How the virus could boomerang on Facebook, Google and Amazon

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How the virus could boomerang on Facebook, Google and Amazon

But Facebook and its Internet titans have one big advantage over most other companies: piles of money.

Google’s parent alphabet was $ 117 billion at the end of March, while Facebook had $ 60 billion – more than the gross domestic product of Lebanon, Slovenia, or Tanzania. Amazon reported free cash flow of $ 24.3 billion. This money will help companies prevent layoffs and closings that have brought unemployment to the level of the Great Depression.

“Google and Facebook could see sales drop 20% or 25% year over year and don’t have to worry about shutting down,” said Mark Mahaney, general manager at RBC Capital Markets. “More than any other ad-financed business model, Google and Facebook can afford everything that comes from Covid.”

Your competitors are shrinking or disappearing

Yelp – a longtime Google critic with anti-trust authorities – fired a third of its workforce and hired another 1,100 people this month as ad revenue for small businesses shrank. TripAdvisor, another Google critic, said it will lay off 900 employees and vacationing many of his remaining US workers. Uber, who competes with Google’s sibling Waymo in developing self-driving cars also taking into account steep layoffsThe information reported this week.

The The plight is worse for the media Companies whose advertising dollars have already disappeared from competition Google and Facebook. Some estimates suggest more than 33,000 US journalists have been fired because of the pandemic. News Corp. – one of the loudest anti-Google publishers – suspended Print copies of 60 of his newspapers in Australia, although U.S. operations and the flagship Wall Street Journal have not yet seen any cuts.

Startups also hurt roughly 30,000 of their workers dismiss across the country since early March. In one Monday noteThe National Venture Capital Association said that investment in young companies is likely to “decrease significantly”, adding that “companies will close at a higher rate than what is inherent in this risky industry.”

And Amazon is ready to have far fewer competitors at the end of the outbreak: up to 100,000 retail stores are expected to close in the next five years, according to UBS analysts suggested in a note last week as Shutdowns from coast to coast accelerate the trend of buyers go online. Some long-established retail names may never recover from the pandemic: The Gap, the clothing chain owned by San Francisco, the Old Navy and Banana Republic, announced last week that it was expecting this close some places permanently, while J.C. Penney skipped numbers Interest on bonds this month – the first step towards filing for bankruptcy.

Even if the economy recovers, the big ones will be the first to reap the benefits.

Facebook and Google are ready to recover faster than other ad-supported companies, said Jasmine Enberg, senior analyst at eMarketer. Their platforms allow marketers to essentially switch online ads so that they can stop and get them up and running again as easily as possible. The two companies eMarketer estimates that 60 percent of the online advertising market is already controlled.

“Whenever there is economic uncertainty, advertisers turn to these proven platforms and they are less likely to be experimental,” she said. “Facebook and Google are currently considered important platforms for advertisers.”

The crisis could create the conditions for buying sprees

In the middle of the last recession, tech companies used their reserves to buy companies at a higher price than normal. According to an analysis by Google, a record of 36 companies has been achieved CIO diving.

Now the big technology companies have the opportunity to bargain again and attract talent, intellectual property and competing companies at greatly reduced prices. Both Zuckerberg and Alphabet CEO Sundar Pichai said during a earnings call this week that they would try to invest during the downturn, even if they slow down hiring in areas other than engineering and product management.

“One of the more difficult questions for antitrust law will be how mergers and acquisitions can be managed from this crisis,” said Gene Kimmelman, senior advisor to the Public Knowledge advocacy group. “Surely the big technology companies are sitting on a shipload of cash and could buy if they think it makes sense. There can be many struggling smaller players. “

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