Big up BigTech: Large technology companies are making the most of lockdown
May 5, 2020
3 min read
What's going on here?
As the global lockdown keeps dragging on, most companies will suffer significant losses. Yet, there is one industry that seems to thrive and will come out of the pandemic stronger: Big Tech. Amazon is hiring over 100,000 people for its deposits. Companies such as Slack, Zoom and Facebook have seen a massive surge in demand, reaching an all time high.
What does this mean?
Big Tech was already one of the most prominent industries on the market. Amazon, Google and Apple are all valued at $1 trillion and are only projected to grow further. Given the unexpected pandemic and the necessity of remote work, they have at least 4 new avenues for growth.
First, there is more demand than ever before. People are relying on Amazon for grocery shopping, on Zoom, Slack and similar services to communicate and work remotely and the list can go on. For example, Microsoft has announced that sign-ups to its Microsoft Teams have soared 37% in one week.
Second, as bigger companies are more in demand, smaller start-ups are having a difficult time surviving. Many of them are already cutting staff by as much as 35% and reducing costs. This is a golden ticket for Big Tech. With so much talent on the market they will increase their pool of brilliant minds to help drive innovation.
Third, given the lack of funds, these start-ups become easier targets for acquisitions. These sorts of “predatory” takeovers are common for Big Tech firms. They have been relentlessly acquiring any potential competitor that was seen as threatening. In an already weakened economy, such mergers will likely become more commonplace.
Finally, in an ironic turn of events, regulators and governments will be unlikely to intervene. The antitrust lawsuits against Facebook and the other giants are on hold for the time being. It is unlikely that in a frail economic climate there will be much action to disrupt businesses. This is especially so for Big Tech given the fact that it is now seen as nothing less than a quasi-public utility service.
What's the big picture effect?
For a start, consumers’ habits might change permanently. Morgan Stanley predicts that grocery shopping will move online even after the lockdown. This would benefit e-commerce businesses and Amazon primarily. Amazon has by far the quickest and most reliable delivery system. This will make it difficult for other newcomers to compete.
Moreover, the relationship between Big Tech and consumers is going to substantially improve. This is due to both the services’ increased presence in peoples’ lives and the companies’ efforts. For example, Facebook and Google are leading the fight against fake coronavirus news. And they are doing a great job at monitoring and taking down such stories (with the help of AI of course).
Finally, a more vigorous push to regulate Big Tech is likely to appear. As people realise that these companies are a necessity, chances are the desire for clear regulations will increase. Such proposals have already been discussed, especially in the EU. As recently as February, Margrethe Vestager, the European Union’s digital and competition chief, released a proposal to regulate the “digital single market”. This included areas ranging from the use of AI by Big Tech companies to taxation. Therefore, we can expect to see the first regulations appearing shortly.
Yet, all in all, Big Tech is hands-down the uncontested “winner” of the pandemic; its crown is consumers’ increased reliance on its services.
Report written by Bogdan Ciacli
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