A Few Words About The 2020 Digital Outlook (1,772 of them, to be precise)

by Tom Beck, Executive Director of SoDA

SoDA has released an annual Digital Outlook Study for the past seven years. We explore spending trends, adoption of emerging technology, perspectives on the digital landscape and evolving priorities for both agency leaders and brand marketers. The study for 2020 was supposed to go according to plan... a plan we’ve executed many times over. We drafted the survey with our colleagues at Forrester. We fielded the research in late Q4 2019. We analyzed the data and assembled our insights. We prepared key findings and readied the report for a release on March 16th at SxSW in Austin. Then everything stopped.  

For obvious reasons, our plan had to change. And it wasn’t because SxSW was cancelled. Amid a rapidly accelerating pandemic and a global economy grinding to a halt, the annual outlook data we’d collected just weeks earlier suddenly seemed like ancient history. Or, at the very least, what had appeared to be a clear (and rosy) continuation of the existing trendlines took an abrupt turn and reappeared behind the looking glass, darkly.

The theme for this year’s SoDA Report was also called into question. It had been selected months ago. We used it to brief our many contributing authors. On first blush, “The End of the Beginning,” seemed a bit too ominous for a time of global uncertainty and apprehension. But a closer look at the origin, intent and actual meaning of the idea reminded me that it’s anything but. In fact, “The End of the Beginning” was intended to be a momentary celebration that what we’ve all been part of creating has made a lasting imprint and the next phase of opportunity (and duty) is upon us.

“The End of the Beginning,” as a thematic idea, is based on a presentation delivered by Benedict Evans from Andreessen Horowitz in November 2018. In his annual State of Innovation address*, Evans suggested that we’re entering a new, and fundamentally more transformative, epoch for digital businesses. For the past 20 years, the story of Internet and mobile technology has been largely focused on the global ubiquity of “access” and adoption in our everyday lives. Those beginning chapters are at an end and a new narrative will take shape over the next 20 years – a story about “use” instead of “access,” and meaningful transformation at a scale that dwarfs what we’re seeing today. As Evans states,

“Close to three quarters of all the adults on earth now have a smartphone, and most of the rest will get one in the next few years. However, the use of this connectivity is still only just beginning. Ecommerce is still only a small fraction of retail spending, and many other areas that will be transformed by software and the internet in the next decade or two have barely been touched.”

Industry by industry, Evans points out that while digital spending appears to be large in aggregate terms, it still represents just a tiny fraction of the overall spend (and opportunity) in any category. A case in point: US eCommerce spending at around $585BN in 2019 was still just 5% of total consumer spending.... 5%! And that’s just one of many examples.

More importantly, Evans points out that for the past 20 years, we’ve labored (successfully) to build foundations, invent new technologies, prove relevance, entice adoption, and solve important but relatively inconsequential problems. We’ve picked a lot of low-hanging fruit. We’ve slayed a lot of tiny beasts. We’re now graduating to a new phase of opportunity where digital technology (and those who think about it, design it and develop it) will be called upon to tackle some of the most significant, systemic, structural challenges and opportunities facing our societies. That, to me, is as promising and motivating a storyline as any. And I can’t wait for us to write it.

Alas, we find ourselves just 3 months into “the next 20 years” and already facing an unprecedented challenge – a global health crisis with a stunningly immediate impact on the economy, the way work and how we relate to one another. Agency leaders (and society, at large) have moved very quickly to adapt for a distributed, work-from-home model. Education, commerce, work/life balance, parenting, entertainment, fitness, civic responsibility, community, social interaction and just about every aspect of our daily lives has been upended. In a matter of weeks, necessity (the mother of all invention) has forced us to accelerate and deepen the ways in which we integrate digital technology into our very fabric of being. Many were well positioned to do so and report positive results thus far. Some have even suggested that they’ll never go back to their old ways of working. That alone is incredible and I’m heartened by the fluidity, creativity and resilience that makes humanity (and great agencies) great... under any circumstances.

The financial outlook for 2020 has also taken a hit and many agency leaders will be pressed to reduce headcount and hustle for new revenue even while they wrestle with significant operational disruption at their clients and in their own studios. But there’s a silver lining too. Many agencies reported strong financial performance in 2019 and they came into the year in a healthy position, well-prepared to weather a storm. For others, they’ve reported little financial impact thus far and their forecast for the year remains strong. And still others have used the current climate to accelerate a strategic shift in their business and experiment with different pricing models. If you look around among the uncertainty, you’ll see boldness, hustle and the kind of determination that will, “never let a good crisis go to waste.”

It’s going to be hard to think about the next 20 years when we’re in the middle of this disruption. It’s going to be hard to see that we are at the beginning of a new era of opportunity and relevance when we don’t even have visibility into our sales pipelines 2 months from now. This year, some of us will be focused on survival. Others on adaptation. And others on the auspicious timeliness and relevance of their particular specialization. We’ll all learn resilience. And when we come out on the other end, I suspect we’ll see that 2020 served to accelerate what Benedict Evans optimistically (encouragingly) called, The End of the Beginning. One need only imagine how quickly or effectively we would have adapted to this crisis without the digital technologies we now rely on to keep our work, family, social and civic lives stitched together.

As it relates to our annual Digital Outlook Study, we quickly re-fielded a small portion of the survey and focused on the immediate steps agency leaders have taken amid COVID-19, how their outlook for 2020 has changed, and where they feel most (and least) prepared to weather a disruption to their business. We realize that this supplemental data is a tiny snapshot in time (March 13-22, to be precise) and an incomplete view amidst a rapidly changing and uncertain year. We also know that the timing and depth of impact for agencies will be unevenly distributed. That said, this new data provides a useful glimpse into how agency leaders are initially responding to the new reality in 2020.

We’ve also taken a fresh look at the data we collected from agency leaders and brand marketers in late Q4 and believe that many of the structural and systemic changes that have been playing out in recent years will continue to be important factors going forward. In some cases, the trends may only accelerate. While we fully understand that forecasts for budget growth and revenue growth in 2020 may be upended, we’re presenting key findings from at least a portion of this data as a useful reference point against past and future forecasts. That said, we’ve dropped, for the time being, our “Trends to Watch” section. New trends are in the making this year and I am hardly in a position to predict them. Plus, a little less declaration and a little more humility will do us all some good. We’re entering uncharted territory once again and the strength of our capabilities, the courage of our convictions and the generosity of our spirits will serve as the best moral compass and roadmap for the path ahead.

In conclusion, I want to express my heartfelt gratitude to the SoDA community, SoDA’s Board of Directors, Forrester Research and our partners at Adobe and Media Temple for making this report possible. We’re bound by the common belief that we’re stronger when we share generously with one another... knowledge, ideas, experiences, resources, encouragement and support. More than ever, my hope is for an abundance of generosity this year.

I also want to thank Justin Lewis for serving as the Guest Editor of this year’s SoDA Report. Justin is Co-founder and CEO at Instrument in Portland and he leads with a restless curiosity, an uncommon thirst for change and a level of candor and ethical clarity that is rare in this business. He’s an optimist by nature but knows that nothing of lasting value comes easily. He’s lived and breathed the beginnings of this digital revolution and he’s more ready than ever to fight for work that matters. I can think of no better rallying cry for all of us, this year, when Justin writes:

“I’ve always needed to believe that the best thing I’ve ever done hasn’t happened yet. I’m thankful that I picked a path where I truly believe that and know it is possible.

I’m not saying that the path ahead won’t be without challenge. As our collective businesses have gained notoriety and our industry has solidified its position in the market, we now experience some of the same business conditions that drove many of us to the horizon in the first place. In this moment, we are experiencing industry challenges around rate pressure and in-sourcing. These factors, coupled with tremendous global, economic, and political uncertainty, test our will to move forward.

And yet, we do move forward. We move forward out of a love for our people. We move forward out of a genuine passion for the work. And we move forward because we believe the work we will do matters more than the work we have done.

Eyes open, heart forward, towards the future.”

From all of us in the SoDA community, stay safe, healthy and full of energy and optimism this year. Our best work has just begun.

* If you haven’t watched it already, I highly recommend taking 20 minutes to watch Benedict Evans’ presentation, “The End of the Beginning,” from his annual State of Innovation report in November 2018. Super relevant for the years we find ourselves heading into.