The website development market is dying: what to do and where to go? Interview with Mikhail Tokovinin (amoCRM)

    I often talk with the owners of Russian web studios and agencies to understand and explain to readers the ongoing processes in our market. In fact, the market is changing. I think that these changes are felt by all players, including us at Simtech Development. And our work on the international market confirms that the process is global and covers not only Russia, but also most Western countries.

    Recently, an interview with CMS Magazine came out with Mikhail Tokovinin, one of the partners of QSOFT + AIC, the founder of amoCRM and a very authoritative expert. This interview concerned his published open letter to the editorial board of the CP “The website development market is dying - like video rental in 2002.” I think many of you, if you haven’t read it, you’ve heard of it.

    Mikhail’s opinion caused a wide resonance among web developers and representatives of the digital market, and I decided to find out more about the prerequisites, reasons and, most importantly, Mikhail’s thoughts about what developers should do and how to adapt to changes.

    Today I decided to publish this interview here. It is interesting to know what you think about this and what we all need to prepare for (at the end of the interview there is a survey for statistics). Enjoy and enjoy reading!

    - Mikhail, you say that the website development market is dying, the number of orders and customers is decreasing every year, and soon our industry will turn into an extremely competitive environment. What prerequisites do you see and why do others not notice this?

    - Before speaking about objective factors and premises, it is necessary to make an important reservation. Market participants are always in a distorted reality and do not see objective trends that inevitably affect the market. A huge number of comments on my article on “Zuckerberg will call”, where people say: “No, this cannot be, but we have been working here for a long time, and everything is fine with us,” they only confirm my words.

    It is not by chance that in my letter to the editors of the CPU I started with a story about video rentals. Once the video rental market in the country was actively developing, and then it froze. In 2002, my friend, the owner of several major video rental offices in Moscow, was worried that his revenue began to decline month after month. Of all the reasons, he chose the most obvious - the poor work of the director, and replaced him with me. I headed a network of 11 video rentals, but despite all my busy activities and short-term growth, the business went bankrupt and was closed after 2 years. I experienced the experience in a falling market, survived this story and realized how it works.

    The situation with video rental in 2002 is very similar to today's with sites. It is very difficult to step aside and look at the situation soberly. While you are standing at your machine, you point blank do not notice what is happening. In the reality where you live, really all sites do. You communicate with people who need sites, you make sites, and your friends make sites.

    But there is one marker that reflects whether the market is growing or falling. In a declining market, you should try to optimize processes, do your job better than others - in general, be great. A growing market will forgive you any mistakes, you just have to manage to ship. You can squint, do all the mistakes, you will still earn. If where you work, it suddenly becomes important what your processes are, how carefully and carefully you approach them, then most likely your market is already falling.

    - So what is happening objectively in our market?

    - What are commercial sites for? Globally, I see only two tasks: attract new customers and make sales, or serve existing customers, provide a service.

    Ten years ago, everyone created sites, because the business was sure that the presence of a site in itself already brings customers. But if you look at the situation today, it becomes more than obvious that the site itself does not bring customers. Moreover, the site is simply a platform for finding customers and far from the most effective. Yes, there is online advertising, it can be considered. But if you objectively calculate where it is easier to get a client: by organizing a sales point at the station and near the metro or by launching advertising in Yandex.Direct, interrupting the cost of lead from competitors, then the answer is not at all obvious.

    Selling on the Internet has become expensive and difficult. This environment is very competitive. On the Internet, you fight for the consumer, not only with your competitors, but with the entire business on earth. The focus of attention is limited, and if at this second the conditional buyer of flowers wants to buy a house on a mortgage, then both the flower shop and the bank are fighting for his attention. The bank clearly wins this battle.

    The world of advertising has not yet seen such a highly competitive story. And in the next ten years, online advertising will become a hypermarket.

    A lot of businesses have already intuitively sensed this and stopped thoughtlessly making sites. The number of sites is steadily declining. Of course, there is a part of the market where websites are made for show, to write on a business card. But this task is perfectly solved by free designers. There are still large projects and large online stores. This is clear.

    But the site market is not the two hundred customers who do something very expensive, as it seems to my colleagues. Not even a thousand or ten thousand. The market is fifty thousand sites a year. When these fifty thousand become thirty five thousand, the change seems barely noticeable. Many will say - it's okay. And then thirty-five thousand will turn into ten thousand, ten into five, and five into a thousand. Then the market will shrink and become very competitive.

    Niche players will appear here. May be industry specific. But for sure, all the little things will be washed out of the market by services, because studios that rivet sites for 100,000 will become completely uncompetitive compared to services.

    - With a small business that will switch to designers to save resources, it’s clear. Well, where will medium and large projects go?

    - Most likely, the fattest part, and these are the most expensive, large and complex projects, will also go away. More precisely flow into in-house.

    The customer is becoming more professional. Moreover, for many, attracting a client and working with him on the Internet is turning into a key business process. Roughly speaking, on one side of the balance is a Tinkoff bank, which has its own powerful web development department, where they do not save on salaries, and on the other, the Siberian Credit conditional bank, which has an external contractor on salaries. And then the question arises, not how much the developer services cost, but which bundle is more competitive and efficient.

    I can tell from my own experience, and I launched several startups on different schemes, no one can compete in quality with full-time specialists. And all the well-known cases on the market prove this. Own team is more expensive, but it provides a better service.

    If quality becomes very critical for competition in the customer’s market, a bleak future is expected for contractors. That is why, I do not understand what the future of this market is at a distance of 5 - 7 years. Most likely, he is not.

    What will remain? The middle peasant. Projects in the range from 200,000 to 1,000,000 rubles. Oddly enough, now it is a very insignificant part of the market. We have a very strong bias of projects in the cheap segment and many offers in the expensive. And the middle was always not very densely populated. And she, most likely, will continue to live.

    Of course, it’s slightly exaggerated to compare our market with video rental, which has completely disappeared. The web development market will be more like car tuning. There is a mass consumer, but there is some small caste of fans of non-standard disks - a club of fans to change wheels.

    - But what about online stores? Who will make them?

    - Online stores have a rather sad future. There is such a story as aggregators that greatly change the picture of the market. Little things will not, several dominant large monsters will work. And a barely living medium for exotic needs. This story, the lack of a long tail, is global, and it is logical for any online business.

    Offline, there are two - three giants and then millions of small stores that have the advantage of a geographical location. Online everyone is just a click away. Therefore, the degree of consolidation of any online business should be disproportionately higher than in traditional areas.

    - In this case, web studios and agencies can switch to online promotion and digital advertising. The need for digital advertising will only grow if competition for consumer attention is tightened. Is it so?

    - The idea of ​​selling advertising is the idea of ​​selling some kind of contact with the target audience, selling the target audience to the business. Suppose we publish a magazine about cars and sell the contacts of people who read our magazine to car dealerships. However, the problem with modern advertising is that competition for human attention is changing, as I said. It doesn’t matter which site a person reads about cars on. We just know that he needs a car and can catch him at least for porn. This changes the history of advertising.

    In addition, the ability to attract an audience becomes so unique and important competence that it makes no sense to sell leads when you can sell customers. Booking sells hotels to non-leads; it sells customers to them. And takes away the lion's share of the proceeds. We are entering a wide phase of large aggregators, which initially will consolidate all the demand on themselves and will not need advertising.

    You need to understand that the ability to find an audience and sell becomes more important than the product itself. Look at what Tinkoff Bank is doing now. He sells a mortgage, but not his own. It is believed that the key competence for a bank is to buy and sell money. But it turns out that now the main ability has become the ability to find a customer and sell him a product. And Tinkoff sells another bank's mortgage. Which one is the bank? Who earns more? Which of them needs advertising?

    Surely, they have already come up with some term to name what is happening now in the economy - something like a post-post-industrial economy, when customer ownership is the main value.

    For example, do you see what a music group’s advertisement might look like when there is Apple Music, iTunes, VKontakte, YouTube?

    - But iTunes itself will not provide recognition to the group. We need promotion within these services.

    - Everything is easier. If you write good music, then people share it, share it with each other, and you become popular. Now you don’t have to spin anyone, produce, iTunes will still earn money.

    That is, in the case of artists, producers of goods, nothing changes. And production centers and advertising are no longer needed, like extra intermediaries.

    Another example, hotels and Booking. You can engage in the promotion of a hotel in Paris, and if you are a PR monster, then even something will work out. But compared to what customer flow brings this Booking Hotel, it will be nothing. A Booking does not care where to direct people. Where reviews are better, there is more flow. Therefore, the main task of the hotel is to change sheets and toilets more thoroughly. This is the best he can do. PR still has some potential, but advertising doesn't.

    - Then we turn to the important question of what the web development market should do. How to avoid a sad fate, keep the team and profit?

    - You need to understand that all current web studios have a unique and fantastic resource. They have in their hands a group of developers whom they feed so far. Demand for developers will only grow, site-building technologies will not disappear. Web development, like technology, is not in danger. But very soon, web studios will not be able to pay their developers a salary, and they will lose this resource. One day a conditional bank will come and redeem these developers for such money that no web studio can keep them. Already, all the most powerful web developers are being washed out of the market. Web studios are increasingly required to engage in training, staff development.

    Today there is a unique opportunity, having these resources, to turn around and make your project, startup.

    - In what area do startups need to be launched? Create aggregators? In our company, the number of orders for large marketplaces has recently increased. Is this the same trend?

    - Yes, marketplaces, like aggregators, are an attempt to get into a niche and distribute client traffic. But it is not necessary to do aggregators. In theory, aggregators sound cool, but in practice - this is, to put it mildly, a non-trivial thing. To defeat the aggregator market, to become a recognized leader there is a super task, few can afford.

    When you choose an idea for a startup, it’s important to be not too late and, much worse, not too early. So you need to choose topics where there were already the first promising projects, but they failed. And you know why this happened, how to eliminate shortcomings and bridge the so-called abyss. This is a classic of Jeffrey Moore.

    There are millions of projects that are currently in the abyss. From obvious ones like 3D printers to less predictable ones like project management. All project management systems are in the abyss. For many, many years no one can crawl it. And the potential is so huge that when some kind of more or less breakthrough idea appears, like Slack, it simply explodes with an atomic bomb. In order to achieve a capitalization of $ 3 billion over a year, you need to understand that this is not only well done Slack, it is the readiness of the market.

    Explosive growth does not demonstrate the potential of the team, but the potential of demand and the market. So, in this industry lies an oil field, from where it climbs out of all the cracks. Project management is undoubtedly such a topic. I myself developed a project in this area, project management software. But I lost and left early there.

    Another promising area is education. Russia has already understood this. All classic markets, like real estate (real estate aggregators, catalogs), are also in the abyss.

    In general, the ideas are a wagon. I repeat: you need to take an idea that no longer seems original and where someone is already doing this. Just answer the question: if many are already doing this, what is the percentage of penetration of all taken together.

    It seems to many that the CRM market has already formed. After all, there are so many CRM systems. I myself thought so four years ago when we launched our amoCRM project. I was sure that the market was divided for a long time. And what percentage of business in the world generally uses CRM? God grant if one. This is a typical example of an abyss. You’ll figure out how to pass from one percent to twenty - you will earn billions of dollars.

    Therefore, I believe that now that there is a team of two or three developers (and more is not necessary, since this is already harmful for a startup), design competencies, usability, and, even more valuable, mobile development, the worst idea that one could imagine, do something to order.

    This has always been a bad idea. We started in 2004. We were stupid and did not come up with an idea better than creating a web studio (now it is QSOFT. - From the author). Durov in 2004 launched VKontakte, Zuckerberg - Facebook. And we opened a studio. Someone is obviously a fool of us, and this is clearly not Zuckerberg (Laughs).

    - Michael, the last time you live in the USA. Your business operates in the USA. We also have more than 30% of customers from North America. And, as it seems to me, the story you are talking about has been developing for a long time on the American market. Small businesses use designers, modifying them a bit to fit their needs, for large businesses there are very expensive enterprise offers, there are almost no middle peasants. How do you see the American market and what are its differences from the Russian one?

    - In fact, the Russian web development market is not so far behind the American one. Moreover, it is unique in that it is at the forefront. Take the story with taxi drivers. Uber is in the USA and Europe. And in Russia, in addition to Uber, there are two more aggregators that compete with it - Gett and Yandex.Taxi. At the same time, there are many countries like Australia, Africa, Latin America, where everything is very backward so far. Everything that happens in the States happens with us. When you talk to local web studios, the conversations are the same: something has become hard, competition.

    And the American market is a market with great traditions, a large number of players, a very large share of small business, which, incidentally, is very seriously protected. There are cities where chain stores are prohibited at the local administration level. In the United States, you can still pay by hand-drawn checks in stores.

    America, being the heir to great traditions in business, is developing more slowly than the Russian market. A lot slower. I can say that the story of a taxi in Moscow will be more abrupt than in San Francisco. On emptiness is easier to build.

    How many Americans wake up with a standard alarm clock on their nightstand? And how many Muscovites wake up on an alarm clock in a smartphone? It struck me that an alarm clock had just appeared in the American Windows Phone. Yes, in Russia it is impossible to imagine the sale of a mobile phone without an alarm clock.

    - And what about e-commerce?

    - There are differences, since we do not yet have such players as eBay or Amazon. Such aggregators are fierce competition for the rest of the market. Yandex.Market is trying to portray something like that.

    But in general, Russian stores outperform American stores in many ways. For example, courier delivery with Cash on delivery is an absolutely fantastic thing by American standards. Or trying on delivery at WildBerries.

    But in the USA they continue to use such tools that we no longer live with. For example, coupons in the mailbox. Every week, my box is littered with coupons. At the same time, paper coupons are in great demand. I can’t imagine a single Russian who has paper coupons for meat in the nearby Pyaterochka in his pocket.

    We are an absolutely unique country that began to cost an Internet business from scratch and went so far. We do not catch up, as is commonly believed. We are on another branch of development.

    “But there are indisputable things like service in online stores where Russia is far from the West.”

    - Well, of course! The worst service than in the US, I have not seen anywhere else. Service in America is disgusting. But there is a developed legislative system. In California, say, there is a refund of only thirty days. This fact alone makes the service acceptable. Because, firstly, you can always threaten to return, and secondly, you can really return.

    What Americans are good at doing is selling, presenting, building sales. You can’t argue with that. We conduct a lot of research on how to sell in Russia and the United States. Of course, we have an abyss here. In Russia, they not only do not sell, in Russia they wait when they buy.

    - Is this due to the fact that the USA has very high competition?

    - Oh sure. High competition that lasts for centuries. A very high proportion of small businesses spurs the entire business as a whole. Small businesses are harder to compete with. When you have two or three clients, you are trying very hard to sell them. This is also part of the tradition.

    - So, we are nevertheless moving towards when competition in our country will become unbearable and we will learn to sell?

    - In order to have high competition, you need either a lot of offers or little demand. We were waiting for when in Russia there will be many offers. And now the market is entering a phase where there is little demand. Competition, of course, will escalate, but I would like it to grow for another reason. Not the fact that the lack of demand will have a sufficient motivating effect on development.

    - Michael, thank you for the interesting conversation!

    Maria Azizova, Simtech Development Business Idea Blog Editor

    Source: CMS Magazine

    Only registered users can participate in the survey. Please come in.

    Do you think there is a threat that the web development market will shrink so much that there is no room for 90% of web studios and agencies?

    • 52.2% Yes, this is inevitable. I agree with Mikhail. 222
    • 25.4% No, I do not see any prerequisites for this. 108
    • 22.3% I can’t answer, I don’t understand this question. 95

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