Saturday, July 28, 2012

Masters of Vertical Integration in the Digital Domain


Is the future of digital media open or closed? How is the ascent of smart devices redefining the environment? To what extent have platforms become a dominant force in mediating the digital media experience -- for both consumers and marketers? These are the key questions that researchers attempted to answer in a recent market study of the evolving digital landscape.

eMarketer says that a significant portion of the online digital experience now rests in the hands of four dominant companies -- Amazon, Apple, Facebook and Google.

"Other than content creation, it’s difficult to imagine any aspect of today’s digital landscape where at least one of the Big Four fails to play a prominent, if not defining, role," said eMarketer in their new report entitled The Changing Digital Landscape: Key Trends Marketers Need to Know.

The apparent clashes between these four companies are already reshaping the digital landscape -- affecting hardware, software, services, the delivery and sale of content, advertising, and commerce.

Of course, the key players are not competing equally in all of these digital realms. But by a combination of necessity and design, all have expanded far beyond their core competencies in an effort to strengthen their appeal to users, solidify their standing with marketers and maintain their easily eroded relevance in the fast-moving digital economy.

For example, Google initially went head-to-head with Apple in the smartphone arena -- using the Android OS as its primary weapon. Google initially introduced its own Nexus One smartphone at the beginning of 2009, and it essentially accomplished their goal of gaining broad awareness for the Android platform.

Then, Google recently introduced its own Nexus 7 media tablet, further reinforcing the role of Android and its associated software applications -- extending and evolving an active independent developer ecosystem in the process.

By comparison, consider the contrasting approach that Facebook has embarked upon. As a platform that sits across every device and operating system, eMarketer believes that it now finds itself at a competitive disadvantage. Persistent rumors of the upcoming introduction of a Facebook smartphone offering are perhaps an indication that it has recognized the benefits of gaining a hardware presence.

“Expansionary moves on the part of the Big Four reflect a corresponding evolution in the digital world. Tight, increasingly verticalized integration of hardware, software, content, services, advertising and commerce has become table stakes,” said eMarketer.

They believe that competing effectively now requires direct control over many, if not most of these closely related assets, and enough leverage in areas of strength to compensate for areas of weakness.

Overall, the influence the Big Four wield over the digital experience is broad-reaching. In many ways, it is their domain and everyone else -- consumers and marketers alike -- simply play or work within it.

3 comments:

InfoStack said...

These companies can provide "vertically complete" solutions and ecosystems because the data processing world has scaled horizontally. It's a mistake to call it vertical integration. To the extent they are, remain, or become "silo-ed" is an entirely different issue. True vertical integration would mean they own the assets at every layer.

David H. Deans said...

@InfoStack, that's an interesting point of view. Perhaps some will come close to true integration, by adding assets on the missing layers.

David H. Deans said...

Wharton has a good summary of why others may want to try and emulate Apple's version of vertical integration http://knowledge.wharton.upenn.edu/article.cfm?articleid=2959