When you think “Big Tech”, its synonym “Tech Giants” should come to mind not far after. For those who haven’t heard these terms used, we are talking about the largest and most dominant companies in the information technology industry. This means the Apples, Googles and Twitters of the world. It also means leveraging trends from artificial intelligence (AI), blockchain, self-driving technologies, media streaming and software-as-a-service (Saas) offerings. As we come out of the crisis, many big tech monopolies are already recovering and doing just fine. So how did Coronavirus affect big tech companies?
It is no secret that tech is destined for further growth as we enter the 2020s. There have been a number of programs that have continued to raise money for innovative startups. This transition to a more tech-focused society has since overlapped into sensitive markets. Some of the most prominent include healthcare and education. This further expands the possibilities of what is mainstream. However technology finding new uses is only one of the ten predicted outcomes of how Coronavirus will affect big tech monopolies.
1. Monopolies Will Remain Monopolies
In the words of Eric Schmidt, the former CEO of Google, Coronavirus should make us more “grateful” to tech giants. It is true we have become heavily reliant on communication tools like Microsoft Teams and Zoom. Without these tools, many small and medium-sized businesses would be struggling to communicate with one another. Adapting to these new conditions have only accelerated some of the trends that these big tech companies have thrived on. This has led some to the conclusion that the strong will continue to get stronger. These businesses just need to continue to survive through this pandemic. This is possible since they do have the resources to wait out the storm. This means any big tech company that can hold tight might face nothing but smooth sailing ahead.
As things return to normal, big tech monopolies will maintain their advantage, now gaining new market share. The only difference? They will have more access to capital.
2. Big Tech Companies To The Rescue
Let’s backtrack for a minute. When we say a company has a monopoly, we mean they are the only player in a given area. As a result, their business has remained stable and their emergency reserves high. Consider that Google is the king of online advertising, and Amazon has thrived in the e-commerce industry. This means in the face of a pandemic, big tech companies might actually be strengthened and ready for expansion. We see further evidence of this looking at their financials. Companies like Facebook, Amazon, Microsoft, Apple, and Netflix for the most part all saw an initial drop in profits. However, many have already recovered while some have increased. This leads us to believe these companies might bounce back more powerful than before.
Predictions have been made that as our economy slowly returns to normal, there will be a view towards bolstering these big corporations so they can employ more people. Rather than let a good crisis go to waste, several have been led to believe the pathway for Google, Apple, Microsoft, and Amazon to reach market caps of 2 trillion are more likely than ever before. Since these companies have a lot of money already, they will be able to hire and protect their employees. Once we see these big companies thrive, we can rest assured that the rest of the economy’s success is not far behind.
However, tech is a big industry and the results can be very different.
3. New Public Perceptions
Many of us might have looked at some of the big tech monopolies as taking advantage of the crisis. After all, we have seen inflation in the costs of consumer products. To name a few: hand sanitizer, toilet paper, and face masks might come to mind. As leaders in the industry, this doesn’t paint a good picture for consumers. Additionally, tech giants have also been known to hoard huge cash reserves. Reserves that could be reinvested into the local economy or paid out for doing good.
What looked bad initially has since changed. For example, social networks like Facebook and Twitter have since become the place to find quality information about the virus. They also share information about taking the necessary precautions. Other monopolies have donated supplies and money to help support relief efforts. For example, Google’s parent company Alphabet has donated over 856.5 million for relief efforts.
This has included $340 million in Google ad credits for small businesses, $200 million in investment funds for NGOs and financial institutions to help small businesses, and $5 million for donations for the Covid-19 solidarity response fund.
Salvador Rodriguez from CNBC, stated that
“Facebook won’t be able to rebuild trust with the public overnight, but when the company was presented with an opportunity to rebuild goodwill by being proactive and helpful during global health and financial crises, Facebook sprung into action and seized the moment.”
If this wasn’t enough, Facebook pledged another $100 million in grants to support small businesses and Amazon claimed they would provide jobs to 100,000 people. These actual deeds have now overpowered any previous misconceptions we might’ve had. Without Amazon we would have a hard time getting many of our favorite suppliers, so how could they possibly be a bad guy in all of this?
4. Some Will Suffer
While we continue to put a lot of faith into our big tech companies, not all of them will be able to recover right away as hoped. Consider that Airbnb, which counts on people traveling, might still not be able to offer the majority of its homes this year. This means their board has instead looked at options including raising money from investors, adjusting plans to go live on the stock market and purchasing small or medium-sized businesses who are also struggling. While this thinking is not uncommon to other businesses who are trying to survive the pandemic, Airbnb will also have a challenge when it comes to convincing the public that staying at their properties is safe. This might be difficult as many are skeptical when it comes to travel.
Another service that is suffering is Facebook’s Instagram. Although other social networks have done unusually well, Instagram has had lower traffic. This is because people aren’t out and about and have less new content to share.
Additionally, while the government sees the benefits big tech companies can bring, they have still taken action to protect citizens when need be. Actions have included the government summoning Jeff Bezos (the founder of Amazon) last week to testify about allegations of monopoly abuse. While these complaints are not new as a result of the pandemic, they continue to appear as new legal tactics for those that believe Amazon is now too powerful.
5. Survivors Will Pay Taxes
Governments are now increasingly focused on survival. Therefore, it would be hard to believe that governments would not want to see big tech companies continue to do well. After all, the more money you make, the more taxes you will pay. Big tech companies are no exception.
One Silicon Valley investor, Chamath Palihapitiya stated,
“It’s where the money is, so it is where governments are going to go when they need relief.”
Consider that most big tech companies have been almost immune to the impact of the viruses, and some have even profited from it. While this has happened, governments struggle for money and small businesses struggle to stay afloat. This has led many to believe that in the pursuit of the greater good, taxing these larger companies seems fair to ensure profits are being distributed equally. In Europe, big tech companies might even be looking at paying higher taxes, so the government has more “fresh cash” to distribute. One example is the UK. In April they added a two percent tax on digital companies that make over $650 million from digital activities.
However, many also believe the tax might not produce the added cash flow we would expect. This is because taxes don’t end up being paid by the big tech companies the government is hoping will pay. Due to the number of clients and partners a large organization has, these taxes can be passed off. This negatively impacts the consumers or the smaller players that work with the business. Additionally, adding a tax discourages job creation for big tech companies and suggests that the company should slow their growth to avoid paying extra taxes. Even worse, the company might opt to move their operations to another country that doesn’t impose the same taxes.
6. Adjustments To New Consumer Expectations
Not only is the business itself affected but so will their offerings. Consider that as much as things have been changing, we’ve all learned to adjust to new ways of doing things. We might not know it but our newfound love for online shopping has shifted how big tech companies are thinking. Small businesses have been quick to follow tech leaders in moving their platforms online.
Consider Amazon. The company began selling books and other consumer goods and has done well. But recently there has been an opportunity to enter the grocery market. This is because many now feel more comfortable having their groceries delivered. As a book retailer and now consumer products seller, this proves to be a challenging but necessary pivot.
Additionally, you might be surprised to know that many offices were not used to the online atmosphere and had to adapt quickly. With players like Amazon, Microsoft, and Google offering platforms that improve the online work experience at a discount, many new corporate networks have hopped on the bandwagon. This isn’t a short term change either. Jared Spataro, a corporate vice president at Microsoft shares that they “believe that this sudden, globe-spanning move to remote work will be a turning point for how we work and learn.” This means offering a short term discount now while businesses are low on cash might prove to be successful in creating new customers in the long run.
7. More Tech in More Places
We’ll admit when a pandemic of this magnitude occurs, there will undoubtedly be lasting effects. Some of these trends include the accelerated need for organizations to adopt a hybrid or multi-cloud strategy. This infrastructure will allow businesses to continue to adapt to changing circumstances. One such change has been the Coronavirus, which has made the thought of uncertainty more real to us. With cloud technology, businesses have the flexibility to scale and descale depending on fluctuations in business.
With social distancing, we also saw a trend in people reaching out and talking to those more than they had previously. This means in addition to traditional sites growing, there has been a big boost to companies offering opportunities to video chat. Apps like Duo and Houseparty have become increasingly popular. Many users on HouseParty have admitted that they have met a lot of new people outside of their friendship circles. As a result, new friendships have been created that wouldn’t have been otherwise. This might become a new permanent trend. Many of us will likely continue to chat with people online and communicate with those who don’t live near us. Although we might have been before, now we can expect to more frequently. For big tech companies that operate in these areas, this is great news!
8. Accelerated Adoption of 5G Technology
The Coronavirus has shown the majority of the population that the need for remote interactions is a trend that shouldn’t be overlooked. This means 5G technology might just find its need. As a recap, 5G is a technology that operates at lightning-fast speed and allows for near-instant communication. For businesses who often face issues in teleconferencing, the appeal for 5G is only growing. Currently, in Canada, most major carriers use 4G LTE networks.
Other areas of interest include the connection of smart cities, 5G technology, and the Internet of Things (IoT) being further implemented to ensure citizen’s health and safety. The government has looked into facial recognition scanning and virus scanners that will be able to track a person’s body temperature. While privacy is a concern, the government might step in to ensure safety is upheld.
Providers across the United States have started implementing 5G technology in some areas. While some thought that these efforts would have slowed down, the opposite is happening. This is because many organizations that are now struggling to survive through the pandemic now are seeking opportunities to increase market share before one of their competitors. Their efforts have continued to play a critical role in connecting people to businesses. As a result, a number of other industries are also expressing increased demand in these services.
9. Most Will Remain at Home
After the virus, many agree that the number of people working from home will be permanently increased. Bit-tech companies like Twitter, Slack, and Google have already announced that the majority of the workforce has transitioned to work from home and will continue to do so for the foreseeable future. Big tech firms were some of the first to switch over to remote working for chats. This provided a good example to the rest of the public that doing so was possible. Especially with office chat groups, remote access to tools, and video conferencing. Since people have already adjusted to working from home and have even invested in a home office, many organizations will be motivated to keep the work from home lifestyle. After all, this could also result in huge savings in rent for organizations that had been paying for lots of office space.
Unfortunately, everyone being on the Internet can mean slower speeds. This has become apparent with spikes in Internet usage due to more people using streaming services to entertain themselves. This mass working-from-home trend means more companies can continue to save on rent and utilities and pass on some of these savings to staff. Additionally, proposed economic benefits have even considered people moving to rural locations, boosting home prices in regions that are farther away from downtown.
While the benefits appear to be many in number, we do wonder if people will get tired of being on their own.
10. Big Tech Finding New Uses
Many big tech companies like blockchain will be forced to adapt their capabilities to meet the needs of consumer health and safety. New projects have suggested that health-care providers in need of medical equipment could source our suppliers using the blockchain. This is increasingly important as a number of small and medium-sized businesses (SMB’s) have also started making masks that can be used by those in the medical field. The process for connecting these two communities has traditionally taken anywhere from 4 to 8 weeks. With blockchain technology, this process is believed to be greatly reduced. If this concept succeeds, the technology could then be extended to sourcing other supplies like ventilators, oxygen masks, and dialysis machines.
Additionally, this technology could also help to validate a person’s immunity to Covid-19. Any participating test center could use the health records of an individual to see if any antibodies or immune proteins are present. Any indication that the person has some sort of immunity could be added as a hash on the blockchain. While this hash could not be decoded a digital certificate of immunity would be shown on the patient’s records. In more developed models, this would grant additional access to these ones including international travel. With a more secure method of transfer in place, authorities would have more information about the pandemic, how it spreads, and would be able to strategize more effectively as a result.
A third use case is currently being used in China. Here, blockchain technology is used to speed up time for health insurance payments to be issued to health-care providers and patients. These are only three uses that have been leveraged so far. This makes us wonder what else blockchain can do. Even better, we wonder if a killer app might be found.
Capitalize on World Events
It can be easy to become fearful of what lies ahead. We agree it is important to know what is going on in the world. However, we also encourage you to keep your thinking positive. We typically have little control over what will happen and need not worry until things do change. After all, there is no use in needlessly worrying about how something is going to change. Especially, if we don’t know for sure that it will. The ideas discussed are only suggestions based on trends over the pandemic and does not constitute financial advice. To consider how these changes might affect your investments, we encourage you to do some of your own research.
Some things might still be uncertain in the near future. But, we can be confident that there are still good investments to be had. To find out about these diamond-in-the-rough opportunities, we recommend the HedgeTrade platform. All you have to do is go to app.hedgetrade.com/signup to get started!