Big Tech is not dying, ad-supported platforms are

Well, you probably read quite a few alarming news about how Big Tech is hit hard by inflation.

No surprise, as you have to remember, so much of U.S. Big Tech is plain consumer businesses massively scaled by digital network effects, and as such, its Achille's heel is inflation. And also? I told you so.

But not all of Big Tech is hit that hard. Apple and Microsoft are doing fine, just like AWS to some extent. The weak link? "Free" ad-supported platforms.

In the current stream of events, the elephant in the room is that ads are not a growing business. They have always been a stable 1.3% of the U.S. GDP. And now that Google and Facebook have nearly entirely gobbled it up, they don't have room for growth. They're not incumbent businesses anymore; they are becoming obsolete.  

Their fragility is even more remarkable as, unlike with non-ad-supported platforms, ad revenues have been their only revenue stream. It's been crack cocaine, and they didn't care to diversify or couldn't pull it off for a decade and a half.

Adding insult to injury, Apple implemented in April 2021 an app-tracking transparency feature across their platform that forced a simple question to all their customers: do you want to be tracked? Only 16% said yes.

The digital ad business is not dead, but its growth and ever-expanding reach are. And this is a significant turning point for the next decade of digital platforms. While any single business had to weigh how much they would have to spend on Google and Facebook ads (making these spendings a defacto online tax on making business), the importance of these spending will be more and more challenged from now on.

As I was discussing very recently with a high-profile customer brand, from now on, how do you evaluate the importance of spending dozen of millions of dollars on digital marketing with accelerated diminishing returns vs. investing in in-store customer experience, improving your supply chain and R&D? Because looking forward, the latter options are indisputably going to yield so much more customer impact than "smart" multichannel marketing campaigns.