Eric Siu argues that service-based businesses face fundamental disruption. Agencies are people-intensive and low-margin compared to software companies like Google. Those who don't adapt to capture new opportunities will fail.
Service-based businesses such as agencies are going to change forever. And if you don't do something about it, you are going to lose your shirt. But the good news is this provides a massive opportunity for people willing to put in the work. And if you go back in time, people in tech, if you've worked in software, for example, people have always looked down on service-based businesses because the common knowledge here is that service-based businesses aren't as scalable, right? And which is why they're kind of looked down upon and being able to sell these businesses back in the day, it wouldn't sell for as much versus like a software company, right? Software companies would sell for much higher multiples, which is just means you end up making more money on, you know, lower profits and lower revenue because service-based businesses are very people-intensive and that brings the margins down. Now, a business like Google, for example, the margins are a lot higher and they have a lot more to reinvest into the, the business. So they're a lot more profitable, they're money-printing machines. And, you know, ultimately this is why Google is one of the best businesses even today.
