Why Digital Products Will Disrupt Commerce

The digital goods commerce is growing twice as fast as physical goods commerce, and accelerating. Soon it will dominate global commerce, driven by exponential technologies and seismic shifts in consumer behaviour. It’s already a gigantic USD 950 billion market, and even bigger opportunities are arising. Get ready for the next commerce revolution.

It was in the final days of 2018 when the US Supreme Court started to hear oral arguments in a lawsuit against Apple. The suit, known as Apple Inc vs Pepper, had been filed by a class that included a group of iPhone users led by a man named Robert Pepper and their claim was straightforward: Apple App Store is a monopoly and is not only breaking antitrust laws but, more importantly, making it harder and more expensive for consumers to buy digital goods.

The litigation was really unusual and the Court didn’t have a jurisprudence to judge the case, so this case is still pending. But this surprising event is special, not because of its uniqueness, but because it’s a symbol of a dramatic change of times: digital goods are becoming more and more important and consumers, more than ever, want to have access, convenience and freedom of choice when purchasing them, and are willing to fight for it.

Digital goods are products and services that are completely delivered using information technology. In other words, they don’t involve an exchange of physical things. Some illustrative examples of digital goods include:

• media such as movies, music and publications delivered as digital files or streaming services;
• games delivered without a physical media;
• virtual goods such as avatars and tools sold in a game;
• art, photographs and graphic designs sold in digital format;
• software such as mobile apps;
• education services that occur in a digital environment;
• communications, computing, consulting, infrastructure or data services provided digitally.

The list is long and growing everyday as technology digitizes the world around us. This thesis is intended to investigate the impacts of the tremendous evolution of this industry, the possible consequences in consumer habits and in businesses, and to point out astounding opportunities that are arising.

The Digital Goods Age

Analyzing and cross-referencing information from a wide variety of sources, such as trend reports, market forecasts, business news, corporate announcements, industry researches, books and conferences, it becomes clear that the effects of the digital goods economy is already huge and will become even more so. Digital goods commerce is growing dramatically – twice as fast as physical goods commerce – and accelerating, boosted by seismic shifts that are happening worldwide in the way we buy things.

As technology becomes more accessible and pervasive, the digital goods commerce importance will only be greater. It will not only increase the sales of virtual items inside games or subscriptions of mobile apps services, it will disrupt the entire commerce ecosystem. We may be seeing the beginning of a new era, an age in which the commerce of digital products surpasses the commerce of physical products in value and importance: the Digital Goods Age.

In order to go deeper into this argument, the following series of posts will present  facts and figures on the digital goods commerce, explore the trends that are shaping the commerce ecosystem showing why digital products may disrupt it, demonstrate some of the most successful cases so far in digital goods commerce in the world and their extraordinary numbers, and enlighten great opportunities to push this industry even further while solving the biggest challenges to fulfill the vision of such a digital goods world.

This article was originally published in the book “The Digital Goods Age: Why Digital Products Will Disrupt Commerce“. Download it for free.

The Digital Disruption of Commerce has Already Started (part 1/4)

The first post of this series will explore three major trends that are shaping the commerce landscape, deeply changing consumer behaviour and forcing a profound reorganization of the industry. These trends overlap and strengthen each other, and, together, outline one overarching key message: digital is dominating commerce piece by piece.

Right up front, we will show that digital has already conquered commerce sales channels, with e-commerce now representing 50% of the year-over-year growth of retail sales in the US and expanding. After that, we will show how digital is transforming not only the point of sales and the marketing techniques to promote sales, but the entire purchase process, moving all of us as consumers from a digital centric to a digital only commerce experience. Finally, we will show that digital’s next disruption might occur in the last bastion of traditional commerce: the digitalization of goods themselves.

The more we penetrate and immerse in a digital world, the more digital goods are becoming the next commerce battlefield!

Big Wave Chargers (part 2/4)

The second post, in turn, will illustrate some business cases from top companies that are exploring the digital goods commerce with staggering success. It will focus on one of the most prominent areas of this burgeoning industry, where are concentrated the major players and the biggest numbers: digital goods distribution.

Considering only the value of consumer apps, enterprise apps, and app-driven IoT technologies, the Digital Goods Economy is already a gigantic USD 950 billion market. In a year that retail defaults showed an all-time high in the US, it’s noteworthy to see that some of the most valuable companies in the world are already creating billionaire businesses around digital products and services with great growth potential, way more than their physical goods counterparts.

The More We Build Moats, The More We Will Need Bridges (part 3/4)

Post number 3 will spotlight new opportunities to take the Digital Goods Age even further. The purpose is to pinpoint some possible paths to overcome the biggest challenges to the evolution of the digital goods industry.

As the history of Apple Inc. vs Pepper lawsuit shows, the market is today heavily concentrated in just a few players, especially regarding distribution. Besides that, there is a consistent trend of business model convergence in the industry, each of the big tech companies trying to create their own end-to-end platform for producing, distributing and retailing digital content and services, so the more their dominance expands, the more the market is concentrated.

This situation may prevent us from having more access to digital products and services. If we can find ways to increase the accessibility, discovery and convenience of purchasing of digital goods, we will deeply meet the wishes of consumers and possibly unleash great business opportunities. A new economic system to trade digital products and services, decentralized and fully integrated, could be the way for the digital goods industry to reach its full potential.

A Digital World is a Digital Goods World (part 4/4)

Finally, the last post in the series will try to wrap up all the arguments presented in the previous ones and highlight the most important takeaways of this thesis. The Digital Goods Age is coming, rapidly. Here’s why digital products will disrupt commerce.