When technology is fundamentally changing our world, one thing is sure: Only those who are bold enough to question the status quo will survive. Ovidiu Solomonov, dives into what the future might bring for digital marketplaces.

The amount of data collected every year increases exponentially – in 2015 we collected more data than in the history of mankind up to 2014. The ability to store and process this data increases exponentially – Moore’s law is (still) at work driving ever faster, smaller and cheaper hardware. Algorithms now exist that can crunch these vast amounts of data and learn on their own how to optimize for specific targets.

Step by step

This is why we are bombarded with news about smart cars, humanoid robots, and artificial intelligence. While it’s impossible to predict exactly what the future holds, one thing we know: the future will be discovered, step by step, by those who have the courage to experiment and disrupt the status quo.

Let’s think about what the future might bring for digital marketplaces where millions of people buy and sell goods every day. It’s not difficult to see how an image recognition algorithm could simplify ad insertion on marketplaces, but are there deeper implications on the very structure for these sites? Could this be not just a change of degree, but a change in nature?

Historically, marketplaces have been predicated on liquidity: you bring all buyers and sellers to one place and get them to trade with one another. The path to building such liquidity always starts with the supply side: you attract the sellers in a given segment, bring them buyers, attract more sellers interested in those buyers and yet more buyers interested in what the new sellers bring. This virtuous cycle makes perfect sense as sellers have an economic incentive that motivates them to incur the “cost” of listing their content in exchange for the promise of potential prospective buyers.

This is now changing with people increasingly spending their lives online and having more content than ever competing for their attention. They are no longer willing to invest the effort to search through generic content – they are increasingly expecting full personalization – what I need, when I need it.

Matching goods to people

Let’s try a mental experiment on what this exponential growth of data and processing power can mean for digital marketplaces: imagine a world where all goods are identified and their ownership is known, where people’s preferences, needs and desires can be predicted and where algorithms exist that can optimally match existing goods to people’s needs.

In such a world we would all be passive sellers: you would receive a message telling you that you might want to sell your current bike to someone else and buy the new one that you have always dreamt of in exchange of a small difference; swipe right and within 24 hours you have a new bike.

In such a world even the notion of ownership will change – as long as you can sell any goods at any given time for the “right” price, you are de facto “leasing” it for as long as you need it.

Is this a viable future? If, when the Iphone was launched in 2007, someone told you that within ten years, with one swipe, you could summon a car that drives itself to take you from point A to point B, would you have believed it? This is the power of exponential growth.

Let’s try to make a testable prediction: Within the next ten years marketplaces will have morphed from places where an “infinite” number of fungible buyers search through unique content, to algorithms/bots that push an “infinite” number of goods to the right person, at the right time. Demand side personalization will replace supply side scarcity.

Maybe they look as healthy as ever, but the food giants are in serious trouble. They are threatened by a new generation of consumers fed up with standardized products of uncertain origin. Mats-Eric Nilsson, food writer and former managing editor at Svenska Dagbladet, tells us how Big has become Bad.

Ten years ago, when I was part of the editorial management team at Svenska Dagbladet, participating in various development projects, we regarded the largest British food chain Tesco as a shining and inspiring example, well worth a study visit to London. Here we had a large and extremely successful company, clever at understanding its customers, “consumer insight”, and also able to adjust to every shift in their demand.

Today this food chain is struggling with dwindling revenues, losing 6.4 billion pounds in 2014 forcing the company to close 43 non-profitable stores and their own HQ.

A change in mind-set

Even the largest supermarket chain, the American giant Wal-mart, priding itself on low prices, is struggling with serious problems, stagnating sales and shrinking market shares in the food segment. For over a decade the company has been at the bottom of the list for consumers’ satisfaction and must, according to the expertise, abandon its extreme focus on prices and change the entire mind´set among the staff. Similar problems exist in the whole food business and are also affecting the traditional purveyors to the food chains.

In May 2015 the business magazine Fortune ran an in-depth article under the headline “The War Against Big Food” which is the American over-all term for the food giants. The feature started like this:

“Try this simple test. Say the following out loud: Artificial colors and flavors. Pesticides. Preservatives. High-fructose corn syrup. Growth hormones. Antibiotics … If any one of these terms raised a hair on the back of your neck, left a sour taste in your mouth, or made your lips purse with disdain, you are part of Big Food’s multibillion-dollar problem. In fact, you may even belong to a growing consumer class that has some of the world’s biggest and best-known companies scrambling to change their businesses.”

Producers are aware of the problem

Such drastic statements may seem grossly exaggerated in order to create an interesting opening for the piece, but the American producers of packed food, who held their yearly conference three months earlier, would hardly agree. “Big” has come to equal “Bad”, lamented a representative of the giant Conagra that has lots of well-known brands. Another speaker feared that the growing skepticism towards the food giants might make the customers turn their backs on them for good. Denise Morrison, CEO of Campbell Soups said: “We understand that increasing numbers of consumers are seeking authentic, genuine food experiences, and we know that they are skeptical of the ability of large, long-established food companies to deliver them.”

Since 2009 the 25 largest food companies in the US have lost market shares to the tune of 18 billion dollars.

“I would think of them as melting icebergs”, one analyst said at the trade conference. “Every year they become a little less relevant.”

Still, the problems of today are nothing compared to those waiting round the corner. The latest generation of consumers, the millennials, have already put fear into the business. They are the age group born 1989-2000, thus being between 16 and 27 years old today. Pretty soon they will be the most important of the consumers’ groups and all those reports saying that these young customers are having, and will have, much stronger opinions and demands than their parents had, worry the food industry.

Suddenly they insist on being told where the food comes from and how it is produced. They like locally and traditionally produced food and try to avoid processed food and GMO. And since we are now talking of the largest generation in history – in the US they are 80 million people – the companies must adjust to the prevailing wind that is expected to blow for many years.

Smaller manufacturers doing well

The giant Kraft Foods, with lots of well-known brands, is doing away with artificial coloring and preservatives, as is Kellogg’s and many other producers. The world’s largest fast food chain Subway, which now after years of strong growth is facing serious difficulties, is promising to sort out their additives, while McDonald’s – which is not going well either – have stopped using chickens that have been treated with antibiotics.

While the faltering giants apply various defensive measures the smaller manufacturers of organic products, and other products that are perceived as more genuine and natural, are doing well. Earlier their items were sold in special shops for the very food conscientious people, but now they are also on the shelves of the big supermarket chains, including the low price ones.

One example of many is the now fast-growing family business Amy’s Kitchen which was founded in 1987 by Rachel and Andy Berliner and is named after their then newly born daughter. Their frozen vegetarian cooked meals – from burritos and pizza to Japanese teriyaki and Indian palak paneer – are prepared in traditional ways with basic ingredients of fresh organic vegetables. The onions are chopped by hand every morning and instead of buying ready-made tofu they are making it themselves in the traditional manner. Today the company employs 2.000 people producing 700.000 meals a day and in 2015, symbolically enough, they took over a factory building from Heinz, that can no longer find sufficient demand for their well-known frozen meals.

The big chains are feeling the competition breathing down their necks. Unless they make some radical changes they will, as American analysts predict, be hopelessly over-run in the not too distant future.

In this situation some of them have begun to play down their own brand into which they have invested so much. Seven years ago Starbuck’s opened some cafés in their hometown of Seattle without even the smallest of chain logos. In order to be inspired by genuinely personal places the chain’s representatives paid frequent visits to some of the city’s independent cafés. From one bar the entire interior decoration was copied straight off, including the fittings of the industrial lamps and the wooden chairs.

And in Sydney a couple of years ago McDonald’s discreetly transformed one of its “McCafés” into an anonymous café with the bland name The Corner. These giants, who a couple of years ago were boasting about every new unit they opened, have all of a sudden become embarrassed by their own size.

Specialized digital services are growing strong, but new user needs and behaviours are bringing new business models. Therese Ahlström Brodowsky, CEO of the car vertical Bytbil, looks into new possibilities in the niche market.

Where do you turn when you are considering a purchase of some kind? In general, any advertising space will probably suffice when you’re browsing for a baby stroller, a chest of drawers or a canoe. But when you are contemplating a major investment, say a house or a new car, you will probably be better off using a service specialising in that specific area.

Not least because in a rapidly changing business environment you will need the best advice available regarding which kind of ownership and financing model suits you besst. Let me explain:

Not too long ago, I used to rummage through the classifieds in the paper in a never ending search for homes, cars, travels etc. Mostly I wasn’t looking for anything in particular, rather just daydreaming about the house I could picture myself living in, the car I wanted to drive or the next holiday I wanted to go on.

A bygone era

Today those classifieds are but a fading remnant of a bygone era. One of the first victims of the digital revolution, the classified paper ads soon found themselves replaced by cleverly packaged internet based solutions. All of a sudden, buyers could search countrywide for houses, cars, travels, etc., browsing through pictures and dive deep into data and history.

Yet the world moves on. With the millennials coming of age, not only the advertising but the whole business is going digital. In my area, traditional car dealerships are facing challenges from the internet-based brokers such as Beepi, Shift and Carspring, offering risk minimized end-to-end solutions.

By connecting sellers and buyers over the internet, the online players tend to all cumbersome activities surrounding the purchase process (inspections, paperwork, warranties and even delivery), all while minimizing overhead costs by ridding themselves of any need of showrooms and salespeople. No longer do you have to leave your sofa in order to buy a used car. Haggling with a man in a moustache and a polyester shirt in a car lot is a thing of the past.

Still, this entails you actually buying and owning a car, something which is no certainty anymore, as the modes of ownership transform and diversify.

Collective ownership

Especially in urban environments everything from congested traffic to a lack of parking space drive a shift from personal to collective ownership, particularly where public transportation alternatives are available. Car sharing and rental solutions are gaining ground, appealing to people with occasional rather than daily transportation needs. Booking apps facilitate both accessibility and payment, whether it is a central car pool or a peer-to-peer based business model.

There are other ways of not owning a car. If you still want the unlimited accessibility of having your own car, but are less interested in the mundane hassle of services, repairs, insurance and similar paperwork, financial leasing might be an interesting alternative.

Having a leasing company actually owning the car, basically renting it to you long-term, is a way of lowering the risks of personal ownership. The lease package may include car service, insurance, warranties and other services at more or less fixed prices. When the lease expires, usually after 36 months, you simply return the car to the leasing company, without having to suffer the agonies often connected to trying to get it off your hands.

What we are seeing is a shift from the car as a personal asset and status symbol to the car as a commodity. The need for personal transportation has not lessened – the sales figures in the automotive industry have been steadily increasing over a long time – but the way we consume it is changing and diversifying. Not only does the digital revolution decrease the need for ownership, but technological advances such as self-driving cars may also be diminishing the actual sense of ownership. You will probably be less emotionally connected to your car as a passenger than as its driver.

Participation in such a dynamic marketplace requires agility and adaptability. Remaining simply an advertising site will not suffice. Instead, realising the potential as a connection between car consumers and service providers, regardless of the mode of ownership, will be crucial for survival and prosperity.

A variety of solutions

For a company like Bytbil, this entails being able to reach the car commodity consumers and being able to offer them a variety of solutions, be it the traditional ad network, leasing solutions or even car-pooling. As a specialist service provider, we need to face up to the ever-changing challenges, and possibilities, of the market.

Specialization requires a market complex enough to fund innovative business models. Just then the agility and adaptability offer a significant advantage above that of any generic actor. This is the key to be able to thrive and expand in a constantly changing environment.

75 percent of new app users don’t return. So stop looking only at downloads, CPI, visits or active users, there is really just one question to focus on – how do we keep our users engaged? Caroline Ragot is determined to act on app retention.

There are over two million apps in both the Google Play and the Apple App Store. On average we use between 25 and 30 apps a month. 87 percent of smartphone users use less than ten apps a day. Less than 25 percent of new users return the day after first use, which means more than 75 percent of users don’t come back. It’s pretty clear the big issue of apps is user retention. How do we keep our users engaged?

The same recipe

Mobile apps have already disrupted a few industries and it continues. Think about Instagram vs Flickr, Whatsapp vs SMS, or Waze vs Tomtom. We hardly use the second ones anymore and the first ones are now part of our daily life. Why? They are easier to use, they are more immediate, and  get what you need in the moment.

Deliveroo is another example. It’s a food delivery app where you have a selection of premium restaurants’ menus in the same place. No need to have cash on you to pay the delivery guy. No need to give your phone number and spell your street name until the person on the phone gets it right. And with a quick look at the app you get updates on your delivery. It is as if Deliveroo knew exactly which small painful issues you used to face when ordering food the old way.

With Mytaxi you don’t need to look for a taxi stop, wait ages for a ride or pay with cash. Runtastic knows that the hardest thing about exercise is motivation, so the app tracks your progress, gives you rewards and companionship to boost your motivation day after day. If you think about it carefully, these apps have the same recipe for success. They use the same three ingredients, simplicity, context and real-time information to give us solutions to our little everyday problems.

This way they become part of our routine and make us change our daily behaviors. Routine is without any doubt the best friend of Retention!

UX, the secret weapon

Surprisingly, it is easy to make things complicated and hard to make them simple. This is why user experience design is so important when building an app. I consider UX as a secret weapon because it is still too often an undervalued discipline. It is all about listening to your users, again and again.

First you need to know if there is a real problem to solve. If your app doesn’t solve a problem it will be hard to succeed. When you know what your users’ pains are you can prototype a solution and then observe people using it. When you see people making mistakes and not using your app as you thought they would, you learn what you need to change. If your app isn’t easy to use people will get frustrated and won’t come back.

User experience is a mix of design and psychology. Psychology is key to understanding people if we want to modify their habits and behaviors. And disruptive apps are those that make you change your way of doing things.

You also need to know who is a valuable user for you. What do you need your users to do to make your business run? Any e-commerce app wants its users to place orders. It matters how many times they order and how much money they spend each time.

Marketing heating up

Then you need to figure out what your most valuable users do in the first seven to 15 days that the others don’t. Get your data analysts to help you with cohorts and median analysis and discover what is your aha moment – the instant a user understands the value of your product. If they do so they will come back! Chamath Palihapitiya declared that Facebook aha moment was “seven friends in ten days”. Next you get your product and marketing guys to work together and try to make users have their aha moment.

The bottom line

Stop looking only at downloads, CPI, visits, or MAUs, and start looking at Day-1, Day-7, and Day-30 retention rates. Retention rates are the only KPIs you should care about. If you get them right, the rest will follow!

Average numbers and large figures don’t really tell us much about our users. But these are the facts media houses have relied on for years when developing and evaluating. At Swedish newspaper Aftonbladet this is now changing – and they are getting to know their users for real.

At Schibsted, we have been working on how to become truly user-driven for several years. Two years ago Aftonbladet embarked on a journey to become an organization that bases everything it does on its users.

We established a vision: everyone working in the media house – from editors to developers – should have a shared and comprehensive picture of our users, based on data and user behavior. We should also have shared, comprehensible objectives and key numbers for each user segment, as well as tools and insights, so that we can address our user segments in real time.

With a shared vision of our users, we can muster our efforts to build the media house of the future, with more engaging and relevant products, and more loyal users.

To try to understand our users in depth, we looked at a year’s data, fully 25 TB of behavioral data from Aftonbladet. Initially, this involved segmenting our users based on loyalty, where frequency over a given time period was the best measure.

We grouped our users based on how often they return to us – from infrequent visitors, who visit once a month, to news junkies, who access us almost every day. We placed loyalty in relation to the level of commitment of the various behavioral segments and witnessed what is known as the Pareto principle: our most loyal users, who represent 20 percent of our unique visitors, account for 80 percent of Aftonbladet’s page views.

Our initial analysis and segmentation aroused an interest to dig deeper to understand and learn more. We then carried out five steps to finally identify Aftonbladet’s new target groups. The new target groups represent a platform for how we will build the new Aftonbladet, which will always act based on user insight and digital behavior.

These are the five steps:
1.    Workshops with employees to define hypotheses about our users’ behavioral patterns.
2.     Iterative data analysis processing, in which we stress tested our hypotheses about users’ behavioral patterns against actual behavioral data.
3.     Clustering behavioral data, by which we identified ten significant behavioral segments in the traffic data.
4.     In-depth interviews with actual users from each behavioral segment to understand the needs and motivations behind  the different behaviors.
5.     Quantitative surveys  of actual users from each behavioral segment.

During the in-depth interviews and the quantitative surveys, we found the same motivations and needs behind many of the behavioral segments’ use of Aftonbladet. By clustering the ten different behavioral groups according to their motivations, we were able to establish four new target groups.

In early 2016, we developed strategies and key figures for each target group with the aim of building a more relevant experience for each group. Several product innovations based on these strategies will be launched in 2017.

Following readers in real time

In connection with the launch of the new target groups, we installed new dashboards throughout the media house where we can monitor, in real time, how our different target groups behave at Aftonbladet. We have also begun to steer our paid product Plus’ fixed sales messages towards different target groups, resulting both in higher sales and increased appreciation.

But this is only the beginning. We have now appointed a manager for our users, who will drive the product and business development process ahead within the organization. It is up to Aftonbladet as a whole, from department managers to editors and reporters, to take responsibility for ensuring that we move towards a more user-centered approach.

The method of combining dynamic online behavioral data with qualitative and quantitative interviews is unique and we will now scale up the process and the segmentation model to include Norwegian mediahouse VG. We have a hypothesis that VG has the same behavioral segments as Aftonbladet. If this proves to be true, we will be able to derive considerable benefits for our product and business development.

With a shared view of our users, we within Schibsted will be able to muster our efforts to build the media house of the future with more engaging and relevant products, and more loyal users.

Matching a brand’s expertise with a publisher’s storytelling and distribution has turned out to be a success. Content marketing fulfills publishers’ needs for new business models and is all about leveraging competitive advantages.

Since the New York Times in 2014 launched their in-house content marketing department T Brand Studios, publishers all over the world have followed in similar fashion: producing and distributing content on behalf of advertisers.

Commonly categorized as both native advertising and branded content, it sure has been subject to much debate in the media industry. Despite that, even the most conservative of publishers are jumping on the bandwagon.

Worldwide native advertising spend is expected to double – from 31 billion USD in 2015 to 59 billion in 2018, according to Adyoulike, a native advertising network. While native advertising as a whole does not solely include publishers’ content marketing efforts, it says a lot about the direction we are heading in.

A staggering result

For an advertiser to have a content strategy is perhaps as given as a management consultant’s powerpoint, including the word “synergy”. In Schibsted, publications were quick to launch branded content departments. One of VG’s first content marketing pieces was an article for movie distributor Nordisk Film, and their movie “The Wave”. The article quickly generated more than 300,000 page views, both from VG.no and viral traffic. Considering the population in Norway is 5,000,000, that number is quite staggering. While we don’t see numbers like that every day, they are not uniquely spectacular either.

Users visit online newspapers to be updated, informed, inspired or engaged – and do so by reading, watching and listening to content, in some form. Therefore, it should not come as a surprise to anyone that branded content click rates are outperforming those of display advertising.

What has been more surprising though, is how often branded content is head to head with editorial content. More often than not, VG’s branded content campaigns enter the top 20 list of most clicked content from the front page.

Accepted by users

Time spent on articles and completion rates on videos are comparable to editorial content. Articles shared from VG’s Facebook account usually gain the same amount of reach and engagement as expected from editorial posts, in some cases even more. There is no need to doubt whether the user accepts the branded content format. In the age of user experience, branded content clearly fits the bill.

Transparency has been the main talking point so far. It shouldn’t be. First of all, labeling the content should not be hard, at least not while we adapt a new format over time. Second, there are no incentives not to be transparent; in fact, the whole purpose for the advertiser is that the reader connects the content to the brand. Although fundamentally important, expect less talk about transparency as publishers improve their labeling standards and users become more used to branded content as a format.

A core competence

Seen from a publisher’s business perspective, branded content is basically all about leveraging competitive advantages.

Publishers are experts at storytelling, and at distributing content to their audiences. Branded content is a publisher doing what she is best at, but in another format. It is a business model that plays to your core competency.

For advertisers, building brand by telling stories makes sense too. A 2015 Boston Consulting Group study showed that 60 percent of Americans do not believe traditional advertising is based on facts. That makes alarm bells ring for any advertiser. How do you sell your products to an audience that do not trust you?

At the same time, 96 percent of the respondents said that their trust of a brand increases when a brand tells them something without trying to sell them something. If there is one thing that the content marketing trend has shown us, it is that brands too have every chance of telling great stories. Matching a brand’s expertise with a publisher’s storytelling and distribution is by all means a good combination.

As long as user experience remains uncompromised, with clear labeling and good content, branded content will continue growing. The users get more relevant ads. The advertisers get a great way of communicating with their audiences. And the publishers get a digital and profitable business model. Everybody wins.