Why Is Digital Growth More Expensive Than Ever?

The accessibility of technology is here to stay, be it not only for the innovations and constant advancements made in the area but also for the multiplied needs it covered from the very beginning of the pandemic. Wouldn’t you think that, therefore, the accessibility of digital growth should come hand in hand? Well, somehow it doesn’t.

Attila Tóth

Digital Strategist

Something is happening in the global digital landscape that might seem like a paradox. In such situation, conspiracy theories foster. However, in this case, there is no theory to debunk. So why does growing in digital cost companies more than ever before? To understand what’s happening, we need to take a look at the connections between digital markets and technology.

Let’s start with the markets.

Before the pandemic hit in early 2020, the number of companies that single-mindedly focused on digital growth was a fragment of today’s numbers, not counting in those that have only been speaking of digital growth as a distant item on their to-do list. With physical sales being a viable and well-proven option, brands that established their market in the previous decade had minimal motivation to actively pursue digital growth.

Working in the field of digital strategy, I’ve experienced that, before the pandemic, the most frequent question decision-makers put were the following:

Why should we focus on digital? Is the ROI of digital better than what we do today?

In the second quarter of 2020, these questions have changed to:

How can we transform digitally fast? How can we achieve similar results in digital like companies X, Y, Z? What’s the fastest way to build a digital business model?

Do you see the great shift that took place in the decision-makers’ way of thinking? The changed questions represent a wave that cannot be ignored anymore:

There’s immense pressure to grow in digital.

A crucial matter this tension has done is it made companies spend more on digital advertising than ever before.

Digital advertising has had massive growth over the last decade:

While these growth numbers are amazing for them, they are pretty bad news for those who just started focusing heavily on digital growth.

Are there plenty of fish in the sea?

Imagine a fishing lake at a decent distance from the loud city noises. The owner of the lake sells fishing licenses. The permit price varies according to the different parcels, the most expensive location being at the center of the lake, where the most fish are. We’re getting the idea: the best places come to those who pay the most for it.

Before the pandemic, there were 100 fishermen on the lake, now there are 200, and the number is growing. But the lake’s dimensions aren’t. How does that affect license prices? Well, they also grow. More and more anglers want the best spots for themselves, so they have to outbid their fellow fishermen. These guys don’t want to be squeezed on edge either, and a bidding war begins.

Who will win in the end: the fish, the fisherman, or the lake owner? Well, the poor fish don’t even know which bait to bite on. The anglers are fighting and spending more and more money; the lake owner grins as his pockets get full. While this analogy has some caveats, the big picture is visible nonetheless.

Secondly, let’s look at technology.

Now you may think: OK, Attila, the lake analogy may be true on the markets, but in the last decade, digital innovations soared, and there’s also a visible trend that technology is getting cheaper. Doesn’t that even things out?

Well, technology is getting improved and, even if not cheaper, but more efficient for sure. There is no doubt about that. And let’s say that we neglect the massive chip manufacturing shortage that the world faces right now. Normally we shouldn’t do that, but for the sake of this example, let’s take it out of the equation. So, while most technologies are ready to be used, they need an implementation process. And that process requires experts. Unfortunately, the number of experts with hands-on experience is not growing fast enough. Thus the cost of implementation increases. And because this cost is increasing aggressively, some companies try to work with cheaper, less experienced professionals.

This tactic looks intriguing because they save money in the short term. But, actually, in the long term, they burn it because those who are not at the top of their league can’t facilitate efficient implementation and efficient growth. More and more brands realize this and choose only top-level experts, and as the number of these people is not increasing at the required pace, the cost of paying them is growing fast.

Those who promise you fast and cheap growth in digital usually don’t know what they do. And don’t understand the global markets.

Of course, it’s up to you to roll the dice. However, I want to guide you with a helping question:

What will you lose if your digital strategy fails to bring you the right results in the next 12 months?

Remember, the number of anglers is growing, and the lake owners don’t have any motivation to improve the circumstances for your company.

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