What is a Digital Product?

Woman graphic designer working on her laptop

Almost all of us, in any sub-sector of technology, have encountered the term “Digital Product” – It’s quoted by pundits, marketers, and sales-people as one of the fashionable catchphrases intended to capture our attention or promote a product. But what does it REALLY mean?

Let’s examine this phrase and attempt to hang some definitions on it. If we can identify a reasonably precise definition, then the next time you are listening to a hard sell or product presentation, having a well-structured definition of digital products, and comparing the offering against these criteria may be a good framework to assess the value of the pitch.

A Simplistic Approach

To get a really simple definition, you could take this approach:-

A Product is anything possessed by one entity that can be transferred to another entity for compensation (Like cash)

Digital items which are sold do not have a physical form. You cannot touch them as they exist as structured information, they are intangible – for example, an API or digital video.
Combining the two definitions, “Digital Products” are therefore “Any digital objects which are created in a digital format & sold to be used on computers or other electronic devices”

Like most simplistic approaches, the outcome has questionable value. The definition is a little better than wordplay; too trivial to satisfy serious inspection. To be useful, the definition needs to be more selective and more specific.

So, we must press on.

The Internet as a catalyst for digital products

Digital products are a relatively recent phenomenon whose catalyst was the Internet, or more specifically – internet commerce. Before the internet, products were almost without exception physical things; Even ideas were typically communicated in printed books and therefore tangible.

The advent of the internet opened up new opportunities for product developers. Suddenly products could be conceived, created, modified, updated, launched, marketed, customised, and sold all in digital form. Development teams could be geographically diverse, offices started to become less critical than connectivity, and development lifecycles were dramatically compressed. Traditional (Waterfall) approaches became less relevant and whole new methodologies (Such as Lean, Scrum, and Agile) were created to efficiently and reliably compress the product development and delivery cycles – and some of these methodologies became digital product in their own right

Online marketplaces caused an explosion in product innovation. Commercially speaking, the globe shrank dramatically, and distance was not a factor in generating and delivering the new virtual product. It could be argued that the combination of the internet plus digital services have been one of the most economically significant drivers in globalising international trade.

Let’s conduct an experiment

But how does the above help us define what is a digital product? We have established that the definition is more complex than “non-tangible stuff sold on the internet” – but how? What test can be applied to decide whether an offering is in or out of the Digital Product category? We need to conduct an experiment. And for this, we need some test subjects to dissect. First, let’s find something that is clearly a Digital Product.

Take a look around some of the online marketplaces like Fiverr, Toptal, or PeoplePerHour to see the hotbed of geographically irrelevant services that can be procured and delivered digitally with no regard to distance or timezone. These examples are the tip of a very big iceberg – the market is massive and a lot of money is being made in this sector. Hundreds of thousands, if not millions of freelancers offer a vast swathe of services.

If one thing is clear, it is that the freelancing platforms themselves very clearly sit in the “Digital Product” category.

Apply some tests

Now we have isolated a test subject – Let’s apply some tests to sharpen our reasoning:-

Are the platforms digital-only entities? : Yes

You can certainly access its services via a laptop, tablet, or smartphone app.

Do these platforms meet a specific personalised need: Yes

They provide a common marketplace for freelance services. Users could not market their services without the facilities they provide

Are they more than a simplistic static facility? : Yes – Not just a website, these are fully fledged, rich, and complex applications, supported by a multi-tiered application architecture. Users establish, through their registration and activity, identities and profiles which persist over time. The user experience is tailored based on prior activity and configuration.

Digital Products: Consider the outcome

It could be argued that these platforms are actually Digital Productions, rather than Digital Products – because you cannot go and buy a “PeoplePerHour” – They are someone’s bespoke digital creation. However, the frameworks to create services that mirror any of these platforms are available. Any number of agencies will happily provide a quote to do just that – behold a Digital Product! (Somewhere in the contract will be a clause stating that any copyright or IPR infringement liability belongs to the purchaser – caveat emptor)

On the subject of personalisation. As a user, it’s interesting to watch these platforms’ behaviours over a period of time. With a bit of observation, an appreciation of the complexities of the product can be established – some conjectures about the architecture can be made. Clearly there are some clever algorithms at work supporting both the sellers and buyers. Based on user behaviour (Search patterns, ratings, etc) the platforms choose who to promote (Or penalise), establish freelancer capacity, detect “bad” behaviours, and establish a bid/win/click ratio that supports each individual participant’s capacity. The question of whether these behaviours are statically implemented, manually tuned, based on analytics or use some form of machine learning is moot – the fact is that digital behaviour is rich and complex.

Test with some other candidates

The same judgement criteria can be applied to other large-scale web applications – Shopify as an example, provides a very rich framework for the creation, management and marketing of online retail platforms. The three-point test described above (Yes, Yes, Yes) puts both it and hosted instances of its product firmly into the Digital Product category. Similarly, APIs, such as those offered by the Azure AI suite of services, will pass the same test.

But taking some of the digitally offered services on the freelancing platforms, website design, photo manipulation, Happy birthday – but sung with a rooster clearly fail the test (No, Yes, No). Whilst others such as chatbot creation and maintenance pass with flying colours. The algorithm seems to deliver reasonable discrimination.

Conclusion

The reality is that Digital Product has no simple and universally accepted definition. From the simplistic “anything sold in a digital format to be used on devices” – through to the more complex “products which are sold in purely digital form, which offer a useful, rich & personalised user interactive experience” – There is no definition which will satisfy everyone from every perspective. I, personally, lean towards the latter, but that’s my perspective. Let the debate commence!

Image source: Pexels.com