Why Amazon, Facebook, Amazon, Apple and Microsoft are the winners of the coronavirus crisis

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The pace of investigations against these companies has slowed, with regulators and lawyers forced to work from home. Emboldened tech lobbyists are fighting to delay the implementation of a new privacy law this summer in California, saying they cannot meet the July deadline due to the upheaval.

And as the global economy faces unprecedented potential unemployment and contraction since the Great Depression, tech giants – and a handful of midsize tech companies – are already benefiting from new consumer habits during closings which analysts say will turn into more – term changes in the way people buy, work and play. Larger stock markets have collapsed in recent weeks, but Amazon and Microsoft stock prices have hit or near record highs. Facebook is set to acquire highly skilled talent, announcing the hiring of 10,000 new workers this year.

The deep pockets of tech giants will help them weather the next global economic recession, a stark contrast to what industry insiders and analysts expect to be the biggest upheaval in the tech landscape in years. As many start-ups collapse, tech giants will increase the power they have built up using the playbook of the past decade: recruit talent, buy or copy rivals, and erode traditional industries. Some of these weakened companies could disappear completely and cede even more territory to technology.

Former Google CEO Eric Schmidt said in a recent virtual panel that the most powerful companies have the capacity to rebound much faster than others. “When you have an industry leader and something collapses, the industry leader, if managed well, tends to come out stronger a year later,” he said.

Facebook and Google declined to comment. Apple did not respond to requests for comment. Amazon spokesperson Dan Perlet said in a statement, “While we appreciate the opportunity as a retailer to serve customers and see an increase in demand for essentials, there is no winner of Covid-19. “

(Amazon founder and CEO Jeff Bezos owns the Washington Post.)

As tech giants start announcing quarterly results this week, Big Tech’s current position is much better than in previous market crashes. In the 2001 dot-com bust, Google was not yet public. Amazon almost went bankrupt, losing 90% of its value in two years. The crash was viewed as a Silicon Valley crisis, when money poured into thousands of frothy starters and pie skies with unhealthy business models.

During the Great Recession of 2008 and 2009, large technology companies were affected with the global economy. Facebook was still private. The combined value of the five wealthiest companies – ExxonMobil, General Electric, Microsoft, AT&T and Procter & Gamble – was $ 1.6 trillion. Today, technology giants occupy these top spots. Microsoft, currently the most valuable company in the world, alone is worth $ 1.3 trillion.

“There really are two Americas right now,” said Scott Galloway, professor of marketing at New York University’s Stern School of Business and author of “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google. “” There is Big Tech and everyone. They can do what very few companies can do, which is to play the offense in the middle of a pandemic. “

Meanwhile, more than 250 start-ups have already cut more than 30,000 jobs since March 11, according to Layoff.fyi, who tracks layoffs and holidays from Silicon Valley. A recent survey of 400 investors and founders of the venture capital firm NFX found that more than half of the start-ups said they had initiated a hiring freeze or lowered their value in hopes of attract new investment. Start-ups that have raised hundreds of millions of dollars, like the scooter company Bird, have laid off a large part of their workforce. The company made the difficult decision to fire people – in a Zoom call lasting a few minutes – to keep the business afloat until 2021, according to a company note reviewed by The Post.

“Every start-up and every investor is having these conversations right now,” said investor Roy Bahat, head of Bloomberg Beta, a venture capital fund supported by Bloomberg LP. “We tell start-ups in which we invest that the safest assumption is that the next time you can raise money again, it will never be. “

The Yelp review service, however, could suffer an even bigger blow. Yelp has complained for years that Google has copied its services and used its power to redirect people from company listings in search results. Today, the company is laying off or laying off more than 2,000 people, more than a third of its workforce. Unlike Google, which has diversified its advertising revenue and huge cash reserves, Yelp generates almost all of its revenue from advertising from local businesses, such as salons and gyms. Interest in these categories of businesses alone has dropped by more than 73%, said general manager Jeremy Stoppelman in a blog post.

Yelp declined to comment.

Within Google, a cautious attitude prevails as the search giant anticipates significant losses in advertising revenue, particularly in the travel, entertainment and retail sectors, in the coming months, according to people who work there and who spoke on condition of anonymity. EMarketer estimates predict that overall search and display advertising spending, which is Google’s core business, could drop by at least 20% or reach 38% in the quarter starting April 1.

“The global economy as a whole is suffering, and Google and Alphabet are not immune to the effects of this global pandemic,” wrote Sundar Pichai, chief executive officer of Alphabet, Google’s parent company, in an e- mail to staff this month. “We exist in an ecosystem of interconnected partnerships and businesses, many of which experience significant pain.”

But he tempered the warnings, not promising major layoffs. The company “would slow the pace of hiring, while maintaining momentum in a few strategic areas,” said Pichai.

Google, however, could benefit crucially from the crisis as the tech giants’ relationship with the federal government changes. In the past year, the Department of Justice and the Federal Trade Commission have launched investigations into Apple, Amazon, Facebook and Google for possible violations of antitrust laws, and more than 40 state attorneys general have announced large-scale surveys of Google and Facebook business practices. Last year, the FTC imposed the biggest fine in agency history on Facebook for violating user privacy in the Cambridge Analytica scandal, in which the company allowed the political consultancy firm affiliated with Trump to violate the personal data of tens of millions of Americans.

Investigations are slowing in the short term because everyone works from home, said Gary Reback, a Silicon Valley antitrust lawyer whose clients have been involved in several of the federal investigations.

“How much can you force a business to do when it is locked out? So if they want an extension or a deadline, what are you going to say? ” He asked. “This is better for the companies that have been investigated. “

At the same time, the public is increasingly dependent on the services of technology giants, while governments contract out essential work to them. California Governor Gavin Newsom (D) uses models and slides derived from location data from Google and Facebook to show the possibilities for new infections. Health services across the country are collaborating with Google and Apple to perform contact tracing.

The Association of National Advertisers, a lobby group representing Google and Facebook, is actively lobbying the California Attorney General to delay final regulation and enforcement of the state’s Landmark Consumer Privacy Act, which is expected to come into force this summer. In several letters, the group argued that the regulations, which oblige companies to provide the data they hold on consumers and to allow consumers to request the deletion of data, are too expensive to be observed now that lawyers companies work from home.

As the economic contraction continues and start-ups disappear, the largest companies may also be among the only companies able to recruit. In a recent interview, Sheryl Sandberg, Facebook’s chief operating officer, said the company will create 10,000 new jobs this year in engineering and product roles.

This contrasts with the invitations and the ticketing company Eventbrite, which had to lay off or lay off almost half of its staff. While invitations to virtual events are booming, the company is suffering due to the cancellation of many events and the resulting loss of ticket sales.

Julia Hartz, managing director of Eventbrite, said the choice to fire was “heartbreaking”, but necessary. “We knew early on that we had to take bold steps to survive this time,” she said. She sees the rise of virtual events as a potential business opportunity.

Eventbrite has referred some dismissed employees to Facebook, she added.

Meanwhile, Facebook’s rival event team has responded to the pandemic by shifting employees to other product teams that have exploded in popularity, such as Messenger and Livestream, according to people familiar with the company’s operations. . Facebook launched a competitor for videoconferencing services Zoom and Houseparty on Friday, allowing up to 50 people to videoconference at a time.

After years of reputation problems with Cambridge Analytica and other scandals, some employees say morale has risen, according to others at the company, who asked to remain anonymous because they weren’t not allowed to speak to the media. Even the new positive reception from the Facebook portal – a very ridiculous video chat device that all employees received free of charge for working from home – is a surprise.

Facebook CEO Mark Zuckerberg is on the media circuit, touting the company’s efforts to keep the public safe. He wrote an article in the Washington Post on how data is essential for survival and sees the crisis as a potential moment of redemption for Facebook, according to people familiar with his thinking.

Amazon executives have also launched a media blitz, touting the company’s role in providing important goods to consumers.

Amazon is leading the biggest hiring wave of tech giants, announcing more than 175,000 new jobs, mostly low-paid, in warehouses and delivery. The company openly recruits workers who have been made redundant from other industries because it is struggling to keep up with rising consumer demand.

Meanwhile, some of its warehouse workers protested the unsafe working conditions, as dozens of warehouses have workers tested positive for covid-19.

“We are investing heavily to keep our employees safe and temporarily raise associates’ salaries – spending $ 500 million just for salary increases until the end of April,” Amazon’s Perlet added in the release.

Meanwhile, Bloomberg reported that Apple CEO Tim Cook recently told his employees that the company felt so comfortable with its cash position that it would continue to invest in R&D throughout this year and did not anticipate layoffs.

Big Tech’s ability to continue to hire and support themselves during crises will not only give businesses an advantage in Silicon Valley, but also in the economy at large. Many of the traditional industries that are expected to suffer – retail, food, media and entertainment – are the same industries that have been progressively destroyed by technology since the last recession.

While analysts expect Google and Facebook to earn revenue for the first time, small ad platforms, publishers and social media competitors will fare even worse, analysts said. Small digital advertising companies, which have long fought against the giants, have started announcing waves of layoffs.

And when spending comes back, it will favor larger technology platforms over smaller digital advertising companies and publishers, said Nicole Perrin, analyst at eMarketer.

“Many traditional media and advertising companies are in decline. The decline will happen faster this year, and a lot of that money will not come back because it was slowly flowing, “said Perrin.

However, some start-ups will thrive during the crisis. The user base for the Zoom video conferencing service grew to 200 million users last month, up from 10 million in December, the company said. The Houseparty video chat app is growing even faster than Zoom, whose downloads have increased 1580% since March 15, according to app analytics firm AppAnnie. The Instacart grocery delivery app saw a 540% increase in downloads.

Analysts and investors expect consumer habits and habits to continue to change, potentially over the long term. It could also lead to a new order among start-ups that are emerging or surviving the crisis, said Roelof Botha, partner of Silicon Valley venture capital firm Sequoia Capital. He said he’s already starting to search for a new category of winners, automating everything from mortgages to garbage collection to the data infrastructure needed to support remote work.

“It is a shock to the system, and sometimes from this shock a new order emerges,” said Botha. “Like the massacre of dinosaurs, it is reorganized and survives in the new era. It is the shock that accelerates the future that Silicon Valley has built. “

Faiz Siddiqui and Jay Greene contributed to this report.

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