On June 10th 2016, Wolfgang Digital held their annual marketing event in The Foundry, at Google in Dublin. One of the speakers was the renowned economist Constantin Gurdgiev, who spoke on a couple of different topics relating to The Online Economy during part one of the event. These are his slides.
Wolfgang Essentials 2016 - Constantin Gurdgiev - The Online Economy
1. At the Cross Roads of Growth
Constantin Gurdgiev
Middlebury Institute of International Studies, Monterey
TCD, Dublin
www.macroview.eu
June 2016
2. Some choices to be made…Topic 1: The Online Economy
Growth v Risks: Margins & Atomization
Topic 2: Old Media, New Media
The Demand Cliff Content Bubble
Topic 3: Data, Analytics & AI
Disrupting More Than Insights Social, Operating & Strategy Risks
Topic 4: Export Opportunities
Open Market Closed Demand
Topic 5: Irish Economy Through 2020
Crises Ghosts The Wings of Change
9. Content Bubble?
Media-driven inbound leads are still x1.5
more productive in generating traffic than
outbound leads
Inbound leads are 1/2 cost of outbound
leads, so margins should be improved
… but… content space is crowded:
social media converging to blogging platforms
(14% leads generation efficiency to 7%)
Vanity metrics:
reach ≠ engagement ≠ influence ≠ conversion
2T web users
5.3T online ads & 1.7T FB content items annually
10. Content space is crowded:
social media converging to blogging platforms
(14% leads gen to 7%)
Vanity metrics are a problem:
reach ≠ engagement ≠ influence ≠ conversion
2 trillion web users
5.3T online ads & 1.73T FB content items annually
Revolt of the Middle?
In 2010, 13 percent of Americans opted to forego TV
services
In 2015, the number was 19 percent
65% of those ages 18 to 29 had cable or satellite
service at home in 2015
Compared with 83 percent of those 50 or older
Of those who opted to “cut the cord” 84 percent had
“advanced internet access”
The key is instrumenting choice and empowering supply
Unique offer at commoditized price
Answer (hope): AI + Robotics
12. Cost rising
Systems stability falling
Degree of complexity in data
collection & connectivity
Reputational costs (data
ownership shift)
Analytics must align with models & intuition
Analytics will fade into data-driven demand
Supply side will fade into robotics, AI-based
design, behavioral modification & SCM
But humans will remain…
Value-Added Margins Challenge Eureka Moment
High value-added in commoditized
space
High informational potential in
design & development
Bridging the gap to market
The Analytics Value Curve
13. Social, Operating and Strategy Risks
In operations:
Smartest systems…
…yield dumbest fails
In production:
Complements
Substitutes
In interactions:
Aiding
Displacing
In strategy:
Tails
Uncertainty
Will over-reliance on analytics and
automation de-humanize the economy?
14. A Demand Plateau
Internet usage is showing
signs of fatigue
Flat growth 9% y/y, but 7% ex-India
De-accelerated steadily post-2008
(15% pa)
Geography is changing
Top 3 internet-enabled markets:
China, India, USA
Smartphones growth is
slowing
21% vs. 31% y/y
Smartphone shipments slowing 10% v
28% y/y -- lowest since 2008
16. Changing Patterns of the Norm
U.S., Old Europe, Japan
Secular stagnation:
Demand side
Supply side
Factor analysis
FX valuations, employment,
GDP growth & retail sales no
longer translate into global
trade growth
Demand geography
changes in EMs
Trade v domestic supply
17. Finance and Trade Disruption
Policy uncertainty is elevated
across the globe
Advanced economies lead…
…but EMs follow closely
Risk correlations are now more positive
Investment & Monetary Policies
remain challenging
Low policy rates not translating into
operating, trade & capex credit easing for
smaller firms
Currency wars continue to rage
But trade slowdown is a temporary
phenomena
As production & design become
increasingly individual / atomistic…
…through enablement via production &
supply technologies, design enablement &
AI…
Global Trade will become borderless to
facilitate transition to a new model of
demand & supply matching
18. Finance and Economic Disruption
Key factors
Financial sector: capital, margins, NPLs, regulatory charges)
Still re-trenching geographically
Competitive devaluations and QE-induced volatility
Indirect capital controls (Financial Repression)
20. View From the Top
Recovery shifting toward domestic
sectors
Investment (organic ex-FDI)
Retail sales Jan-Apr 16 growth ex-motors
~ similar to 2015 in value & volume
Value of sales growing slower than volume
Construction pick up is off extremely low
levels
Drivers for growth
ECB and the Euro
FDI and tax optimization
Domestic demand (ex-investment funds)
Reduced public sector drag
Recovery-related risks
Property prices and rents
Lack of business capex
Labor markets compression
Productivity growth
Return to fiscal profligacy
21. Has Irish Economy Decoupled from the Global?..
Global growth slowdown
World economy is expected to grow at
3.1-3.2 percent per annum in 2016-
2017
Well below historical average and
average for past episodes of recoveries
Irish growth trend
Irish growth is de-accelerating: total
domestic demand is expected to growth
4.7-4.8 percent in 2016 or ½ the rate of
2015 growth
Still, this is well above 2.9-3.3 percent
potential rate of growth
External drivers (inc. expected
tax amnesty in the U.S.)
Internal drivers (bouncing from
extreme losses)
Internal drivers to organic upside
22. Legacy of the Crises
Banking & finance 101
Mortgages
13.2% of all accounts were in arrears,
18.6% by value
207,624 accounts (23.5%) at risk (in
arrears or restructured with higher or
same level of debt)
31.1% of all mortgages by value
(EUR39.7 billion) were in at risk
Banking & finance 102
Lending
Total lending to Irish households down
2% in 2015
Personal credit down 4.2%
House lending down 1.7%
Credit advanced to Irish Resident SMEs
(ex-financial & property sectors) was
down 14.8% in 2015
New lending for Irish SMEs was up just
EUR245 mln y/y in 2015
Lack of consumer
credit pressures
demand and
investment
Risk mispricing
uncompetitive
distortions in
business credit
Pensions and
savings are under
pressure due to
NIRP
Lack of business
credit strategy
loss of future
productivity
23. Wings of Change
Economics of Growth 101
Irish Demand
Early risers
Gen-Jinx & Gen-Z with familial networks
High mobility lower risks & greater
opportunities (indigenous & foreign)
Relatively robust family formation rates
Low debt of younger generations
Labor market skew toward services
favors younger generation
Economics of Growth 102
Investment
Competitive institutions & regulatory
environment
Minus a skew in favor of MNCs
Highly open economy
High HK on-shoring potential
Enterprise culture is not prevalent, but
coincident with exporting culture
Financial risk
cushions are still
significant &
supportive of
demand growth
Challenge =
Opportunity:
lifting indigenous
exports & value-add
Relatively healthy
entrepreneurial
culture & high HK
mobility
State-controlled
sectors are yet to
face productivity
challenge
Hinweis der Redaktion
Topic 1: The Online Economy
Growth v Risks: Margins, Atomization, Platforms Exhaustion
Topic 1: The Online Economy
Growth v Risks: Margins, Atomization, Platforms Exhaustion
Topic 1: The Online Economy
Growth v Risks: Margins, Atomization, Platforms Exhaustion
In looking for ways to target Generation Z — those born between 1995 and 2010
The Demand Abyss Content Bubble
The Demand Abyss Content Bubble
The Demand Abyss Content Bubble
The Demand Abyss Content Bubble
http://www.livescience.com/2836-people-live-tv.html
http://www.pewinternet.org/2015/12/21/4-one-in-seven-americans-are-television-cord-cutters/
Topic 3: Data Analytics to AI
Disrupting More Than Insights Less E Risk, More SG & OB Risks
Topic 3: Data Analytics to AI
Disrupting More Than Insights Less E Risk, More SG & OB Risks
Topic 3: Data Analytics to AI
Disrupting More Than Insights Less E Risk, More SG & OB Risks
The Demand Abyss Content Bubble
Topic 4: Export Opportunities
Open Markets Closed Demand
The Demand Abyss Content Bubble
The Demand Abyss Content Bubble
The Demand Abyss Content Bubble
Topic 5: Irish Economy Through 2020
Brexit Ghosts The Real Wings of Change
The Demand Abyss Content Bubble
The Demand Abyss Content Bubble
In its biannual Economic Outlook, the OECD said that a tighter labour market will drive wages higher.
It also warned that wage growth may turn out to be stronger than projected, lifting consumer spending in the short run but pushing up inflation and eroding competitiveness over the medium term.
The report said that the Government may be tempted to spend more of the fruits of a growing economy.
But "given the vigorous expansion, the Government should avoid more fiscal stimulus than currently planned" so as to avoid the risk of overheating the economy, it added.
It noted that business investment - even when excluding the multinationals - has grown solidly.
But it cautioned that lending rates to SMEs are "among the highest in the Euro area", while tight credit conditions will continue to exert a drag on investment.
The OECD said that productivity growth in Ireland has been trending down for some time because of a slowdown in Knowledge Based Capital (KBC) investment.
A recent surge in KBC investment by multinational companies should, it said, lift productivity growth - although much of this surge may be related to the "onshoring" of intellectual property already used by these multinationals.
The organisation said the diffusion of innovation to smaller, Irish owned firms is likely to be limited by the weak linkages with the multinationals.
It has urged the Government to offer more direct research and development support to domestic SMES, rather than R&D tax credits, as is currently the case, which are more advantageous to multinationals.
Last year gross fixed capital formation grew by 28%, but this year the OECD said it is expecting growth of 10%, dropping to 4.3% next year.
Consumer spending should grow in line with labour earnings, although the OECD noted that debt repayment will likely keep its momentum in check.
It is projecting private consumption growth of 3% this year and next, down slightly form 3.5% last year.
Debt is also a factor in its assessment of the Government's budget stance.
It said the Government is on track towards its medium term goal of a balanced budget, but said most of the projected improvement in the deficit is due to the upswing in the economic cycle, rather than from specific budget actions.
Strong revenue growth and low interest costs should be used for a more rapid reduction of the "still high public debt", it added.
It also advised the Government to prioritise structural reforms that would get more people back to work by improving the efficiency of public employment services, so that growth can become more sustainable.
It said the unemployment rate fell to 9% last year, but noted that Ireland's employment rate remains low.
This year the OECD said it expects GDP to grow by 5% while total domestic demand is forecast to grow at 4.8% - half of last year's rate.
It had pencilled in export growth of 6% and import growth of 6.9% - both well down on last year's very strong figures of 14% and 16% respectively.
HICP inflation - at zero last year - is forecast at 0.3% this year and 2.2% in 2017, the Paris-based organisation said.
In its biannual Economic Outlook, the OECD said that a tighter labour market will drive wages higher.
It also warned that wage growth may turn out to be stronger than projected, lifting consumer spending in the short run but pushing up inflation and eroding competitiveness over the medium term.
The report said that the Government may be tempted to spend more of the fruits of a growing economy.
But "given the vigorous expansion, the Government should avoid more fiscal stimulus than currently planned" so as to avoid the risk of overheating the economy, it added.
It noted that business investment - even when excluding the multinationals - has grown solidly.
But it cautioned that lending rates to SMEs are "among the highest in the Euro area", while tight credit conditions will continue to exert a drag on investment.
The OECD said that productivity growth in Ireland has been trending down for some time because of a slowdown in Knowledge Based Capital (KBC) investment.
A recent surge in KBC investment by multinational companies should, it said, lift productivity growth - although much of this surge may be related to the "onshoring" of intellectual property already used by these multinationals.
The organisation said the diffusion of innovation to smaller, Irish owned firms is likely to be limited by the weak linkages with the multinationals.
It has urged the Government to offer more direct research and development support to domestic SMES, rather than R&D tax credits, as is currently the case, which are more advantageous to multinationals.
Last year gross fixed capital formation grew by 28%, but this year the OECD said it is expecting growth of 10%, dropping to 4.3% next year.
Consumer spending should grow in line with labour earnings, although the OECD noted that debt repayment will likely keep its momentum in check.
It is projecting private consumption growth of 3% this year and next, down slightly form 3.5% last year.
Debt is also a factor in its assessment of the Government's budget stance.
It said the Government is on track towards its medium term goal of a balanced budget, but said most of the projected improvement in the deficit is due to the upswing in the economic cycle, rather than from specific budget actions.
Strong revenue growth and low interest costs should be used for a more rapid reduction of the "still high public debt", it added.
It also advised the Government to prioritise structural reforms that would get more people back to work by improving the efficiency of public employment services, so that growth can become more sustainable.
It said the unemployment rate fell to 9% last year, but noted that Ireland's employment rate remains low.
This year the OECD said it expects GDP to grow by 5% while total domestic demand is forecast to grow at 4.8% - half of last year's rate.
It had pencilled in export growth of 6% and import growth of 6.9% - both well down on last year's very strong figures of 14% and 16% respectively.
HICP inflation - at zero last year - is forecast at 0.3% this year and 2.2% in 2017, the Paris-based organisation said.