Consumer Takes All Part 1: 2024 Focus Areas
Focus areas and anti-focus areas as a consumer investor
This is part one of my three-part Consumer Takes All Series. See part two here and part three here.
At the start of each year, I like to consider which types of companies will be the ultimate winners –publicly traded companies six to 10 years post-launch– of the future. I then spend the rest of the year focusing all of my time connecting with and supporting the founders and consumers within those categories. This series outlines where I’ll be investing my time and capital in 2024.
The next multi-billion dollar consumer companies will allow consumers to achieve at least one of the following:
A rich, utilitarian life beyond screens (decline of the attention economy)
The ability to gain more knowledge and learn new skills in cheaper and more flexible ways (education, upskilling, reskilling)
More efficient and delightful connections with one another (consumer social)
If you’re a consumer founder, I’d love to chat. Reach out at tcburning@gmail.com or DM me @tcburning.
The Evolution of the Average Consumer
Understanding the consumer habits of yesterday and today give us a sense of what is ripe for the future. In 2022, the average household in the USA spent $72,967 over the course of the year. That capital was split into the following categories: housing (33.3%), transportation (16.8%), food (12.8%), personal insurance and pensions (12.0%), healthcare (8.0%), entertainment (4.7%) and by smaller buckets of other miscellaneous spending.1 These buckets are unlikely to change meaningfully in the coming years (even with economic uncertainty), but how they are specifically allocated will shift due to maturing digitally-native populations and post-pandemic tailwinds.
Changes in spending will reflect a shift we’ve already started to witness in society. The pandemic-induced closure of schools and offices, ongoing social and political turbulence across the globe, healthcare crisis, and more, have showcased vulnerabilities in our governmental, public, and private structures– some of our most relied-upon institutions. Nevertheless, there are enduring factors that suggest it’s still a propitious time for humanity: a notable decline in extreme poverty and significant strides in global education, for example.
All of these factors combined have shaped the current state of consumption. But Tomorrow’s Average Consumer… is different.
Tomorrow’s Average Consumer
Whereas the early 2000s saw the resurrection and solidification of the dot com era, and the 2010s saw proliferation of mobile, now in the 2020s, we’re starting to see the full immersiveness –and therefore early limits– of our interactions with technology. Tomorrow’s Average Consumer – let’s call her Cat– is seeking community and connection more desperately than before, and she’s more educated about how her actions (aka, data) are being tracked and manipulated. Cat “asks app not-to track,”2 but still finds her favorite clothes through Instagram ads. She loves hanging out with her friends IRL, but might meet them online. In the remaining years of this decade, she will use technology without thinking for very specific, utilitarian purposes (purchasing, planning, communicating, learning, working), and then she’ll go outside and touch grass. If she’s Gen-Alpha, growing up seeing her parents stare at screens, she’ll (like all generations before her) try to do things a little differently. If she’s lucky, she’ll have a new hardware device that enables novel ways of physically interacting with technology. She’ll use her phone or laptop to make money online –regardless of what her full-time job is.
As Cat and her generation gain more economic power, the most compelling opportunities for the private sector will come into focus.
Focus Area 1: The Decline of the Attention Economy (“Peak Screen Time”)
The average Gen Zer spends half of their waking days on their phone.3 By 2030, 48% of consumer spend will come from Millennials and Gen Z.4 As Gen Z continues to enter the workforce, battle eye problems5 from screen time, and value their time away from screens, they’ll spend less time online. In other words, we’ve hit Peak Screen Time. And this will have cascading implications.
Digital advertising will never go away entirely, but breadth and depth of the experience will degrade as people turn their eyes to the real world.
An ironic shift will take place: advertising spend will erode, but digital spend will increase. Even with fewer eyes on screens (and thus a smaller ROI for digital advertisers, leading to a contraction of ads), the biggest drivers of consumer spending will increasingly be digital natives, used to purchasing their toilet paper and takeout and jeans via the internet. Digital advertising will never go away entirely, as it’s the ultimate product discoverability and “free usage” tool for consumers. Instead, the breadth and depth of the experience will degrade as people turn their eyes to the real world. We’ll see the effect of this on giant incumbents who are reliant on screen-addiction to inflate their market share. TikTok and companies like it will slowly fade – we’ve seen this dance start to play out with Meta and its declining Facebook usage– as they try to roll out differentiated monetization strategies with their preexisting cohort of users, desperate to stay alive.
Startups that understand and capitalize on the decline of the attention economy by providing clear “omnichannel” value, will win. Think of Hinge’s spot-on slogan: “designed to be deleted” (and dating apps overall). Other examples include Partiful (whose network effect comes from spending time with people in person, a huge reason why I led their seed round) and Geneva.
* To be clear, I don’t think that these counter examples will fade to oblivion – quite the contrary! But I don’t think they present the absolute biggest opportunities for the next decade.
** One example that has limited real world value today but can potentially have a lot in the future is crypto. It’s largely digitally native (e.g., Bitcoin as a digital store-of-value), which only means so much right now, but could mean much more over time.
*** Yes, there is some gray area here. For example, photo-sharing apps, while they capture moments in the physical world, I’d argue don’t enhance physical life in a meaningful way. (Artists and creatives, don’t come for me!)
Focus Area 2: Education Upskilling, and Reskilling6
The Organization for Economic Co-operation and Development anticipates that technology will disrupt 1.1B jobs in the next decade.7 This shifting workforce is coupled with a growing disconnect between higher education and the workplace; students, employers, and the general public place less and less value on higher education.8 The education system in the US has faced significant challenges over the last few years (particularly with the pandemic), such as equitable digital access for students9 and affordability. Nevertheless, we know that skilled and educated populations result in strong societies (and big business). Employers and educators will need to be nimble to adapt to changing market landscapes and to retain employees and students.
As we outlined above, Cat (Tomorrow’s Average Consumer) will be digitally native and thus use the internet to navigate all of the above. Startups that leverage technology (AI in particular has a lot of potential here) to give people the information they are seeking –for school or for work– in increasingly flexible, cheap, and personalized ways, will win.
Technology can enhance accessibility, support differentiated learning, and bridge gaps created by the pandemic's impact on education. Not to mention, the supply –students, schools, and working people– is evergreen. Compelling sub-categories include vertical ed-tech SaaS, teaching and learning tools, and more. Some examples include Stepful, Replit, Nearpod, and Sana.
Focus Area 3: Social10
Remember, nothing is too big for failure or disruption.
Consumer social is probably the hardest of the consumer categories (let’s take a moment of silence for this random assortment off the top of my head: Dispo, Clubhouse, Ello, Threads, Gas, BeReal, Poparazzi, etc). Don’t let the fear of this graveyard distract you from the reality that consumer social winners include the biggest companies in the world. Remember, nothing is too big for failure or disruption. Despite the “flash in the pan” problem with consumer social companies, entrepreneurial innovation is happening constantly, and the desire to connect efficiently and meaningfully is higher than ever. So make no mistake: there will be more winners in the future, and the investors too scared to touch consumer social will lose money. The key is to effectively spot and support winners early (more on this in parts two and three). Compelling sub-categories include YouTube unbundlings (like Supergreat), audio, and vertical social networks.
Anti-Focus Areas
There are some consumer categories that I won’t be focused on in 2024. These categories have a few concerns that lead me to pause. There may be answers to these concerns –particularly as market dynamics continue changing at lightning speed and I learn more– but until a shift happens, I won’t be focusing much of my time on the following:
CPG/ecommerce: Achieving viable unit economics for these businesses is a lengthy process, typically requiring large sums of capital over a sustained period of time until profitability-at-scale is achieved. A lot of these businesses are better suited for a PE model. That said, tools that power ecommerce businesses at scale will always be of interest (e.g. Shopify).
Creator economy/influencers: While the creator economy is huge and content rules the internet, content creators are in many ways, the modern-day SMB. Historically, I’ve seen many companies struggle to monetize with SMBs as their target demographic (though perhaps that’s changing11– it’s worth keeping an eye on), and many of those mistakes will be repeated in this new context.
Entertainment and media: While certainly a fan favorite in my personal life, technological novelty and competitive differentiation remains a question in this category.
2024 and Beyond: Investing Time and Capital
Investors stand to lose valuable opportunities if they neglect the consumer sector. The two of the three technology companies in the Fortune 10 are consumer companies (Apple and Amazon). In failing to prioritize consumer-centric investments, investors risk not only missing out on potential lucrative returns but also forfeiting their competitive edge in a landscape where consumer influence continues to grow.
If you’re a consumer founder —especially if you’re building for the decline of the attention economy (“peak screen time”), education/upskilling/reskilling, or consumer social— I’d love to chat. Reach out at tcburning@gmail.com or DM me @tcburning.
Apple’s App Tracking Transparency policy of 2021
This could also be considered a subcategory of Focus Area 1.
A huge focus area for me as a trustee at NYU.
This, too, could be considered a subcategory of Focus Area 1.
“Even with fewer eyes on screens (and thus a smaller ROI for digital advertisers, leading to a contraction of ads), the biggest drivers of consumer spending will increasingly be digital natives, used to purchasing their toilet paper and takeout and jeans via the internet. Digital advertising will never go away entirely, as it’s the ultimate product discoverability and ‘free usage’ tool for consumers. Instead, the breadth and depth of the experience will degrade as people turn their eyes to the real world”.
Interesting insight! Hadn’t thought about this this way 🤔
Thanks for writing that we've peaked for the attention economy. I've been feeling this for a while now and I'll be interested to see what changes come to the creator economy as a result.