The web’s huge mistake: handing over the digital customer relationship
Empowerment Tech can restore real connections to what matters: true customers and brands that people love
Hi everyone,
Thanks for coming back to Customer Futures. Each week I unpack the fundamental shifts around Empowerment Tech. Digital wallets, Personal AI and new digital customer relationships.
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The so-called ‘web2’ platform winners, notably Google, Meta, TikTok and Amazon, have amassed the most incredible numbers of daily active users. DAUs.
They have the most ‘eyeballs’, as marketers would say.
It’s all down to remarkable platform economics. And powerful network effects which keep users and businesses spinning around each other in a flywheel.
Most importantly, it’s the result of the ‘power laws’ around collecting and using data. The more data you have, the more you know about users. And the more you know about users (and the more users you have), the more power you can have over the market.
Viewed another way, these powerful Data Majors now enjoy the most fantastic business and customer lock-in.
(Side note: once customers and businesses are locked in, the web2 platforms then squeeze prices and services, in a process brilliantly described as ‘Enshittification’ by Cory Doctorow.)
This lock-in and new dominant market position has allowed many of the web2 players to walk their way into the ‘customer reputation’ business (“should we trust this person called Jamie?”). And several are now at the centre of the ‘customer authentication’ business (“is it really Jamie coming back?”).
They offer rich customer profiles and insights. They help companies understand who goes where, who does what and when. And they help companies communicate with customers.
The point is that these 3rd party platforms, especially the social media players, are now being used right across the customer lifecycle. From login to check out. And vast numbers of companies around the world now rely on them completely.
It’s been a wild success.
But that’s largely because online merchants and digital providers find it easy to make the business case.
Lower short-term costs. Superior sign-up and log-in experiences. Increased transaction volumes. Lower friction. Even larger basket sizes.
From the CFO and CMO’s point of view, what’s not to love?
A quietly massive mistake?
But there’s another way to look at this.
These capabilities are right at the very core of the digital customer relationship.
Identity. Reputation. Login. Customer communications. Customer engagement. Customer data.
All of these short-term benefits from the Data Majors - of efficiency, of revenues - have masked a much larger problem. The providers have quietly, slowly, been outsourcing the customer relationship to these data-rich 3rd parties.
Look closely and you’ll see that your favourite online businesses have now been completely dis-intermediated.
By Amazon. By Facebook. By TikTok.
By Baidu. By Alibaba. By Google.
It’s now the Data Major 3rd party providers that have the primary relationship with the customer.
It’s happened slowly, and unthinkingly. And yet company after company has been handing over this crucial aspect of the business for years.
Your online businesses everywhere have now become boiling frogs. Unaware of what’s slowly changing around them. And dying one at a time.
You see, these 3rd party data providers can now directly message, inform, promote (and indeed demote) certain services.
They can lock customers out. They can even lock businesses out. They control the data, and in many senses, they control the market.
Who can access what, and which businesses thrive or die. And they can choose to change their terms of service or pricing whenever they want.
It’s checkmate.
How do we know?
Consider the small-medium online business that doesn’t have its own IT department or skills.
Without using one of these 3rd party data platforms, they can’t offer instant log-in, a seamless experience, or one-tap checkout. They can’t personalise services.
It would simply be too expensive, or complicated.
So, they say, it’s worth it. Not least for the eyeballs. For the traffic.
Yes, even if they have to cede control of the customer relationship to another company. And all the data that goes with it.
But take another look and it goes way beyond our friends at the small online business. This is a huge challenge for the world’s largest companies too.
Can you imagine 20 years ago that Nike, one of the world’s greatest brands, would become subservient to another brand in a customer channel?
Yep: it happened that fast: www.facebook.com/nike.
And just look at the URL for Disney on Amazon.com: https://www.amazon.com/stores/page/EF081BE7-FC57-4715-9A43-440C8BAF0514
Wow. It’s just another page.
That’s quite something in brand positioning terms.
B2C has become B2A2C (B2-Amazon-2C) and B2-G-2C (Google).
Yes, brands have relied on this model with retail marketplaces for years and years. But that was for distribution. Now, it’s for the entire Digital Customer Relationship. From customer acquisition through to check out. Even to delivery (Amazon’s latest move).
Restoring real connections
Today more than ever, brands need to compete on customer experience. On cost. On customer insights.
But how to achieve these without handing control of the customer relationship to a digital 3rd party?
The answer is to give customers their own digital tools. To give customers ‘Empowerment Tech’.
Digital wallets and Personal AI.
A new channel for businesses to connect directly with individuals. And for customers to connect directly to brands they love. To the companies they want to shop with.
Remember: genuine, authentic brands want to build genuine, authentic customer relationships.
They don’t want 3rd parties in the way.
So take a moment to understand how important Empowerment Tech can become.
It will mean no more login. It will mean new, seamless experiences. And it will mean portable, trustworthy customer reputation and insights. Even reusable digital ID.
Many of the same capabilities that the Web2 winners offer today. But without the 3rd party downsides.
All in, it’s a better way to do business. A better way to connect. And a better way to build customer insights.
Yet there’s more.
For customers, it will be a better way to be remembered by the business. A better way to have a personalised experience.
Put simply, it will be a better way to build true, real and trusted customer relationships.
No more handing over control to the Data Majors and Web2 platforms. No more disintermediation by 3rd parties. And no more boiling frogs.
It’s time to leap into the future. It’s time for Empowerment Tech.
And it’s time to restore real connections to real people and businesses.
Thanks for reading this week’s edition. Stay tuned for more Customer Futures soon, both here and over at LinkedIn.
And if you want to learn more about the future of Empowerment Tech, digital wallets and customer engagement, then why not sign up:
Kudos on this article Jamie. I think Apple should replace one of your 12 NASCAR stickers. I loved how you refer to the tech titans as "3rd parties"--that cuts them down to size! LOL! And yes, later you call them "Data Majors"...nice!
You correctly point out that when an app/site integrates, say, Facebook Login, Meta, Inc. would be considered by that app/site's lawyers to be a [3rd party] service provider covered under the app/site's TOS and Privacy Policies and thus not something for which the app/site needs to ask permission from the user.
Since we're talking about these kinds of 3rd parties, Shopify should be included. One doesn't immediately think of them because they are more camouflaged as to how they implement login (i.e. by asking for the user's phone number and sending them a code). And now Plaid wants to get into the "3rd party" game too.
You wrote "It's been a wild success. But that's largely because online merchants and digital providers find it easy to make the business case." If the last 20 years of working in Empowerment Tech space has taught me anything, its that in your sentence you could have replaced "largely" with "almost entirely". And going forward, this will remain the case. In other words, providers of Empowerment Tech must be able to make it easy for online merchants and digital providers to make the business case.