisition of Whole Foods, marking the company’s first serious foray into brick-and-mortar retail. Amazon is a tech company, but the Whole Foods acquisition wasn’t about technology at all; it was about acquiring the local distribution centers necessary so that Amazon can rethink and modernize how we buy groceries — a category that requires a different approach than books or electronics. Together, Amazon + Whole Foods only represents 1.5% of the US grocery market, but they’re already forcing every other grocer to respond, through partnerships or acquisitions of their own, to the impending shift in consumer expectations.

The second landmark event was Disney’s deal to acquire the entertainment properties of Fox, consolidating the two largest movie studios and Hollywood IP holders. This is a great example of a legacy brand responding to the shifting market, making bold moves to ensure its place in the new economy. Make no mistake, this was a defensive move by Disney, to remain competitive in a Netflix-driven world. Again, Netflix may be small by most metrics compared to Disney, but it now funds more series than any other network, and recently plucked a crown jewel from Disney’s TV lineup by poaching Shonda Rhimes. Once the Fox deal is complete, Disney will be well-positioned to not only survive, but thrive, as a thoroughly modern entertainment conglomerate. The company will be uniquely positioned to transition sports away from the cable bundle, and with its majority stake in BAMTech — an industry-leading streaming platform used by Major League Baseball, HBO, and others — a strategic hedge against competitors. And, as we’ll see across this year’s trends, Disney may be able to join Facebook, Amazon, Google, and Apple as the fifth major driver of the economy going forward.

The past is prologue, and over the next few years, we see these aggregators of consumer data and attention impacting the rest of the market in four key ways: by creating new vectors for the spread of media and culture, by forcing a bifurcation of the retail experience, by embedding their technology platforms deeply into our homes, and by changing the definition of brand trust. Let’s take an in-depth look at each of them.

All Culture is Digital Culture

One event that didn’t occur last year, but certainly underpinned the conversation about technology disrupting in unexpected ways, was the 2016 US presidential election. Putting aside the actual politics of the time, it’s impossible to deny that the political system was not disrupted by social media in ways we still may not fully understand. In retrospect, we should have seen this coming, as social’s disruption of how we consume, produce, and distribute news to 67% of Americans makes politics an obvious target. And it may lead to the first major government regulation of a technology company in the US. But more broadly, it underscores that there is no longer a separation of “internet” and “real life” — all culture is digital culture, and that, by definition, means that it’s changing.

There is no longer a separation of “internet” and “real life” — all culture is digital culture, and that, by definition, means that it’s changing.

What we’re seeing in the entertainment industry is similar: a shift to a modern, internet-powered infrastructure means all assumptions are up for grabs. We’ve been talking for years about Appified TV — how the steady migration of consumers from broadcast to streaming television is less about the delivery mechanism and more about how it impacts content discovery and expectations about traditional ad load while enabling new kinds of brand experiences. As cord cutting accelerates, we expect that rethinking windowing will become part of the conversation. As theatrical subscriptions like MoviePass and experience innovators like Alamo Drafthouse Cinema redefine the low- and high-end of the movie-going experience, consumer expectations have shifted enough so that at least one solution to bring the theatrical window into the home will launch in the next couple of years. At a minimum, the launch of Disney’s streaming service will incentivize them to experiment with reversing the theatrical and SVOD release windows. And once that theatrical window is broken, we expect all of them to be in play, refocused around maximizing revenue across a global audience, regardless of which screen is being viewed.

Sports has long been hailed as the lynchpin that is holding together the traditional cable bundle. But Disney’s ESPN streaming service has launched, and was the fastest service ever to reach 1 million users in the US. So far it is mostly additive, but gives the company a place to move leagues as contracts renew (presumably first with Fox’s regional sports network), and the ability to rebuild the sports bundle in a direct-to-consumer fashion. Meanwhile, traditional sports are under generational attack, as younger millennials eschew them in favor of esports, which are now mainstream fare in the US among a younger generations. Notably, while ESPN and Turner do carry esports, the major viewing platform for them is Twitch, a streaming company owned by Amazon, which captures both major tournaments, but also the esports equivalent of “regional” matches, often streamed on individual athlete’s personal channels. Twitch has also benefited from some recent push-back against YouTube, as Disney trials exclusive content from some of its top stars on the platform. If successful, it could position Amazon as the first major competitor to YouTube in nearly a decade. A generational shift in viewership toward new kinds of sports is something that most analysts could never imagine, and yet is exactly the kind of cultural shift that the internet has enabled.

The direction in which our technology platforms are evolving puts us on the cusp of the analog world being entirely subsumed by the digital.

Beyond forms of traditional media, the direction in which our technology platforms are evolving puts us on the cusp of the analog world being entirely subsumed by the digital. Augmented reality, one of the most promising emerging technologies, layers digital context on top of the physical world. It helps us shop for furniture online by showing it in our homes, provides visual directions to guide us to the correct storefront, and maps our real-time facial expressions onto cute emojis. With significant investment from all the major platforms, we expect AR to expand its use cases and rapidly pass VR in mainstream consumer usage. Today, we do this through our phones, but AR’s endgame is wearable — glasses that will augment everything we see, providing eyes for our AIs, and eliminating one of the final boundaries between the physical and the digital.

Recent Updates:

Augmented reality is a brand marketer’s dream come true. From packaged goods to manufacturing to entertainment, AR can bring products and properties to life, combining digital content with the real world to inform and entertain in amazing new ways. Unity’s AR ads platform delivers an AR ads experience across mobile apps, presenting a first-to-market opportunity for brands.

Tony Parisi | Global Head of VR/AR Strategy, Unity Technologies

Two Paths Ahead for Retail

How we shop in the US is undergoing a major transformation, and it’s a change that will impact every brand, whether sold through first-party stores, third-party retailers, or specialized distribution partners like car dealerships. Though only 10.1% of retail dollars are spent online, ecommerce in general and Amazon in specific have an outsized impact on consumer behavior at retail. With analysts estimating that over 50% of American households are Prime members (and some estimating close to 70%), Amazon sets the pace of changing expectations around pricing, convenience, customer service, and soon the in-store experience at brick-and-mortar locations. But the implications will touch every category, from cars to movie tickets to airfare. In order to thrive, retailers and brands must focus on two increasingly divided retail strategies: differentiation or convenience.

Retailers and brands must focus on two increasingly divided retail strategies: differentiation or convenience.

Differentiation can include tactics such as exclusive products, superior curation of products, or the shopping experience itself. Convenience can be centered around things such as product discovery, fulfillment, and purchase methods. In most categories, we already see brands choosing sides, as providing both is a tricky balancing act. For example, retailers like Bonobos and American Girl are focused on creating unique in-store experiences that make their products stand out from similar shirts or toys on the shelves of big-box retailers. Similarly, traditional auto brands are differentiating on the experience of owning or leasing a car, with Volvo and BMW both offering easy ways to purchase and trade in vehicles, while Uber and Lyft are focused on the convenience of on-demand transportation. And a particular tourist destination will focus on differentiation, while aggregators such as Expedia will help you easily find a getaway that accommodates your schedule and budget. Even brand collaborations, once the purview of high-end fashion and musicians, are now a prevalent way to differentiate product offerings and cross-pollinate each others’ audience.

While it’s possible to differentiate on price (or convenience itself, for that matter), it’s a short-term, unsustainable strategy for most retailers. In the face of competition with companies like Amazon, which can quickly match new innovations in convenience and have other lines of business from which to earn margins, it’s difficult to keep ahead for long. That said, price and convenience can both be used to drive short-term gains, which can be especially useful if there are strategies to transition those customers to other types of differentiated experiences.

Ultimately, only the strongest brands will be able to follow through on differentiation strategies. Aggregators with an existing consumer relationship in a category — Amazon and Walmart in retail, Expedia and Kayak in travel, Ticketmaster in events — will become the new gatekeepers to access consumers with weaker brand affinity. The channel itself will shape what is bought, as well: unlimited shelf space and AI-powered, personalized recommendations don’t function the same as eye-level displays and end-caps. And as these tools expand off the web and into physical retail, brands will need to work even more cooperatively with third-party retailers to ensure their products are top-of-mind in a system that looks more like SEO than a planogram.

Only the strongest brands will be able to follow through on differentiation strategies.

This probably means fewer brands, and fewer products, with more focused promotion. We’re seeing brands like Nike follow this path, as they consolidate their SKUs and focus on only the most differentiated retailers. In the race to take control of the customer relationship, a brand’s business model determines what its primary approach should be. Brands with an existing retail footprint and convenience advantage would be wise to double down on improved logistics and fulfillment. Aggregation may even force cooperation between competitive brands themselves, as they realize the difference between a competitor and an existential threat.

Recent Updates:

We’re rapidly racing to a digital retail universe controlled by one or two global businesses. Winning in digital retail requires brands invest in eCommerce infrastructure that supports increasingly convenient transactions such as speed of fulfillment or differentiated experiences such as integration with new device types for ordering. Brands that win will ensure that they have the data to understand when that impulse moment is for their products and have in place the infrastructure to deliver on that need as quickly as possible.

Cillian Kieran | Co-Founder and CEO, BrandCommerce

The Battle for the Home

After years of treading water, the smart home is finally starting to emerge from its flip-phone-esque adolescence of incompatible standards and wonky app control. This is largely being driven by voice assistants. Second to playing music and checking the weather, the market has discovered that voice is one of the best ways to control connected devices, from light bulbs to thermostats to locks, especially when your phone might be in the other room. By giving our major tech platforms a beachhead into the home, voice has unlocked the home as the next frontier in the platform wars between Google, Apple, and Amazon.

While voice is important, it’s a mistake to believe that it’s is the only entry point to the home, an oversight that much press coverage perpetuates. The home will likely be controlled by a constellation of devices: voice, certainly, through microphones embedded throughout the living space, but also the television. As the largest screen in the house and the portal to all video media, it may well evolve into the best place for household-wide communication. And wearables may also play a key role, as well, providing glanceable information (i.e., timers for appliances like the oven or the laundry) as well as presence (who’s home, and who’s in what room) in the one place where you’re likely to not have your phone with you at all times. Despite the excitement around connecting our lights, appliances, and even bathrooms, at the end of the day the platforms that connect and control them will have the larger impact on consumer adoption and behavior, as we slowly upgrade every device and appliance in our homes over the coming decade.

While voice is important, it’s a mistake to believe that it’s is the only entry point to the home.

Today, each platform has its own advantages and weaknesses. Amazon, with Alexa, maintains a first-mover advantage in distributing both its own devices (at about 70% market share) and microphones embedded in other appliances, thanks in part to a willingness to promote Alexa partners through Amazon’s retail channels. To many consumers, Alexa is still synonymous with voice control in the home, and should be viewed as Amazon’s operating system of the future, as important to Amazon as the iPhone is to Apple. Google can offer best-in-class artificial intelligence for responding to inquiries, as well as access to YouTube and Android users’ personal data. After a few false starts, Apple’s HomeKit platform is notable for supporting both the widest range of device types as well as the ability to understand which users are home at any given time, as well as integrating with iPhone users’ personal data. And while it may be behind in distributing microphones throughout the home, Apple will certainly have an advantage if wearables emerge as a key component at home where, again, a watch might be the most convenient display.

And of course all three have television platforms, ready to be more deeply integrated at the right time. Indeed, there is a certain amount of ecosystem lock-in at play here, where exclusives around music and television could be leveraged to entice a customer toward a particular platform to power their whole home. The home creates new choke points for media, with new gatekeepers that will shape not just what and how we consume our media, but how shopping and advertising work within the home, as well. A single assistant that runs across every connected device in our homes would have an incredible depth of knowledge and influence. This explains Amazon’s serious investment in Alexa. If ecommerce shifts from the laptop and the phone to voice, TV, or even the appliances themselves, then Amazon needs to provide the best interface for that. The company’s deep knowledge of consumer purchasing behavior will be key to that. In a voice-first environment, Alexa will use your previous purchases to inform your current request, rewarding brands with established customer bases on Amazon.

The home creates new choke points for media, with new gatekeepers that will shape not just what and how we consume our media, but also how shopping and advertising work within the home.

It’s important to note that some homes may utilize multiple platforms — unlike with smartphones, there’s little inconvenience running your home on both Alexa and Siri, for example. And there’s little network effect outside the home, as running the same platforms as your friends or neighbors doesn’t improve the experience. Beyond technical capabilities and third-party integrations, which will all be roughly equivalent over time, the largest single factor in choosing a platform may wind up being the trust the consumer has in the platform providers themselves.

Recent Updates:

Roku believes that the home theater market is ready for a makeover. Consumers want more affordable options, voice control, and one remote to control it all. To make this home theater experience a reality, Roku recently announced a whole home entertainment licensing program that will enable hardware makers to sell Roku branded smart speakers and audio systems. These devices will run the Roku operating system and Roku Connect, connect wirelessly, and be controllable with one remote and the Roku Entertainment Assistant. Roku believes that there are bright opportunities in the whole home ecosystem for advertisers.

Scott Rosenberg | GM, Platform Business, Roku

Brand Trust is Consumer Access

But these platform providers aren’t the only brands that will face a reckoning with consumers in the coming years — we’re entering a market society, where every aspect of our lives which can be quantified will be productized. We’ve been selling health and hotness as products for decades, but now they’re becoming hyper-personalized products, based on DNA tests to optimize diet and exercise for our individual bodies, and using artificial intelligence to adapt to our behaviors and finally (finally!) help us break bad habits and overcome obstacles to self-improvement. And from there, we can buy ourselves better sleep, the perfect romantic partner, or even a better death, as even end-of-life planning becomes a trend-driven designer industry. There is a purchasable solution for every problem, often powered by artificial intelligence that claims to be able to know us better than we know ourselves.

We’re entering a market society, where every aspect of our lives which can be quantified will be productized.

As the market extends to every part of our homes and bodies, only select brands will be granted access to our most private spaces. That trust will include confidence in the product or service itself, of course, but also confidence in the ethics and politics of the company behind it. We’ve long discussed how brands confer status, but that used to come directly from the products and positioning. Today, consumers increasingly choose products based on environmental sustainability, workplace equality, or to which political parties the founders donate. And, indeed, it may be increasingly impossible to appeal to every consumer — even as politics are becoming more divisive, poll after poll indicates that consumers are looking for brands that are willing to take a stand for their values, with a recent study finding that 58 percent of US consumers believe that brands should share their opinions on social media.

The brands that can navigate this successfully will be granted unprecedented access to their customers, with new channels for direct connection and unique sources of consumer data. This will often be delivered as a hybrid of product and service: Peloton, with its high-end home workout gear that’s tied to a group class subscription, is an example of how health and fitness might work. Or Ikea’s recent acquisition of Task Rabbit, to provide more robust delivery and assembly of furniture, an example of filling holes in the company’s strategy of flat-pack furniture as consumer expectations have shifted. Even Disney has made moves in this direction with Circle with Disney, a hardware device that allows parents to monitor and filter internet content for their children across all devices in the home. It’s a great extension of the brand trust that Disney has built up for decades, while giving Disney insight into your family’s internet usage.

Another brand trust issue may surface as more and more online discovery becomes driven by AI-powered recommendations, and whether consumers trust the algorithms behind them. Amazon and Netflix are obvious examples in this regard, as they populate their landing pages with data-driven recommendations personalized for each user. But the unbundling of online discovery goes beyond that. Snapchat’s new Context Cards feature, for example, pulls in additional information about real-world places into the app when they are geotagged, saving users the need to go outside the app for it. And as mobile AR becomes widely adopted, the algorithms that power it will literally impact how we see the world. In the age of “fake news,” brands will need to establish rock-solid credibility to earn a consumer’s trust.

As more and more discovery becomes driven by AI-powered recommendations, a trust issue arises surrounding algorithms behind them.

For brands that can establish that strong trust, it becomes a differentiator that allows them to expand their business into new areas and get closer to their customers. Over time, we expect blockchain to be a foundational technology to digitize and manage these trusted relationships, and allow that trust to be leveraged across a variety of touchpoints. For brands that don’t have that trust, they’ll have to work through a proxy — most likely one of the tech platform providers we’ve been discussing throughout. One example of this is the new Alexa cooking skills Amazon recently introduced, which allow Alexa to control your connected oven and microwave simply by telling her what it is you’re cooking. But the temperature and time is set by the appliance manufacturers, who may know their ovens but haven’t built up consumer trust when it comes to actual meal preparation. We expect these to quickly be surpassed by skills from the food brands and recipe sites, which have earned that trust over the course of many meals, something underscored by Whirlpool’s acquisition of recipe aggregator Yummly.

For brands that can establish that strong trust, it becomes a differentiator that allows them to expand their business into new areas and get closer to their customers.

Ultimately, brands that have earned their place in a consumer’s heart will be in control of their own destiny, and in the best position to expand their connections in the future.

Recent Updates:

The customer journey has fundamentally changed. We have moved from a single-threaded web experience to owning multiple connected devices that are always on. The ad industry has been talking about aligning “the right ad to the right user at the right time,” and what powers that is getting the right data to the right system in real-time, with identity as the nucleus of successful data execution. The shift to identity means the realization of people-based marketing. With upcoming regulatory changes such as GDPR, modernizing data infrastructure and earning consumer trust around data usage will be the key to make that happen.

Michael-Katz | CEO, mParticle

What We’re Watching in 2018

Throughout the year, the Lab closely monitors developments across industries, and changing consumer behavior, to keep you current on how these trends might develop. Here are the things we’ll be watching for this year:

Will world governments regulate any of the major tech platforms?

Probably the biggest question mark, and the one thing that could alter the trajectory of innovation permanently, is government interference through regulation, trade sanctions, or an outright breakup of a major technology company. Unthinkable a few years ago, the media and the public have increasingly cast Silicon Valley as the new Wall Street — omnipresent, entitled, and out of touch. The EU’s strong stance on privacy would put Facebook and Google in the crosshairs, with Russian interference in the 2016 election adding to Facebook’s worries in the US. Amazon is beloved by many consumers, but also — mistakenly — blamed by many for the retail closures that will continue for the foreseeable future, as it continues its march to dominance. And Apple, one of the few US tech firms to do well in China, could see its fortunes reversed if the US imposes trade sanctions. Any one of these things occuring could dramatically alter the landscape going forward.

What verticals will Amazon tackle next?

Having made meaningful progress in fashion in 2017, and made steps into heathcare earlier this year, the company’s systematic disruption of how we shop is likely to continue unabated. But where will Amazon focus next? Will it expand its auto listings into actual sales, or enter the event-ticketing space, or leverage its logistics platform into a consumer shipping offering? All have been rumored, and wherever Amazon goes, disruption follows.

Does Facebook enter the home? Will Apple turn Siri into a true platform?

Notably absent from the battle for the home is Facebook. We’ve heard rumors that a Facebook smart speaker with a screen (akin to an Echo Show) may be forthcoming, but ongoing security breaches seem to make a go-to-market strategy for it difficult. Similarly, there was a rumor ealier this year that Facebook was interested in acquiring streaming device maker Roku. Roku leads the market for OTT devices in the US and at CES this year announced a connected speaker platform and voice assistant. A Facebook acquisition of Roku would have been a bold move, but seems like it was scuttled in the midst of the Cambridge Analytica scandal.

Meanwhile, Apple’s assistant is currently being used on half a billion devices, and yet Siri is notably absent from the public conversation. Apple’s approach to the home has been more holistic, focusing on more than just voice. And yet voice is emerging as a key strategic asset, one that may require relinquishing some control to third parties. Will Siri ever be accessible via third-party microphones or non-Apple hardware? Will Apple elevate Siri to become its own software platform for developers? They made some progress toward this with Siri Shortcuts in iOS 12, which was a surprising leap in the right direction, but is still hamstrung by limited inter-device communication. More than anything, we’re looking for a sign that Apple sees the potential of a Siri platform that runs across all its devices and in the cloud. The key might be international support — Siri supports many more languages than Alexa or Google, and even modest platform improvements, launched globally, could catapult Apple back to the head of the pack.

How will the use cases and business models for AR develop?

Mobile augmented reality had a banner year in 2017, with platforms launched by Apple, Google, and Facebook. But we know all three companies (as well as Amazon, and others) are working on wearable AR glasses, likely to launch around 2020. The job of mobile AR, at this point, is to help platform owners, developers, and users figure out the use cases and business models that will make the glasses a viable product by the time they’re ready to launch. While there are some exciting apps already in market, how this market matures may point the way to the killer apps of the future.

How much market share will voice and visual search capture?

Voice search and visual search, together, are projected to make up 50% of global searches by 2020. But will they? How often will consumers turn to voice assistants in the home for search queries? Will Google Lens see a widespread release? Will Pinterest Lens see an increase in use? Or will Pinterest’s superior technology make the company an acquisition target? 2018 will give us an indication of the scale of these disruptions, as voice search via assistants ramps up, and we see wider deployment of visual search tools.

How will content distribution windows change?

Content windowing, especially for film and television, is seeming increasingly archaic in the era of a strong, global Netflix. With movie theaters experiencing similar strains to brick-and-mortar retail, cord cutting accelerating, and major players clamoring for a “super-premium VOD” window that matches theatrical releases, we may be reaching a breaking point. Once the theatrical window is broken, what else is up for grabs? And what does it mean for ad-supported entertainment?

For more insights, follow The Lab on Medium, and subscribe to our newsletter and podcast.

Comments, questions, and opportunities are all very welcome. Please reach out to Josh Mallalieu, at josh@ipglab.com to get in touch with us.

Minor updates made on October 3, 2018.

Credits

Adam Simon | Twitter: @adamjsimon

Angel Mendoza | @angeljasonm, Benjamin Hone| @BenjaminHone,

Chad Stoller | @cstoller, Christina J. Adranly | @cadranly,

Josh Mallalieu | @jemalls, Kevin Rodriguez @klrkrod,

Richard Yao | @richard8984, Scott Elchison | @tippier

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Adam Simon
IPG Media Lab

Written by Adam Simon

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