Big Tech 2.0

MARKETS

• Markets: Okay, maybe not the best day to focus on Big Tech, but there’s no going back now. Amazon and Apple led a broad decline for stocks yesterday. That's two straight weekly losses if you're counting at home.

TECH

Big Tech: In the Right Place at the Right Time

It used to be a joke: “Big Tech runs my life.” Now, in the middle of a global pandemic, we can say it without any hint of irony.

Nightclubs, gyms, and, well, far too many things have migrated to Facebook’s Instagram Live.

Amazon delivers our essential goods, and...some nonessential goods . While more than 30 million Americans have filed for unemployment since March, Amazon hired 175,000 new workers—more jobs than it added all of last year.

Q1 earnings are set to fall by 15.8% (the most in more than a decade), but Microsoft said the coronavirus had “minimal net impact” on its revenue. That marked the first time in history that "coronavirus" and “minimal impact” were used in the same sentence.

Screen time on Apple’s phones used to indicate isolation and loneliness—now it measures whether we’ve been interacting with people.

Google was supposed to be dinged by lower ad spend across the board, but...even that wasn’t as bad as feared. “People are relying on Google’s services more than ever,” CEO Sundar Pichai said (correctly) this week.

What techlash?

Turns out, a global lockdown is the ideal time to be dominant in fields such as cloud computing, social networks, enterprise software, video, logistics, and delivery. By helping us make the transition to WFH feel less crippling, the U.S.’ largest tech companies have managed to play offense while middling players scramble for their lives.

Another reason Big Tech is riding high: They might've managed to flip the script on regulation. “Me? You want to break me up? The company who can deliver you toilet paper in two days? Who will let you videoconference with 50 friends for free? Who's developing lifesaving health apps? Didn't think so.”

Reality check: Antitrust investigations that began in 2019 are still ongoing, and they’ll certainly ramp up as lockdowns ease. If anything, Big Tech flexing its muscles during the pandemic may invite even more scrutiny from lawmakers. “We can’t stand by and let Amazon, Facebook, Google, and all the rest gobble up all the innovators in our economy,” Sen. Josh Hawley told Politico.

Right on cue, yesterday the House Judiciary Committee asked Jeff Bezos to testify over allegations Amazon lied to Congress.

SIZE MATTERS

How Big Is Big?

Good question. Use this analogy: Big Tech is to the business world as Yao Ming is to Gary Player...if Yao Ming grew to the size of the Empire State Building.

Microsoft currently has a market capitalization of more than $1.3 trillion. Here's a list of companies whose combined market value is roughly equivalent to 1 Microsoft:

• 50 Macy's
• 5 Twitters
• 4 Fords
• 3 Boeings
• 3 Deltas
• 2 Snaps
• ExxonMobil
• Starbucks
• JPMorgan
• McDonald's
• Goldman Sachs

GROWTH

The Road Ahead

f there's anything we know about the tech giants, it's that they're always looking to rip off Snapchat enter new industries. So what's on tap?

Health tech: Apple and Google are set to launch their joint coronavirus contact tracing software on May 1—but their ambitions in the personal health market have been obvious for years. Google's "Project Nightingale" is a massive project parsing the health data of tens of millions of Americans.

And Tim Cook said this last year: “If you zoom out into the future, and you look back, and you ask the question, 'What was Apple's greatest contribution to mankind?' It will be about health.”
Education: As more classrooms lean on digital tools, tech giants like Microsoft are working on ways to facilitate learning in the most rural communities around the globe. But Google seems likely to dominate the category during and after the pandemic. Its free Google Classroom service doubled active users to 100+ million from early March to early April.

Videoconferencing: Following Zoom’s hostile takeover as our virtual bachelorette party platform of choice, Facebook launched Messenger Rooms for more robust video chat. Meanwhile, Google made Meet (previously Hangouts Meet) free for all users, and Microsoft is beefing up Teams. They're all adding familiar tile views and, this goes without saying, custom virtual backgrounds.

STARTUP

Big Tech Loses Its Engine Room

Aka startups. Young, ~disruptive~ firms with names like uLamp and PlateSponge have always formed the base layer of tech’s innovation ecosystem.

The story usually goes like this: Company founded by 23-year-old → grows like a weed → folds, goes public, or joins one of the big guys.

But, as the NYT writes, the pandemic is “turbocharging Silicon Valley’s natural selection.”

• According to the tracker Layoffs.fyi, 350+ tech startups have laid off more than 34,000 employees since March 11.
• Stay-at-home orders were especially hard on startups in wounded sectors like travel and retail. Airbnb, which barely still counts as a startup, has stopped hiring.

And the venture capital firms that fund startups are in no position to provide emergency capital.

It’s not just bad news for the DataCats.ai of the world
The big incumbents depend on startups to source talent and tech. After all, who better to employ in your AI department than crazy grad students who started a successful AI company? Last year, Tim Cook told CNBC that Apple buys a company every two or three weeks on average. And Facebook wouldn't be leading the charge in virtual reality without its acquisition of Oculus in 2014.

Bottom line: That startup pipeline is drying up. Glassdoor Senior Economist Daniel Zhao says the current startup environment is worse than either the 2008 financial crisis or the bursting of the dot-com bubble in the early 2000s.

NEXT GENERATION

FAMGA 2.0: Who Makes the Cut?

Recessions have a knack of changing up the guard. So we’re wondering...who could be next in line to join tech’s A-list?

Pick your squad

• Gaming: Fortnite maker Epic Games and Roblox are making a strong case as concerts, movie events, and other economic activity shifts to the virtual realm.
• Work: CRM do-it-all Salesforce is certainly a giant, but the newly public duo of Slack and Zoom have also proven their value during the pandemic.
• Fintech: During the PPP chaos, PayPal and Square showed they can be more nimble than Wall Street incumbents. Let's see if they can lead a revolution in payments in the U.S.
• Tech tech: Cloud services and cybersecurity are the unsung heroes of our digital economy. Consider this: A "hybrid cloud" company you never heard of (Red Hat) was bought by IBM last year for $34 billion.

But are they capital-B big tech?

The club is harder to get into than Skull and Bones. Big Tech companies have muscled their way into ~$1T market caps by spreading far and wide across cloud, AI, enterprise services, wearables, entertainment, news, auto, healthcare...we could keep going.

Looking ahead...one day, the FAMGA (Facebook, Amazon, Microsoft, Google, and Apple) quintet will get disrupted, either by natural industry evolution or by alien invasion. Let's hope for the first one.

We want to hear from you. Who’s in your 2030 FAMGA?

WHAT ELSE IS BREWING

• The FDA has approved Gilead's remdesivir for emergency use to treat the coronavirus, President Trump said.
• Elon Musk appears to be going a bit stir-crazy during the lockdowns. He tweeted, “Tesla stock price is too high"—and investors agreed, sending shares down 10%.
• Warren Buffett will be answering questions today at Berkshire Hathaway’s toned-down annual shareholder meeting.
• ExxonMobil reported its first quarterly loss since its founding merger in 1999. Oil prices have collapsed along with your travel plans.
• Canadian PM Justin Trudeau announced a ban on more than 1,500 types of assault-style weapons less than two weeks after the country’s worst mass shooting.

SATURDAY HEADLINES

Only in 2020 could declassified videos of mysterious flying objects get quickly buried in the news cycle. But we're not going to let that happen. We assembled some strange (and true) headlines of the third kind, but there's a fake alien invader among them. Can you spot it?

• "Demi Lovato believes alien encounters could lead to a shift in consciousness"
• "Coronavirus could preview what will happen when alien life reaches Earth"
• "Alien invasion? Not a problem, Russia said"
• "Google assures Gmail users their inboxes ‘are not at risk of alien invasion'”

SATURDAY HEADLINES ANSWER