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In search of a European champion
In contrast to the large domestic markets of China and the U.S., the European internal market consists of many mid-sized economies, each with their own regulatory and fiscal frameworks and “national champions”. As a result, the size of the median European company is smaller compared to their American and Chinese counterparts, whose national champions dominate in virtually all sectors of the global digital economy. Indeed, all of the 20 largest internet companies are either from the U.S. or China. However, proposals to reform the Eurozone – such as creating a banking union, harmonizing tax rates and insolvency laws, and establishing technology funds to finance European innovations and science programs – are stimulating the creation of companies that transcend national boundaries. Furthermore, European regulators also seem to allow these initiatives: last year, intra-European M&A more than doubled to $266bn, compared to $177bn in 2016, with a string of high-profile deals. As Europe is in search of its own “European champion”, a new phase of European corporate consolidation might dawn.
Is it an ad?
With users skipping and/or blocking ads, brands have to find alternative ways to engage consumers in a useful way. Since being loud and interruptive is not working, brands are now moving in two directions. On the one hand, they are creating content and services that people do not perceive as advertising, but that still improve brand perception. Examples range from Red Bull’s branded content channels that compete with content from conventional media companies, to Citi Bank’s sponsoring of the Citi Bike initiative that reduces carbon footprint, improves Citi’s brand image and – as icing on the cake – is much cheaper than a TV campaign. On the other hand, brands are moving closer to the moment of sale, with consumers receiving discounts based on their location, chatbots helping with bookings, and voice assistants buying products. Both strategies are profoundly changing the advertising industry and the characteristics of an advertisement. Instead of in-your-face advertisements, brands will now have to create relevant, useful and engaging experiences that people want to have.
Incumbents strike back
Recently, both Target and Walmart presented strong second-quarter results. The figures indicate that the battle for dominance with e-tail giant Amazon continues, as the big-box retailers are getting better at online commerce, on-demand delivery and bundled services. Retail is not the only industry where incumbents are becoming more resilient to disruptive forces. According to research by IBM, 72% of C-suite executives say incumbents rather than new entrants are leading the disruption in their industry. This may be preaching to the converted, however, established companies can resist disruptive changes. In media, for instance, Norwegian publisher Schibsted successfully shifted its classifieds business towards digital. Even if traditional companies are late to spot threats to their business model, this may not hinder them. In finance, U.S. big-banks P2P payments initiative Zelle may outstrip market leader Venmo this year. And Clover, the advanced point-of-sale payments solution owned by First Data, is challenging first-mover Square. These examples show that incumbents that are willing to innovate, embrace new technologies and adapt their business models, can rise to the occasion.