When Everyone is Using the Same Algorithm, What Happens to Competition?

In the future, the company with the best algorithm will win.

But in some cases, it seems likely that we will all be working with the same algorithm. When that happens, it is unclear who wins. Do we all win? Do we all lose? How can competition exist in an arena where every company is using the same algorithm?

This was a question of some debate at a recent meeting of marketing professionals in New York City. The discussion revolved around the growing role of AI and machine learning algorithms in advertising.

The truth is, a lot of advertising exists on one of only a few large platforms. Consider the fact that 2019 is the year where more than 50% of all ad spend will occur online vs offline. And consider that Google and Facebook control nearly all of the online advertising market.

Each of those companies, along with Amazon, Bing and a large number of smaller platforms, is working on algorithms that better serve the right ads to the right people at the right time. They are doing this because the future of their business relies on advertisers successfully reaching customers and driving sales. And a better algorithm, it’s thought, will be more adept at fulfilling that promise.

But at some point, we must consider that all of the advertisers on Google are running ads on the same platform, and that platform is running the same algorithm (or set of algorithms) to determine when and where to show different ads.

Here are four potential outcomes when this happens:

1) The companies with more/better data will win out over the companies with less/poorer data

When we are all using the same algorithm, the data that we are able to feed into it might determine who succeeds and who does not. Those companies who have the ability to store massive amounts of clean data, data that feeds back into the platform (whether it’s Google or anywhere else), will be better positioned to take advantage of the algorithms of the future. With more data, the algorithm will work more effectively for that company than it may for another.

In this scenario, the real level on which companies are competing is on data.

2) The marketplace will determine winners and losers

This is potentially a dangerous, anti-competitive scenario. But one we must consider. Google and Facebook already have incredible amounts of power. And if they can use their algorithms – intentionally or otherwise – to control what companies succeed in reaching new customers and what companies do not, be careful.

I don’t think any of us wants this kind of a future. Google and Facebook will tell us the same thing. But who is preventing it?

3) Branding will become more important than ever

When there is no real competitive advantage on targeted digital advertising, companies will need to rely on other areas to compete. Brands are one possible area of competition.

While brand loyalty has been trending downwards for some time, it may be that effective branding is going to see renewed importance over time. And that’s because consumers who seek out certain brands will bypass, in a sense, what the algorithms are doing.

4) Pricing will become more important than ever

This one requires very little explanation, because it is similar to #3. And while it might sound like good news for consumers (more companies competing on price and lower prices in the marketplace overall), it spells trouble in the long run.

A price war – with each company trying to lower prices to out-offer competitors – could precipitate a race to the bottom on quality and service. It could also mean that giant companies, like Amazon, undercut competitors to the point that they become near-monopolies.

This scenario is not great of competition either.

The Possibilities Are Endless

These are only four potential scenarios. They all might come true. Or none will come true. There are thousands of other ways this could work itself out.

But if you are responsible for advertising your business, or growing your business in any way, you have to start thinking about the future of competition. Because it may not look like competition today.

Best Algorithm Wins

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The age of AI is upon us. As marketers, we must embrace it. If we do, and if we can find the opportunities to use artificial intelligence to our company’s advantage, there will be nothing but success in our future.

Those who don’t, those who fight back against the changing tide, who insist on doing things the old way, are going to quickly find themselves out of a job. They will be passed over for promotions, will lose existing responsibilities to machines and those who realize their power, and will either go down with the sinking ship that is their company or will be shown the door as their company moves into the future without them.

It’s no longer a question of IF, it’s a question of WHEN. How soon will the algorithms come for your job? Or, put in a more optimistic way, how soon will the algorithms make you better at your job?

First Mover Advantage and AI

The algorithms that will help us become better marketers will help us in a number of ways – from targeting new users to optimizing our offers and pricing. But regardless of what they will do for us, there is one thing that bonds them all. They need data to function. They need data to learn, to grow, and to succeed. That is why there is such a large first-mover advantage in AI.

Those companies with the greatest capabilities at the end of the day will be the ones that are investing in those capabilities right now. If you come late to the party, you may be permanently at a disadvantage. That is because your competitors will have better algorithms than you do, trained on more data, over a longer period of time.

When We All Have AI

When all companies in a place are using artificial intelligence to their advantage, it becomes a question of whose algorithm is best. And there are a number of factors that will come into play:

  • Who has the larger data set?

  • Whose algorithm has been around longer?

  • Who has trained out the initial bugs best?

These are still early days of implementation of machine learning and other technologies in the marketing space. It’s not too late to claim that first-mover advantage.

But what should you do now to set your company up for success in the future?

How to Move Your Company Forward with AI

There are a number of things you can do today that will help your company succeed in an AI-driven future:

  1. Do your research. Find out what other companies are already doing. Talk to experts, attend conferences, and network. There is a lot to learn, and people will spend their whole lives learning the intricacies of this new science. So don’t expect to pick it all up or become an expert overnight. But you can become the go-to source for information and innovation in your organization.

  2. Make the case. Once you have a basic understanding of how companies are going to be using these new technologies to improve their marketing, it’s time to loop in the decision makers. To get them on board, give them real-life examples. How will your company save money? Grow revenue?

  3. Partner with early-adopters. There are a lot of big companies out there that are already making gains with these new technologies, and they are willing to collaborate if it makes good business sense. A great way to get started is to take advantage of the tools that these first-movers produce, and partner with them to expand your own capabilities.

What is a Retail Location For?

Depending on who you listen to, retail in the United States is either on its last legs or is about to be a part of a major evolution in experiential marketing. The truth is, it’s a little bit of both.

Traditional retailers – after years of trying to compete with the likes of Amazon – are falling by the wayside. Consumer behavior has changed in significant ways, which means the way we shop has changed. Even if we aren’t doing all of our shopping online, there is still less in-person shopping to go around. And many of the older brands are no longer able to keep up.

However, there are a number of companies who are having new or renewed success with brick and mortar retail. These companies have found ways to appeal to today’s shoppers and offer something that both the online experiences and the traditional retail experiences were lacking.

And so, more and more, companies are asking themselves:

What is a retail location for?

While the future may bring with it a number of different retail models that can be successful, there are already three categories of retail experiences that companies are having success with today. These include showrooming, support, and experience.

1. Showrooming

Showrooming is the broad category name we give to retail locations intended to get people to try out a company’s products in person. While many of these locations also sell products, that is not the primary reason for their existence.

Companies that have opened up Showrooming locations recognize that much of their actual sales will still happen online. However, the online experience is still bad at giving people the ability to try physical products before they buy. And this is where a Showroom can pay off.

Think of the Apple Store as the premier example of a Showrooming strategy. Many other technology companies are following suit, as are some fashion brands who will show off their wares and let customers try them on, but won’t necessarily hold the inventory necessary to sell on site.

2. Support

There are some retail locations that are not for selling at all. Instead, they are places for existing customers to get help. In this way, they are intended to serve the customer experience – keeping customers happy and promoting brand loyalty in the long term. I put these retail locations into the Support category.

Again, this type of retail experience has been most common in the technology space, where products can often require an experienced professional to review a problem in person. Best Buy popularized this type of retail experience when they introduced their Geek Squad.

3. Experience

Some companies have decided that they want people in their stores regardless of whether they are customers or not. That’s because building a community of people around shared interests related to the brand is more important to them over the long run.

The Experience category includes storefronts that may or may not have been traditional retail environments in the past, but now include some combination of education and training, live events, speakers, meet and greets, and more.

Think of the bookstore that hosts a popular author on the release of her new book, or a camera retailer that features a free lecture given by a world-famous photographer. These are not direct selling experiences, but they help to attract an audience that companies hope will end up developing a lasting relationship with their brand.