A new deal between tech giants & governments?
And other signals of change this week: The new age of entertainment. Investors move to build the “new normal”. Telecoms as a “safe haven” in COVID times
Big tech companies looking to partner with governments?
The current crisis is seen by many as an accelerator for the adoption of new digital technologies, which could be the tool that helps societies become more robust and avoid future disruptions like this. Leading tech companies are already moving to offer help, and this could be an opportunity for them to “clean up” their brands after being massively criticized for abusive practices
Technology will help us recover from the crisis: Many have criticized the over-hyped AI industry for not being able to make significant contributions against the coronavirus threat. But AI systems are present in most of the solutions discussed to control de-escalation. In some cases, even the same systems that not long ago were criticized for creepiness or privacy violations. As an example, office cameras recording video streams that can be analyzed to track employees behaviors are now being proposed to monitor social distancing and ensure a safe working environment (Read)
And Tech giants are moving to contribute: Leading tech companies may see this as an opportunity to demonstrate that their massive data assets and their algorithms can contribute positively to society, and in this way “clean up” their brands from recent accusations. A key (but also controversial) area where they’re working is the management of misinformation in digital media, which grows even faster than the epidemic. Twitter announced this week that they will add labels to tweets about the virus that are determined to be “disputed” by a “trust & safety team” including internal and external experts (Read)
This looks part of a deeper shift in their approach to governments: A more collaborative attitude is starting to be apparent in the largest technology firms. Amazon in particular, which has been accused of being arrogant in the past, has reacted in a very positive way to the increasing pressure from the US Congress on potential antitrust violations, and has even promised to work together with policymakers to settle the issue (Read)
Initiatives are under way globally, and not restricted to software: The crisis has shown how critical data networks are to build a new, more robust social and economic landscape. Regions with weaker networks are expected to suffer more the negative effects of the virus. In Africa, Facebook just announced a (not quantified) investment to build a Regional fiber network connecting 16 countries. For this, they’re working together with Chinese, Arabic and European partners (Read)
And public commentators are starting to react positively: Shira Ovide, a tech columnist at the New York Times, appreciated this week the effort that Facebook, YouTube and Twitter have been doing to fight the spread of coronavirus misinformation (Read)
But (as always in politics) many remain skeptical: An opinion piece at the Financial Times claims that some of the actions being taken against misinformation on the pandemic are a modern version of “Soviet-style censortech”, and could be used as a tool for governments to “crack down open dissent of government policy or consensus thinking”. Obviously, the author may have a point. She argues that, like in real-life viruses, viral content eventually “burns down” if it is too obscene or dangerous, so the system can effectively control itself. In summary, when dealing with these questions, it seems difficult to avoid the purely political (vs. technological) debate (Read)
The new age of entertainment
More signs this week about how the COVID crisis is accelerating structural changes on how entertainment is consumed (and created). Video streaming and video games emerge as the big winners, while Augmented & Virtual Reality keep disappointing their fans. In times of lockdown, content production to feed the explosive demand from people at home, has become a challenge
Video game companies presenting results keep beating expectations: This week Tencent, the absolute video games leader in China, and a global tech giant by its (massive) size, presented excellent results. Tencent, a company with $15bn revenues per quarter, announced +26% inter annual growth, driven by consumers spending more time with hit games under the lockdowns. Online gaming already represents 35% of the company’s total revenue. A good example of “anti fragile” behavior, analysts believe that, for things like these, Tencent will emerge from the crisis stronger than ever (Read)
Gamers are also becoming a very interesting target market: Even for non-content apps, like Discord, one of the previously unnoticed companies that is now thriving with the crisis. Discord is a free messaging app initially focused on gamers, which offers video, voice and text communication tools, and which has grown massively since the beginning of the year (+50% in the US, 2x in Spain and France, 3x in Italy). Now it looks like they’re in talks to raise more capital, on a valuation of more than $2bn (not so bad) (Read)
Video content demand is increasing, but production is a challenge these days: Content demand is exploding, with people staying at home consuming more than ever. This has been fantastic specially for online leaders like Netflix, which added almost +16m new customers in 1Q20. But this success comes also with some challenges, as the same policy that is making consumers demand more (the lockdowns) is also making it almost impossible to create new content in most countries. For now, Netflix is (partially) solving this with filming in Iceland and South Korea, which are exploiting their relative peaceful situation in the pandemic. But the company is lobbying for more lockdowns to be removed, as they need much more… (Read)
Production uncertainties are affecting content supply to customers: American media giant Comcast, a leading cable company that also owns one of the largest studios (NBCU), has created its own “Direct to Consumer” streaming app, Peacock, to enter what has already turned into the central competitive arena for video services. They’re scheduled to launch in July, but they’re struggling to have the right content for that date, due to production delays caused by the pandemic (Read)
But even with consumption growing, some traditional media companies are suffering: One of the reasons for this is that the massive economic slowdown due to the crisis is already affecting the advertising market, so ad-supported broadcasters are struggling to monetize the increase of consumer demand. In the US, the situation is threatening the traditional “upfront” process in which TV networks sold their slots to advertisers, which annually signed contractual commitments to spend, in advance of the season. Now this is changing, and several big advertisers are saying they plan to exploit a contractual option to cut these commitments and significantly reduce their spend (Read)
Also, these don’t seem good times for “too radical” innovation: Quibi, a startup with an all star founder & executive team, including the famous Jeffrey Katzenberg from Dreamworks, had probably a very good idea, and business model, but is failing to succeed. Quibi is one of the first “professional” video providers fully focused on mobile devices and customers “on the go”, with short formats (typically 10min) and some nice technology tricks to improve the experience on a smartphone. The problem is that they’ve launched in the middle of this pandemic, when there is (almost) no one “on the go” (Read)
More comments about how Virtual Reality is missing a historic opportunity: Benedict Evans thinks that the key problem with VR is that there is no visibility at all about what it should (or wants) to be, so unlike what happened in the past with PCs or mobile networks, it remains unclear even what to do next (Read)
Investors moving to build the “new normal”
With the crisis accelerating change and digitalization, including deep shift in consumers’ behaviors that probably will stay after the pandemic, investors are already seeing investment opportunities in companies, activities or assets that they perceive as essential to support the new way of doing business
Cities will change, and a new wave of companies and apps will make it possible
(Physical) shopping won’t be the same after the crisis: It’s not only internet pundits. Retailers across the world are worried that the world won’t go back to normal. And more specifically for them. Even when the lockdowns are removed, people imagine a new shopping experience amid hand sanitizers and monitoring cameras, nothing as pleasant as the previous one. And on top of that, many customers could feel psychological reluctance to go to physical stores again, at least initially (Read)
Even e-commerce leaders are feeling the pressure: Yes, this could be good for e-commerce companies, specially the leaders, which could grow (are already growing) even faster. But this is not without risks, even for them. Amazon is now feeling public pressure on the safety of its employees, and on how the company is dealing with internal protests about that. Calls for policymakers to regulate working conditions at warehouses have started (Read)
Value will shift from retail stores to the city streets: Delivery services, including groceries and even restaurant food, are exploding these days, and may be here to stay, at least in the (probably long) initial de-scaling phase, with many consumers still reluctant to go back to normal outdoor lives. Uber, as the quintessential digital company doing business in city streets, has seen this and is moving fast to lead in this emerging space. This week we learned that they’re considering a $6bn offer for GrubHub, the current #2 in food delivery in the US, after DoorDash, which would turn the combine company into the leader (Read)
Virtual meetings will replace (a lot of) business travel, and companies enabling these are hot: As expected, the IPO of Pexip, a Norway-based rival from Zoom, has been a success, with the company valued at $862m (not bad for a newcomer in a relatively populated space) after the stock price soared in the public markets (Read)
A new generation of infrastructures will be needed:
Semiconductors are already a critical asset, subject to geopolitical tensions: The Trump administration is showing clear signs of their vision of semiconductors as a critical strategic asset for the US, and they’re pushing for the country to become self-sufficient in this industry, avoiding the current dependence on Asia (and China) for manufacturing. This could be beneficial for Intel (which also manufactures chips), and has also triggered a fast reaction from Taiwan’s TSMC, the global leader in chip production, which has announced, also this week, that they will build a plant in the US (Read1)(Read2)
Investors see exciting opportunities in network infrastructures: This is one of the reasons why BT, the UK incumbent operator, may be considering the sale of a stake in Openreach, their functionally separate infrastructure unit, including the fiber and copper networks in Britain. Several Private Equity funds like Macquarie seem to be interested to fund the planned fiber-to-the-home build, which they see as a nice opportunity for good future returns (and probably more after the demand trends that the current crisis has revealed) (Read)
Good times for the bold (investor)? The largest shareholder in Blackrock, PNC Financial, a Pittsburgh-based bank, is selling its 22% stake (equivalent to $17bn), apparently looking for cash to deal with potential future losses triggered by the crisis. But they’ve also tried to see the positive side of the context, and claim to be prepared to use the money to take advantage of the “potential investment opportunities that history has shown can arise in disrupted markets” (Read)
Telecoms emerge as a “safe haven” in this crisis
Good results from Vodafone and DT: The telecom industry has been revealed as a key enabler of societies’ reaction to the public health crisis, with networks making it possible for people to quarantine at home and use digital apps to continue with their (professional and personal) lives as much as possible. This week both Vodafone and DT surprised the markets positively and showed more resilience vs. the economic slowdown than companies in other industries (Read)