The British magazine “the Economist” in an article for the next issue says: in the entire history never has the technological industry was not as economically significant. Today the total value of the five largest Silicon valley companies is about 20% of the aggregate value of the 500 leading U.S. companies stock index S&P. however, until recently no one even had any idea about how these huge, major companies will develop in the fall of the world economy. When the last recession began in 2007, the company “Facebook” was only four years old, the size of the Amazon then there was twenty times less than today, and Apple has earned from the sale of the computers “Macintosh” more than iPhones.
The authors, experts in this article wonder what is happening with technogiant? The obvious and most common among the expert community, the answer lies in the fact that in conditions of severe recession, the tech industry is booming, as people are working remotely and, therefore, spend more time in the screens. However, at the same time experts notice that if you look at everything more closely, the picture is much more complicated. According to their estimates, today the tech industry is beginning to deviate from business models that prevailed in the last decade, towards a new era of subscriptions, e-Commerce and business infrastructure. In other words, the center of gravity of the technology began moving from San Francisco to Seattle.
According to experts, a degree of tension, which is experiencing large technological companies, it is difficult to overestimate. The company Ford stated that this quarter expects a loss in the amount of $ 5 billion at the time, like “Boing” every three months, loses cash $ 4.7 billion. Against this background, technology companies are literally on the crest of success. In the first quarter of this year, sales of the company “Alphabet” parent company “Google” has increased compared to the same period last year by 13%, and the company received profit in the amount of $ 7 billion. And 3 billion users of Facebook now spend much more time to benefit from the services offered by the company. While the most expensive days of our company, Microsoft, for the quarter, expects profit in the amount of $ 10.8 billion.
And yet, according to “the Economist”, for these figures, there is a hint of vulnerability. Advertising revenue, which has been the primary source of profit for “Alphabet” and “Facebook”, now under serious pressure. In March, Google cut the cost of advertising in the search engines is approximately 15% compared to last year. In addition, due to the recession clients from small businesses significantly reduced spending on advertising. Experts also note that the weak link may turn out to be sales of smartphones, which are mostly sold through retail stores, and this sector depends on the supply chain. The company “Apple” has not given estimates, but “Samsung” and “Qualcomm” (Qualcomm), who earn on mobile phones, warned that their sales may be significantly reduced. Meanwhile, among companies that depend on direct contact between people, there is a severe shake-up. For example, a taxi aggregator company “Elevator” (Lyft), which just a year ago public today plans to lay off 17% of workers.
Thus, factors that defined the previous era, now visibly obsolete, and new sources of growth are becoming more apparent: the place of advertising bombardment is a real boom of the subscription. The streaming giant “Netflix” just for the quarter gained 16 million new subscribers. Infrastructure for remote work in the company Microsoft, which is behind the new stars of this sector, such as “Zoom”. In turn, the company “Amazon” has shown that many countries just can’t live without its cloud computing unit AWS and the incredible pace of developing e-Commerce.
Furthermore, large companies that are in a less advantageous position quickly adapt to this new era. “Facebook” in a hurry to improve its offer video calls. Google is expanding its cloud computing capabilities, and “Apple” in order to stimulate demand lowers prices on phones, and promotes its own services. But at the moment the winners are Microsoft and Amazon, located on the North Pacific shelf in Seattle. The crisis revealed not only the sustainability of large technology firms, but that the balance of power is changing, — said the Economist.