The Electronic Retailing Association

Article: Attention Vampires! by Budd Margolis

The benefits of the digital era, we can all agree I believe, are stunning and in many ways make our lives better.  But there is a flip side which is changing how our economy and society functions. 

The title “Attention Vampires” is meant to hook you into this brief description but there is no way of sugar coating the threat, to DRTV & Live Shopping and our children, from the attention merchants.

Budd Margolis, President MIT Consulting, and Global TV Shopping expert

Budd Margolis is President MIT Consulting, and a Global TV Shopping expert who specialises in TV Shopping, Social Media Retailing & eCommerce/interactive retail, covering many areas of the industry such as improving, fundraising, industry forensics and expert testimony. Budd started his TV shopping career with QVC UK and has worked with TV and TV shopping channels across some 50+ countries helping companies & suppliers improve sales and profitability. Budd is American but lives in London, UK.

Budd Margolis, President MIT Consulting, and Global TV Shopping expert

Budd Margolis is President MIT Consulting, and a Global TV Shopping expert who specialises in TV Shopping, Social Media Retailing & eCommerce/interactive retail, covering many areas of the industry such as improving, fundraising, industry forensics and expert testimony. Budd started his TV shopping career with QVC UK and has worked with TV and TV shopping channels across some 50+ countries helping companies & suppliers improve sales and profitability. Budd is American but lives in London, UK.

When we worry about the state of the industry and the impact of the digital threat, what we really mean is the transformation from a splatter broadcast approach to reaching consumers and laser targeting. Think WW2 bombs in the night and cruise missiles. Do not underestimate this enormous challenge: we are at war and losing revenues.  Understanding the enemy, or competitor, is vital to forming strategies and tactics to defend and counter this threat.

Big Data is the new Oil or Petroleum Industry but without providing the jobs of the fossil industry. Automation, robotics and AI are eliminating jobs which is another topic but my concern is how this will impact the DRTV industry.  Will Qurate (QVC & HSN) be able to automate its customer relationships and match products to their needs as well as Amazon which already controls half of American eCommerce? Will you be able to survive?

Data Harvesting has been estimated by security analysis group Sonecon to be worth about $76 billion in yearly revenue. Sales derived from data harvesting have grown by 44.9 percent over the past two years and if the current trends hold, our data will be worth $197.7 billion by 2022. That is greater than the total value of American agricultural output.

Social Media is a furious trend that moves fast and disrupts, then disappears, to emerge as something new within weeks, days or seconds. Influencers come and go, Fast fashion has created weekly seasons as generally people buy more than ever before. DRTV is shrinking and no one is grasping this fact. They may say they are retooling, but sales continue to plummet.

Facebook’s architects exploited a 'vulnerability in human psychology' to create something addictive to users. Whenever someone likes or comments on a post or photograph, he said, “we…give you a little dopamine hit.”   Source: Don't Be Evil (Rana Foroohar)

In just over a generation there are three points that created the most predatory and powerful corporate beasts ever and they are known as FAANG for Facebook, Apple, Amazon, Netflix, Google. China has BATs (Editor's Note: BATs stands for the companies Baidu, Alibaba, Tencent).

#1

Robert Bork, who was once considered for a Supreme Court position, authored a book in 1978 called “The Antitrust Paradox”, which stated that monopoly, should no longer be defined as it always had been under the Sherman Act, as a company that took unfair advantage of a commanding market position to stifle competition. Instead, monopoly occurred when a company unfairly boosted prices it charged consumers. If a dominant player didn’t raise prices, according to Bork, it was not engaged in monopoly. This opened the gates to Big Tech’s unimpeded global dominance.

In the past companies such as Standard Oil or the phone company Bell were broken up to create many new oil and communication companies and a highly competitive, level playing field which benefitted the consumer in low prices of fuel.  Microsoft was taken to court and had to release its hold on the web browser market thus opening up the path for Google. 

#2

Sir Tim Berners-Lee*, ingenious British engineer credited with the invention of the the Web back in 1989: his genius was in understanding that everything in cyberspace is connected to other things and that it could be organised like the Library of Congress, with each book bearing a catalog number. Only it was better than a library, as most of the documents were strung together via “hyperlinks,” providing a vast network of interconnections, a web that physical libraries lacked. Whoever organised it first and best could dominate it.

*Just a side note: Sir Tim’s parents, charming folks, lived just around the corner from my home in London and the local grammar school's (which Tim and siblings attended) assembly hall and a plaque at our community centre bear his name with great pride!

#3

Larry Page and Sergei Brin were at Stanford studying how search was conducted. Larry Page relied on an insight from his parents’ background in academia, where the most desirable papers on a topic were never the ones that just repeated a term or name endlessly, but the one that other papers cited most frequently. So they used hyperlinks instead of citations to find the most relevant data or links.  BackRub was about driven system that counted all the links. On the Web, the equivalent to those citations were the hyperlinks, which meant that their search engine would need a way to tally up all these hyperlinks. So Page and Brin developed a program they called BackRub, because it tracked links  and produced a summary called PageRank after Larry. Monetising Google at an exponential rate thus creating one of the most powerful and wealthy companies in history.

These three keystone events collided into the dominant digital industry that powers FAANG.

Silicon Valley has been called a progressive, even liberal environment but the corporations are libertarian in essence. They want to operate with as little interference or regulation as possible and have a powerful lobby that works to protect them.

And the recent Trump tax cuts have delivered hundreds of billions back into Big Tech and corporate America which have mostly been used to buy back their stock and make them, and the market, wealthier for now. Problem is these companies create fewer jobs relative to their market capitalisation than any previous generation of business giants. In 2009, the twenty most valuable companies in America had 1,790 employees per $1 billion in market cap; today they have 656.57.

Perhaps the starkest example of this trend in recent memory: WhatsApp was sold to Facebook in 2014, at a market cap of $19 billion—more than any Fortune 500 firms—and only thirty-five employees. Facebook has about a third of the employees that Google does, and Google has many fewer than Apple, which in turn creates fewer jobs than Microsoft, which creates fewer than GM which almost went out of business during the last recession.

March 2019, for example, U.S. retailers had announced more than forty-one thousand job cuts, more than double the number from the previous year, in large part due to the Amazon effect.

And the direct response industry has seen a 5+ year downward trend which is spreading from North America across to Europe and soon Asia I expect as digital markets mature and 5G makes everything faster, safer and even more addictive.

5G will deliver greater disruptive features than we can even imagine. Soon, much of the hardware components of our iPhones will be cloud hosted thus reducing cost, weight and increasing battery life. Flexible screens, virtual reality and augmented reality will also finally deliver a dynamic purpose as speed increases while latency decreases. The impact of 5G will be enormous, and I hope safe & healthy!

Attention Absorbing Entities

There are just 24 hours in a day and we are stressed as never before and are sleeping less. I grew up in the 60’s when there were only 3 networks on TV and 2 local newspapers. With cable one could skip across QVC which was generally closer to the major national network channels.

And younger audiences do not factor in sitting on a sofa and watching what someone else has scheduled. They cannot even imagine why someone would schedule their life around a TV show?

Now we have anytime/anywhere hundreds of channels and the streaming of end-to-end series and unlimited films, games, social media, YouTube videos, shopping, betting, porn and communications with friends, family and for business.

Who has time to watch a Shop Channel or infomercial spot when they are binge watching The Crown or Game of Thrones?

Apple CEO Tim Cook gave a speech in 2018, and stated that that there was, and is, a serious dark side to the Big Tech revolution. “We shouldn’t sugar-coat the consequences. This is surveillance. And these stockpiles of personal data only serve to enrich the companies that collect them.” Earlier that year, he admitted that he himself—like many Apple users—was spending way too much time on his phone, and that this was a problem. “I think it’s become clear to all of us that some of us are spending too much time on our devices,” said Cook, at a 2018 event in San Francisco.

The big data, big Tech companies know every move you make and exploit it. Just a few datapoints on your profile and they can target advertising to lure users to their own site and prompt them to click on things they may have been interested in before. They have created an entirely new model for how to get people to buy things.

Mobile & Screen Addiction

What is more addictive than food, drugs, nicotine or alcohol? According to a Goldman Sachs report looking at this effect, the average user spends 50 minutes per day on Facebook, 30 minutes on Snapchat, and 21 minutes on Instagram. Add that up, and think about the effects on productivity and human relationships. According to one 2016 study, we touch our cellphones around 2,617 times a day. Seventy-nine percent of smartphone owners check their device within fifteen minutes of waking up. One-third of Americans say they’d rather give up sex than lose their cellphone.  Source: Don't Be Evil (Rana Foroohar)

Launching products without regulations, or oversight, creates disasters such as we have seen with teen vaping and the incredibly disturbing high levels of teen depression, self harm and suicide.

Solution?

One of the key factors in the rapid growth of Big Tech can be traced back to partnerships or acquisitions which enabled the innovators to grab considerable market share. They easily found funding such as Jeff Bezos who early on placed $250,000 into Google without a business plan, he just liked these guys.

And the vision to innovate, break rules and adapt to constant change fast.

Can the DRTV industry adopt some lessons? Certainly we can look at acquisition and consolidation but not necessarily as QVC & HSN did. Buying up more companies in the same industry might create a bigger problem, not the harvesting of larger shares or consumer bases.

I suggest extension into compatible areas. Making 10 investments in social media, fulfilment and processing logistics may provide some security as not all companies will survive and you may have a few winners on your side.

The cosmetic, beauty and health categories are flourishing as never before. There remain opportunities for jewellery, kitchen and fashion but a department store “one-stop-shop” model is redundant when people can follow their own needs and tastes when and if desired.

Smaller DRTV companies should form a co-operative or JV and exchange data, knowledge and products. They could purchase in larger quantities and reduce costs. This would expand reach, revenues and market while reducing costs if properly managed.

And we must adapt and create “skunk works” or experimental labs to innovate, evolve, trial, tweak and forge new concepts. Standing still is not an option.

It is time to learn and harness the power of the bits & bytes, the 1’s & 0’s that have created a new economic model, changed consumerism and the capitalist society as well as our social and civil culture.