Outlook 2023: The Canadian POV
How the four tech and media trends from our Outlook 2023 report is playing out in Canada
Contributions from: Anna Chen, Kenady Ellenson, Francesco Giacobbe, Brooke Goldenberg, Archana Jha, Brian Jones, Erica Kokiw, Kelvin Mak, Emily Micks, Cory Peters, Anton Schefter
Things fall apart; the center cannot hold.
When WB Yeats wrote The Second Coming, it was right after the conclusion of the first world war, while the Russian Revolution was unfolding on the other side of the continent. The world he knew was coming to an end, and a new one was revealing itself.
Similarly, we’re in a similar time of interregnum — the Roman period where one monarch dies, and the successor has yet to be crowned, the in-between. Society, industries, and businesses are trying to find their ways after three years of pandemic-driven changes, which, in hindsight, may serve as the dramatic conclusion of an old era.
Some concepts that, at one point, many perhaps thought were going to stay permanently true (in reference to the global north), but are now being widely challenged: prioritization on economic growth, globalization, and innovations led by big tech.
Russia’s invasion of Ukraine, global interest rate hikes, supply-chain crises, a swath of data breach or misuse, and mounting ethical questions on the practices of tech companies, have led us to suspect that the particular world we’re so familiar with, for the past twenty odd years, is coming to an end.
But the conclusion of one era doesn’t mean we’re reverting to an older one. Evolution, according to philosopher Ken Wilbur, tends to transcend and include, even if through a different lens it seems more like a pendulum swinging from one side back to another. Take cryptocurrency as an example, while its value relative to traditional currency may have cratered since its highs, and its part in society shrunk, the blockchain technology that enabled it, as well as the societal sentiment of the individual trying to claw back some of their share of wealth against the big players, will certainly still be a key part of our next chapter.
What you’ll read shortly in this year’s Outlook illustrates our prediction of what we believe to be a formational era in the paradigm shift: Big tech players that were once seen as leaders are now in danger of being waved off as legacy, the rise of artificial intelligence (and perhaps finally opening the Pandora’s box that goes with such a world), and the shift from physical to digital “street cred”.
In Canada, specifically, we’re indisputably a part of this shift, and in fact sleeping right next to the elephant that is the United States means an extra layer to navigating this interregnum — not only are we finding our path forward, but we are also simultaneously re-defining our identity either by accepting or rejecting what’s going on stateside, given the massive influence our neighbors have on us. With that in mind, the brands and marketers that are likely to emerge from this with an advantage are ones that can not only stay nimble, but also to truly understand what makes Canadians tick, so to be able to adapt.
The End of the Digital Media Duopoly
Even as Google and Meta remain the mainstays of consumer attention and brand advertising dollars, the cracks that have gradually formed over the years are surfacing.
While there were no senate hearings on Facebook’s social impact on this side of the border, Canadians were certainly paying attention to what was transpiring in the U.S. And it’s safe to say that the platform’s effects on societal wellbeing was not lost. Moreover, with us so culturally entwined with our stateside neighbors, many of Meta’s competitors have similarly chipped away at its market share here.
At its core, it’s really that discovery options for Canadians have grown, and the (perhaps somewhat reluctant) reliance on the traditional duo of Meta and Google have lessened, leading to a fragmentation in platform usage.
Gen Z has especially turned to other options that deliver short-form content, especially for the purpose of discovering new products and services. In a March 2022 poll from MTM Junior and NLogic, just 33% of social users ages 7 to 17 had used Facebook in the past month. In contrast, TikTok led all platforms at 50%, followed by Snapchat at 46% and Instagram at 45%. Tellingly, even the older generations that once were only active on Facebook are now expanding to showcase their creativity on platforms such as TikTok and Pinterest.
TikTok’s meteoric rise mirrors what we saw during YouTube’s explosion onto the scene. (At the risk of dating ourselves, remember lonelygirl15?) Consumers, by and large, follow creators — so when a new generation of content arose on TikTok, we’ve seen the shift in motion. With TikTok’s monetization program expanding in Canada in 2023, it’s likely we’ll see the platform take an even bigger share in the Canadian marketplace and amass more audience attention.
But it’s not just Facebook that’s facing the heat — to treat the likes of TikTok as only a “social” platform risks being solipsistic in our own media-world and minimalizes consumers’ appetite leaning into creators and their content, regardless of channels. Similarly, the continued growth of specialized, passion-based online communities has put increasing pressure on the likes of YouTube and Meta. Take gaming for example, half of the online consumers in Canada now play video games on a monthly basis, and Canadian gamers on average spend 8 hours per week on playing video games, per data from a 2023 MTM report. The reality is that entertainment now covers a whole breadth of content, and each is a competitor to the old guard.
As if that wasn’t enough, even the old guards are reinventing themselves, as both Netflix and Disney+ have launched ads in 2022. Subscription video streaming has become the primary form of digital video consumption in Canada. There will be 24.5 million such users this year, up from 16.0 million five years ago.
To be fair, none of this likely comes as a surprise, since these aren’t trends limited to Canada. However, as always, there are some specific nuances locally that may complicate matters: namely, the support of locally produced content, whether through top-down mandates or more grassroot support, and the current climate of the duo’s relationship with local media. And underneath the shifting consumer sentiment, there are pertinent ramifications for brands to tweak their approach to media.
Two proposed bills being worked through in legislature are of interest here: Bill C-11, which aims to modernize Canadian content requirements for digital players as it’s currently being done for traditional broadcasters, and Bill C-18, which proposes that “digital news intermediaries” compensate news sources (i.e. local news media).
Overall, what this development signals is an increased consciousness to protect Canadian interests and identity, and serves as a pushback to tech giants that have been generating profits from local content. While the repercussions of these bills, should they become law, affect not only Meta and Google, but it’s also likely that they will be impacted the most given where they are in their maturity cycle, and their reliance on broad swathes of content to keep users engaged.
Meanwhile, retail media networks (RMNs) are also slowly carving their own corner in Canada. Granted, the existing RMNs in Canada, with the exception of Amazon, are still fairly nascent, and the execution sophistication still leaves a lot to be desired. Yet, what these local RMNs do offer in abundance is consumer data. Privacy-compliant consumer data, to boot. Because what the ongoing deprecation of third-party cookies, an issue top of mind with many advertisers, is really all about is the exponential increase in the focus of privacy protection. The use of the likes of Walmart, Amazon, and Loblaw to target high-value consumers will only grow in due course and will likely put another dent into Google’s armor.
One additional ramification of the increased fragmentation is the need for brands to identify more comprehensive measurement and attribution solutions. It’s far from perfect in our current state, and with each additional platform in the mix legacy measurement methods are going to become much less effective. That’s why brands are increasingly focused on econometric measurement solutions like Marketing Mix Modeling (MMMs) and adopting data clean room solutions to gain greater clarity on their advertising effectiveness. Clean room offerings from players such as from Google, Amazon, and Disney (currently available in the U.S.) provide in-depth audience insights that can tie back from impression to conversion in a privacy-compliant manner, and while they won’t bridge the walled garden divides, these will help provide greater insights on media efficiency and effectiveness. MMMs, meanwhile, help link disparate platforms’ performance to identify holistically performance drivers.
Ultimately, the duopoly’s decline is taking hold because there are now enough desirable options in the digital market for attention to fragment. And for brands, this means expanding their digital media mix to take advantage of the increase in passion-based communities and partners that makes use of valuable consumer data, while setting up infrastructure that can effectively measure this expanded mix.
Twenty-Twenty Me
Coming out the other side of the pandemic and stepping into a world of economic and cultural uncertainty, we’ve entered a period of individualism and self-centeredness with all the positive and negative connotations that comes with. Fueled by the algorithm feeds that now dominates all social platforms, and deeper online personalization, most tech-savvy users have the tools to attract and retain attention to themselves. Personality cults can be built overnight online, and people are looking for that feeling of belonging to attach themselves to and empower them to do the same.
There are several factors that have contributed to this cultural shift. The rise of the algorithm culture, the “For You” page and data personalization have opened up an endless feedback loop with ourselves. Time spent on TikTok amongst Canadians is up 176% since the beginning of 2022, per ComScore data between January 2022 and January 2023, and with content constant and tailored to our own preferences and interests we create our own media bubbles across all platforms.
It’s not only algorithmic feed that provide a comforting shoulder to lean on in the face of an increasingly distressing and polarizing modern society. Passion-oriented platforms such as Reddit and Discord have boomed in popularity with young Canadians looking for an alternative immersive social environment. One where self-identity can be celebrated and built through micro- spheres of influence.
And it is those same young people that are at the center of driving the increasing digitization of self. Although penetration of digital goods and assets such as NFTs is currently low in Canada — only about 2% of Canadians own an NFT, according to Finder consumer survey data — there is an innate openness amongst Gen Alpha and Gen Z to foster a sense of self digitally first. The Entertainment Software Association reports that 92% of Canadians aged 6 to 12 are playing games such as Roblox and Minecraft regularly, games which provide 3D immersive spaces to present yourself digitally and build a world focused on you. The COVID-driven shift towards a more hybrid work and social environment also serves as tailwind for the focus on virtual capital, with increased emphasis in users the ability to tell their story digitally.
Another factor is the creator economy. Canadians have more tools than ever to create, edit, and post content in a matter of minutes with the tantalizing notion that they could become the next TikTok or YouTube star. And it’s hard to deny the “what if” of potential viral success and all its imagined riches. YouTube’s creator ecosystem contributed $1.1 billion to Canada’s GDP in 2021, an Oxford Economics study showed, seeing a 35% increase in the number of creators making $100,000 or more in revenue. This continues to drive the cult-ification of celebrities and creators, and the monetization of fanbases to benefit financially and culturally from the attention garnered. The potential of striking it big with minimal entry costs, along with the current inflationary economic outlook, is likely to fuel an even greater push towards creatorship.
For brands, this increased focus on the self will entail actions in several ways. First and foremost, they must acknowledge the trend, and grant their customers permission to focus on themselves. Key strategies will involve building up our consumers, and giving them the tools and training to live their best lives and magnify that experience to their online audience. We can see this in the proliferation of campaigns that mimic Spotify’s brilliant Wrapped program, giving consumers data-driven insights about everything from their reading habits to their travel history, along with aesthetically pleasing assets to help them share it.
And while there’s not a uniquely Canadian implication to this — after all, there’s something rather universally primal about the focus on the self — for global brands looking to gain a foothold into Canada, one must be aware of the story that’s being told through the data. Canadians are enthusiastic about personalization and the use of data and AI to improve their lives, but there’s the old trope about Canadians defining themselves through how they are Not-American, and a similar caution is warranted here.
The Rise of Synthetic Media
Take a back seat, metaverse, for we’ve found a new “next big thing!” If the first two months of 2023 is anything to go by, we’ll be hearing a lot more about generative AI for the next ten months, and any product or service tagged with “GPT” at the end of the name are bound to attract some eyeballs. The difference with synthetic media, however, is that for marketers it provides more tangible use cases in the near term than the metaverse and the broader web3 suite.
The best-known example is, of course, ChatGPT — a large language model developed by Open AI. It has been estimated that ChatGPT has been trained on a data set containing nearly 45 terabytes of text data — Roughly 450 million documents, assuming an average document size of 100 kilobytes. This machine learning enables it to generate human-like text responses to user questions — It can even remember user input in the chat and use them to guide subsequent responses.
It’s no doubt that ChatGPT has exploded in popularity. Just two months after its initial launch in November 2022, OpenAI claims that it reached 100 million users worldwide. By comparison, it took TikTok 9 months to reach 100 million users, and Instagram, 2.5 years.
The potential benefits that these AI-powered tools could bring are remarkable. And it’s not just semantics-based tools like ChatGPT, but also image generators like Dune and Dall-E, the latter through which the art in this piece is generated. And ultimately, they come together to help boost efficiency and production through automation. For example, chatbots that help answer consumer questions and improve the overall shopping experience, write website copy, and solve errors in code for developers. Effectively, these AI-powered tools enable brand interactions and personalization, but at scale.
However, there is a dark underbelly of applying these emerging class of Generative AI tools, as seen in some students creatively leveraging it to complete school assignments, signaling that the rise of synthetic media has also other, less positive implications for brands. As AI algorithms become more powerful, it is becoming increasingly more difficult to determine the source of the content. It also raises concerns about privacy and trust.
To counteract this there are tools being created to determine if the content has been created by a generative AI like ChatGPT or by a real human. There are also laws in Canada that have been created to protect consumers’ privacy. The most notable one being Bill C-27, the Digital Charter Implementation Act, which contains new legislation relating to privacy, data, and most importantly AI systems in Canada. If passed, there would be regulations placed about AI usage, coming with penalties for noncompliance. However, the reality is that technology moves faster than legislation, and the rapid development of AI-powered tools will likely outpace regulatory frameworks.
Privacy aside, there are also issues around content ownership and intellectual property (IP). Is it the owner of the tool who owns the content (i.e. Microsoft or ChatGPT), or does it fall into a creative category, where it’s the person who used the tool (i.e. the photographer, not the manufacturer of the camera.) There’s also the fact that ChatGPT was trained on a copious amount of other individuals’ work, so there may be some sort of legal implications around the reuse of this content.
What does this all mean for brands? Until the legal frameworks begin to settle, we believe it’s best that marketers should focus on using synthetic media to enhance current processes, without veering too much into full-on content generation. Whether it’s in sentiment analysis, brainstorming, or SEO copywriting, brands should focus on ways that AI can help them save time by taking on repetitive tasks.
Generative AI can also be integrated via APIs into apps and websites to enhance brand experiences. Instacart, for example, is leveraging the ChatGPT API to power their “Ask Instacart” search engine. Users will be able to make Google-like searches in the app, asking Instacart for recipe ideas, and instead of receiving a list of search engine results, Ask Instacart will populate answers in the form of conversational dialogue. Brands like Spotify are also incorporating the API to power their Spotify AI DJ mode — A personalized DJ that knows your music taste, will provide a lineup of music recommendations, and will share live commentary about the music, artists, or genres you’re listing to.
And while we’re still in the beginning stages of AI’s rise, what the Instacart and Spotify examples give is a glimpse of the longer-term implication: how consumer behaviors will evolve over time. What will be interesting to watch is how major players then adapt to them. We’ve already seen Microsoft’s heavy investment in Open AI (the startup behind ChatGPT) has forced Google into releasing Bard, warts and all. The driving force of that is grounded in the anticipation that search, something that Google has long had a moat on, will be fundamentally changed given the great convenience and context that a service like ChatGPT provides. Where this is headed, we don’t fully know, but the pieces are in place for synthetic media to usher in a profound shift.
A Return to the Kitchen Table Internet
With all of this, we’re currently at an inflection point. The pendulum is swaying towards the pre-consolidation era, fueled by a mix of technological advancements and cultural shifts. Meanwhile globally, central banks have turned considerably hawkish in the creation of money. Putting it all together, we’re seeing the tone of conversation shift from innovation-led to, first and foremost, revenue generation.
Back in 2021, high sector growth, rising consumer demand, easier access to venture capital, along with global hiring competition sparked a significant 7% rise in salaries among Canadian tech workers. This also came with additional perks to help lock-up new talent, such as fully remote/hybrid work setups. Fast forward to 2023, as the Bank of Canada embarks on one of the quickest interest rate hikes in history, intent on dampening consumer demand, we now see that the boom was not as sustainable as originally thought, and has resulted in less opportunity for the traditional tech jobs at larger firms in Canada. This has led to fewer job postings for Canadian tech roles on job-search websites like Indeed, and worse, mass layoffs within the sector became commonplace in late 2022 and 2023 with large companies like Google, Meta, Amazon, Microsoft, and WeWork having laid off tens of thousands of employees globally. Unsurprisingly, Canadian companies like Shopify, Clearco, Lightspeed, Hootsuite, and Thinkific have also followed suit.
Difficult times make it especially easy to concentrate on the negatives. However, this transition offers many opportunities to further develop Canada’s tech space and bolster the economy for years to come. If there is one thing that is manifesting in this interregnum, it’s the building blocks to develop newer innovations, to become more resilient and efficient for the future.
Despite the larger tech firms scaling back, there are still several positive signs in the Canadian market. Expanding Tech companies like Nokia, Globant, Ripple, and others are still seeking out Canada as their home base even though other companies plan to downsize. Additionally, less demand for tech roles within the multinational big players in Canada could also be beneficial as it allows for greater local talent retention. This is a major advantage as it could increase Canadian-owned and operated businesses and startups, spark innovation in existing and emerging markets, and more importantly, present new opportunities to address local demands with the agility of a smaller organization.
Overall, Canada is continuing to develop new pathways for individuals from these businesses and enable them with the right tools and spaces to succeed. It’s promising to see new facilities and involvement for startup development, such as the Climate Accelerator that was launched by KPMG and the innovation hub MaRS Discover District. Combined with the leading post-secondary institutions and incubators within the country, we’re well-suited to attracting and fostering new talent, as well as supporting the development of new startups along the way.
Contrary to the macroeconomic headwinds, the rest of this year’s Outlook themes are signaling to us that the current landscape will, in fact, favor innovation, especially within smaller or middle-sized organizations that remain agile in their operations. While the big players are preoccupied with holding onto as much of their growth as they can, the more agile nature of smaller players will become a significant advantage, as consumer demands for innovation won’t slow down. In addition, combined with the cultural push to expand beyond tried-and-true service providers — individual organizations will have a much greater say during this inflection point we’re in, and will be critical in defining where we go in the years to come.
