Showing posts sorted by date for query mobile drives revenue. Sort by relevance Show all posts
Showing posts sorted by date for query mobile drives revenue. Sort by relevance Show all posts

Saturday, February 22, 2025

Qualitative AI Benefits Will Likely Outweigh Quantitative Value

Firm leaders will definitely be expected to quantify the upside from their artificial intelligence capital investments. But those quantitative metrics are quite unlikely to capture the full value of AI investments, for similar reasons to the value created by the internet, which is partly quantitative (lower value chain costs; lower market barriers) and partly qualitative (convenience, transaction costs, collaboration cost and effort). 


In fact, the value of the qualitative enhancements, which cannot be directly quantified, likely are greater than the quantitative value that can be measured. 


Aspect

Internet (Quantitative)

Internet (Qualitative)

AI (Quantitative)

AI (Qualitative)

Economic Value

Disintermediates value chains (e.g., e-commerce cuts out retailers). Measurable in cost savings, market growth ($6.3 trillion e-commerce sales globally in 2023).

Enhances convenience and access (e.g., online shopping saves trips). Hard to price but drives user adoption.

Optimizes processes (e.g., AI in logistics cuts costs by 15-30%). Projected to add $13T to GDP by 2030.

Amplifies human productivity (e.g., faster decision-making). Felt as improved quality of work, not just output.

Time Efficiency

Speeds up transactions and info retrieval (e.g., seconds vs. hours at a library). Quantified in time saved per task.

Feels like less stress or more free time (e.g., instant answers via Google). Perception-based value.

Automates complex tasks (e.g., data analysis in minutes vs. days). Measurable in labor hours reduced.

Frees mental bandwidth for creativity (e.g., AI drafts let you refine vs. create). Subtle but transformative.

Scalability

Enables global reach for businesses (e.g., small sellers on Etsy reach millions). Seen in user bases and revenue.

Connects people socially or culturally (e.g., global friendships). Intangible sense of belonging.

Scales decision-making (e.g., AI diagnoses for millions). Quantified in throughput or accuracy rates.

Personalizes at scale (e.g., tailored learning for each student). Feels bespoke, enhancing individual experience.

Job Impact

Displaces some roles (e.g., travel agents) but creates others (e.g., web developers). Net job shift measurable.

Changes how we work (e.g., remote collaboration). Less about numbers, more about lifestyle shift.

Replaces routine jobs (e.g., cashier bots) while creating high-skill roles (e.g., AI trainers). Net effect trackable.

Augments roles (e.g., doctors with AI diagnostics). Enhances capability, not just efficiency—harder to measure.

User Experience

Increases access speed and volume (e.g., streaming vs. VHS rentals). Quantified in bandwidth or clicks.

Delivers entertainment or ease (e.g., Netflix binging). Emotional or convenience-driven value.

Boosts precision (e.g., recommendation algorithms hit 80% accuracy). Measurable in engagement metrics.

Feels intuitive or proactive (e.g., AI predicts your next song). Personal resonance over raw utility.

Data Utilization

Generates user data for monetization (e.g., ad revenue $600B+ in 2023). Clear financial metric.

Shapes how we navigate info (e.g., targeted ads feel relevant). Subtle influence on behavior.

Leverages data for predictions (e.g., fraud detection saves $B). Quantified in error rates or savings.

Adapts to individual patterns (e.g., AI learns your habits). Feels like an extension of self, not just a tool.


And many of the quantitative metrics overstate the impact. Consider a simple measurement of e-commerce retail sales, by revenue. Such metrics generally fail to discount the likelihood that the same products would have been sold through legacy channels. 


In other words, the value of internet retail sales is not the total sales volume, but rather the incremental savings to consumers (price savings, less shipping costs) or retailers (cost of sales). That is likely to be a low-single-digit percentage of sales volume. 


Beyond that, there are the disruptive effects of substitution, which have led to replacement of sales and profit for many legacy industries as new internet-based products replaced the existing products. 


Industry

Legacy Product/Service

Internet Substitute

Impact

Retail (Books, Music, Movies)

Physical stores, CDs, DVDs, printed books

E-commerce platforms (Amazon), streaming services (Spotify, Netflix), e-books

Significant decline in physical store sales, near-elimination of some physical media formats.

Media (News, Newspapers)

Printed newspapers, magazines

Online news websites, blogs, social media

Sharp decline in print subscriptions, shift to digital advertising.

Communications

Landline phones, postal mail

Email, instant messaging, video conferencing (Zoom)

Reduced use of traditional phone lines, decline in postal mail volume.

Travel

Travel agencies, paper tickets

Online travel agencies (Expedia), online booking platforms, digital tickets

Decline of traditional travel agencies, shift to online booking.

Education

Physical textbooks, in-person lectures

Online courses (Coursera), digital textbooks, online learning platforms

Increased accessibility of education, growth of online learning.

Advertising

Print ads, broadcast ads

Digital advertising (Google Ads, social media ads), targeted marketing

Shift from traditional to digital advertising, increased data-driven marketing.

Finance

Physical bank branches, paper statements

Online banking, mobile banking apps, digital statements, online trading platforms.

Reduction of physical bank branch traffic, increase in online financial transactions.

Photography

Film, physical photo albums, photo developing services

Digital cameras, smartphones, cloud storage, online photo printing.

Near elimination of film photography, shift to digital photo storage and sharing.


In some cases, we can quantify the shift. 


Industry

Source

Media (Newspapers)

U.S. Census Bureau: "Newspaper Publishers' estimated revenue dropped by 13.4%, from 2015 to 2022."

Telecommunications

U.S. Census Bureau: "Wired Telecommunications Carriers experienced a 29.6% drop in employer revenue generated through fixed local telephony services from 2015 to 2022, according to the SAS. Meantime, the industry's revenue from internet access services increased 46.3% from $79.1 billion in 2015 to $115.8 billion 1 in 2022."

Information Sector

U.S Census bureau: "The U.S. Census Bureau's 2022 Service Annual Survey (SAS) estimates that revenue of employer firms in the Internet Publishing and Broadcasting and Web Search Portals industry soared 181.9% from $120.2 billion in 2015 to $338.7 billion in 2 2022."

Internet Economy

IAB: "found that the internet economy grew seven times faster than the total U.S. economy during the past four years, and now accounts for 12 percent of the U.S. gross" 

https://www.census.gov/library/stories/2024/05/internet-growth.html

https://www.iab.com/news/study-finds-internet-economy-grew-seven-times-faster/


“Time saved” or “trips saved” likewise are hard to quantify. The former is helpful, but does not have an actual “cost” we can accurately measure. “Trips saved” might be calculated using a “fuel saved” or “miles not driven” or some other transportation cost savings. 


Study/Source

Focus

Estimated Annual Savings per Consumer

Year

Assumptions

PwC Global Consumer Insights (2023)

Time and Cost Savings

~$200-$300 (product cost savings)

2023

80% of consumers prioritize cost savings; assumes 5-10% savings on $3,000 annual online spend.

Shippo E-commerce Report (2023)

Travel Savings

~$150-$250 (reduced travel costs)

2023

60% shop online to avoid trips; assumes $10-$20 saved per trip, 12-15 trips avoided yearly.

Statista Mobile Commerce (2023)

Time Savings

~$50-$100 (time value)

2023

70% cite time savings; assumes 10-20 hours saved yearly at $5/hr (low-end opportunity cost).

Forbes E-commerce Stats (2023)

Item Costs

~$250-$400 (cheaper goods)

2023

$5.8T market driven by lower prices; assumes 8-12% savings on $3,500 annual retail spend.

Digital Commerce 360 (2022-2023)

Travel & Cost Savings

~$120-$180 (shipping as proxy for travel)

2023

62% value free shipping; assumes $10-$15 saved per order, 12 orders yearly.

Brand Builder University (2023)

Travel & Time Savings

~$200-$350 (travel + time)

2023

$436B mobile commerce; assumes $15-$25 saved per avoided trip, 10-14 trips yearly.

McKinsey Consumer Pulse (2022)

Incremental Cost Savings

~$180-$240 (online deal-seeking)

2022

27% e-commerce growth; assumes 6-8% savings on $3,000 annual spend via deals.

Hostinger E-commerce Stats (2023)

Time & Travel Savings

~$180-$300 (mobile convenience)

2023

60% mobile sales; assumes $12-$20 saved per trip, 10-15 trips avoided yearly.


In many cases, there are “losses” for individuals as well: jobs eliminated; wage rates depressed; product values decreased; legacy products displaced by substitutes. The aphorism that the internet “replaced analog dollars with digital dimes” captures the essence of the process: internet product substitutes often generate less gross revenue and profits than the legacy products they displace. 


Study/Source

Focus

Estimated Costs

Year

Notes & Assumptions

McKinsey Global Institute (2017)

Jobs Eliminated

400-800M jobs lost globally by 2030 due to automation/internet substitution

2017

Assumes 15-30% of work activities displaced; internet accelerates substitution trends.

NBER - Internet, Wages, Consumer Welfare (2006)

Lower Wage Rates

$8.3-$10.6B GDP gain offset by wage divergence in non-IT regions

2006

Broadband adoption boosts wages in IT areas but depresses them elsewhere by 1-3%.

ScienceDirect - Internet & Labor Productivity (2014)

Lower Product Demand

~$8.16-$14.60 GDP/worker lost per 1% internet use if demand shifts

2014

Based on 108 countries; assumes product substitution reduces traditional sector demand.

Brookings - Economy & Internet (2000)

Product Substitution

~$200B annual cost savings (firms) but losses in traditional retail margins

2000

Savings for firms; assumes 5-10% margin loss for offline retailers (~$50B-$100B).

NBER - Internet Changes Labor Market (2002)

Jobs Eliminated & Wages

10-20% wage premium for IT workers; 5-10% job loss in non-IT sectors

2002

Internet shifts demand to tech skills, reducing traditional jobs by 1-2M in US.

ScienceDirect - Internet & Industry Competition (2016)

Lower Product Demand

10-15% profitability drop in less competitive industries due to internet use

2016

HHI increase suggests smaller firms lose market share; assumes $10B-$20B loss/year.

IMF - Globalization & Wages (1997)

Lower Wage Rates

5-15% wage suppression in manufacturing due to online competition

1997

Older data; assumes internet amplifies global substitution, impacting 10M workers.

BLS - Tech Change Impact (2019-2029)

Jobs Eliminated

1.5-3M US jobs lost in routine tasks by 2029 due to internet-driven automation

2019

Projections for 2019-2029; assumes substitution in manufacturing/clerical roles.


AI Assistant Revenue Upside Mostly Will be Measured Indirectly

Amazon expects Rufus , its AI shopping assistant, to indirectly contribute over $700 million in operating profits this year, Business Intel...