A tectonic shift in online advertising?
And also: New e-commerce formats growing in China. PayPal's commitment to build a super-app. Private investors' money goes to "deep tech" projects. Big Tech firms want to collaborate with governments
Apple’s privacy tools may have triggered a massive change in online advertising
Snap’s 3Q21 results last Thursday triggered a crisis in the online advertising market, as the company attributed the miss on their previous guidance to a disruption due to “changes to advertising tracking on iOS”. These changes are linked to Apple’s new privacy-friendly policies within its devices
This highlights something that had already been anticipated by some analysts, which is the trade-off between privacy and competition: Apple would be helping customers to limit access to their data, at the expense of a more competitive market in online ads. And on top of that, the winner in this new context would be Apple itself, as the best positioned agent to sell “online-ad real estate”
So, on Friday we saw Snap losing almost one quarter of their valuation (in just one day!). Facebook and Google (even if owning Android leaves them in a better place) were also affected
Another winner could be Amazon, where smaller e-commerce companies would now be incentivized to sell, after losing a key tool (personalized ads via FB, Snap or others) to reach massive audiences with no need to go through an external marketplace
The week
1. Consumers and businesses, after COVID
What is happening
Consumer trends
In China, consumers have started to embrace new forms of e-commerce. ByteDance (through Douyin and TikTok) could be one of the winners, and Alibaba is seen as a potential loser (WSJ)(FT)
Retail giants like Saks and Macy’s spin-off their fast-growing e-commerce units (WSJ)(WSJ2)
Emerging risks
Under increasing concerns on kids’ “online safety”, Roblox commits to grow without sacrificing it (NYTimes)
More signs that cybersecurity attacks are now being offered “as a Service” (WSJ)
Future of business: Supply chain and energy issues delay the post-pandemic recovery
China confirmed its economic deceleration this week (WSJ)(FT)
More supply chain problems: worker shortages in Vietnam (Bloomberg)
Worker shortages also accelerate robot adoption in restaurants (NYTimes)
An optimistic message came from great Nestlé results (WSJ)
What it means
In China consumers are shifting to new e-commerce formats. Video streaming is turning into an effective tool for selling, often with a human seller in the process
Pinduoduo, a new e-commerce app with a “gaming-like” user experience, is leading the change. But social apps like WeChat (Tencent) and Douyin (the Chinese TikTok) are also winners
Traditional department stores are spinning-off their digital / e-commerce units, to capture cash for expansion and grow faster. It remains to be seen if they will be able to follow Amazon (and Walmart)
China confirms an economic deceleration and the delay of the post-pandemic recovery, amid supply chain and energy pressures
2. Platforms and digital enablers
What is happening
Snap admits that Apple’s new privacy policies have impacted their monetization model. Shares fall -25% in one day (FT)
The FT had already anticipated that this was happening, and after Snap’s results it is seen as a potential tectonic shift in the online advertising industry (FT)(WSJ)
The effect could be even worse for Facebook, which some people saw losing share to TikTok and Snapchat (Bloomberg)(WSJ)(WSJ2)
PayPal wants to buy Pinterest, within its plans to build a super-app combining e-commerce and payments (like WeChat) (WSJ)(FT)
Trump’s plans for his own social app get investors’ interest (FT)(Presentation)(WSJ)
Connectivity:
Operators struggle to monetize 5G (WSJ)
In South Korea, local broadband firms are asking Netflix to pay for traffic, to leverage “Squid Game” massive success (FT)
Semiconductors:
With the new MacBooks, Apple confirms its full independence from Intel (FT)(WSJ)
Alibaba is also designing its own chips (Bloomberg)
Meanwhile, investors react negatively to Intel’s results (Bloomberg)(WSJ)
Cryptocurrencies:
The Bitcoin Futures ETF debuts with a big success, and Bitcoin prices reach a historical maximum (Bloomberg)(Bloomberg2)
What it means
Apple’s privacy-friendly tools in iOS are shifting online advertising from a ultra-personalized device-neutral model, to a new one where device owners (like Apple) and large e-commerce sites (like Amazon) have an advantage. Snap (mainly) and others suffered the consequences this week
Super apps are the end vision for many platforms these days. The model is Tencent which (via WeChat) has become a “single contact point” for all its users’ digital activities. This week PayPal made a huge commitment on its own plans (a $45bn to buy Pinterest, to use it as the starting point of PayPal’s e-commerce journey)
Bad week for Intel, with a -12% fall in share price after a guidance of “pressured profitability” for the next few years, and with Apple confirming its full independence
3. Financing digital innovation
What is happening
Negative economic perspectives, reinforced by China’s disappointing growth figures this week, don’t seem to affect the stock market, driven by optimistic results expectations (FT)(FT2)
Emerging themes for investors:
Next computing platform: Facebook will create 10,000 new jobs in Europe, to develop the ”Metaverse”, in what is seen as an attempt to move away from current pressures (Bloomberg)(FT)(FT2)
The company could even be thinking on a name change, to support a different narrative (TheVerge)(Bloomberg)
Electric cars: BYD’s results trigger a wave of optimism about electric vehicles in China (Bloomberg). Tesla presented very positive 3Q21 results, in spite of the chip shortage, and is also winning from its position in China (WSJ)(Bloomberg)
Batteries: South Korean companies look for the next breakthrough in battery technology (Bloomberg). Car companies keep moving to secure a reliable battery supply chain (Bloomberg)
Energy: VCs seen as a key driver for investment in climate friendly solutions. These include nuclear fusion, which is getting increasing attention from investors (FT)(NYTimes)
Quantum Computing: After IonQ and Rigetti in the last few weeks, more Quantum Computing startups are planning their IPOs (FT)
What it means
Facebook is trying to change the current narrative to a more positive tone, with its “metaverse” vision, and its benefits for the economy. The announcement this week of a massive job creation plan in Europe can be understood in this context. But skepticalvoices have already appeared
The Chinese electric vehicle market is getting hot, and this is being reflected in the valuations of specialized companies (in contrast with other tech stocks these days). The government’s need to deliver on its climate targets could drive laissez-faire policies that might benefit the industry
Investors are increasingly interested in “deep tech” solutions, targeting humanity’s structural problems. This week we learned about VC activities in nuclear fusion, and about more Quantum Computing IPOs
4. Building new rules for the (digital) game
What is happening
Customer protection: privacy & safety:
Snap’s CEO (implicitly) suggests that Facebook should do more to ensure users’ safety (WSJ)
More accusations against Facebook for wrong content moderation. And a process under way about privacy issues (FT)(WSJ)
Antitrust:
Pressure on Google for a potential monopolistic position in online ads (“as if if Goldman or Citibank owned the NYSE”) (WSJ)
Tech geo-strategy:
Google and Microsoft ask governments to get more involved in cybersecurity (WSJ)(WSJ2)
China reveals a hypersonic nuclear missile that uses advanced rocket science. Concerns grow in the US (FT)
China has also launched research projects to map the ocean floor, apparently looking for strategic materials (Bloomberg)
US’ Counterintelligence identifies 5 strategic technologies for the “Cold War” against China, including AI, Quantum Computing, Chips, Materials and Autonomous Systems (WSJ)(FT)
What it means
A consensus is being reached on the need to combine the efforts of governments andglobal tech platforms to find solutions to some of the most urgent challenges that theacceleration of digital adoption is creating. This week, Snap (about online safety) and Google and Microsoft (about cybersecurity) made claims about this
The new “digital rules” that need to be develop to enable the new “golden age” driven by the last tech revolution (according to Carlota Perez’s vision) could benefit from institutions where both governments and Big Tech firms would be represented
”Deep Tech” / “Moonshot” projects, already a target for private investors, could also be driven by governments, as some basic technologies are perceived as strategical for national security