While the rest of the economy is tanking from the crippling effects of the coronavirus, business at the biggest technology companies is holding steady — even thriving.
Amazon said it was hiring 100,000 warehouse workers to meet surging demand. Mark Zuckerberg, Facebook’s chief executive, said traffic for video calling and messaging had exploded. Microsoft said the numbers using its software for online collaboration had climbed nearly 40% in a week.
With people told to work from home and stay away from others, the pandemic has deepened reliance on services from the technology industry’s biggest companies while accelerating trends that were already benefiting them.
Amazon has muscled in on brick-and-mortar retailers for years, but shoppers now reluctant to go to the store are turning to the e-commerce giant for a wider variety of goods, like groceries and over-the-counter drugs.
Streaming services like Netflix have dampened box office sales for movies in recent years. Now, as movie theaters close under government orders, Netflix and YouTube are gaining a new audience.
Frequently Asked Questions
A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.
There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.
Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.
Companies were already dumping their own data centers to rent computing from Amazon, Microsoft and Google. That shift is likely to speed up as millions of employees are forced to work from home, putting a strain on corporate technology infrastructures.
Even Apple, which once appeared to be among the U.S. companies most at risk from the coronavirus because of its dependence on Chinese factories and consumers, appears to be on good footing. Many of Apple’s factories are nearly back to normal, people are spending more time and money on its digital services, and Wednesday it even released new gadgets.
“The largest tech companies could emerge on the other side of this much stronger,” said Daniel Ives, managing director of equity research at Wedbush Securities.
That’s not to say to say major technology companies shouldn’t be worried. Advertising, the lifeblood of Google and Facebook, tends to suffer during economic downturns. The stocks of Apple, Microsoft, Amazon, Facebook and Google’s parent company, Alphabet, have collectively lost more than $1 trillion in market value from a month ago, when U.S. stocks traded at record highs. And Microsoft and Apple have cut their short-term financial forecasts because of slowing consumer spending.
Beyond the biggest companies, it is more of a struggle. Communication tools like videoconferencing service Zoom are now essential, but ride-hailing firms like Uber and Lyft and property-rental sites like Airbnb are seeing customers vanish.
The $3.9 trillion global technology industry will suffer this year, though just how much remains unclear. In December, research firm IDC forecast 5% worldwide growth for sales of hardware, software and services in 2020. After it became apparent a month ago that the coronavirus would disrupt supplies and cut sales in China, IDC said annual revenue might inch ahead at only 1%. That 1% growth now looks decidedly optimistic, said Frank Gens, chief analyst at IDC.
But when the economy does eventually improve, Big Tech could benefit from changes in consumer habits. And despite more than 18 months of criticism from lawmakers, regulators and competitors before the pandemic hit the United States, the biggest companies are likely to finish the year stronger than ever.
While Amazon has changed shopping habits for items like books, getting customers to trust it with groceries has been challenging. Now, as more people are forced to stay home, one of the last strongholds of physical retailing may be coming under pressure.
Michael Crowe of Charlotte, North Carolina, ordered groceries from Amazon for the first time a few days ago because he didn’t want to risk going to a supermarket, he said.
“I could see myself doing it longer term when this is over,” said Crowe, 36, who works for home improvement retailer Lowe’s.
As more customers try different Amazon services, they may create permanent shifts in buying habits, said Guru Hariharan, a former Amazon employee and the founder of CommerceIQ, a company whose automation software is used by major brands like Kellogg’s and Kimberly-Clark.
In a blog post last week, Dave Clark, Amazon’s senior vice president of worldwide operations, said it was adding the new jobs at its U.S. warehouses and delivery network because “our labor needs are unprecedented for this time of year.”
One reason for Amazon’s increase in demand is that shoppers are buying a broader variety of goods. From Feb. 20 to March 15, over-the-counter cold medicine sales rose ninefold on Amazon in the United States from a year earlier. Dog food orders increased 13-fold, and paper towels and toilet paper sales tripled, according to CommerceIQ.
Stay-at-home orders are unsurprisingly increasing traffic to video streaming sites, apps and social media platforms. Downloads of Netflix’s app — a proxy for traffic from the streaming site — jumped 66% in Italy, according to data from Sensor Tower, an app data company. In Spain, they rose 35%. In the United States, where Netflix was already popular, there was a 9% bump.
Netflix declined to comment on whether it was seeing a surge in subscribers.
Government officials in Europe even called Reed Hastings, the chief executive, to ask if Netflix could reduce the video quality of its streams to lighten the strain on the region’s internet network. The company agreed to do it for 30 days. YouTube also agreed to suspend streaming of high-definition video in Europe for a month.
Voice calling over Facebook’s WhatsApp messaging service has doubled in volume, Zuckerberg said on a conference call with reporters Wednesday. Facebook’s Messenger app has had similar growth, he said.
“So the normal spike for us is New Year’s Eve, right, where basically everyone at the same time just wants to message everyone and takes a selfie and sends to their family wherever they are, and to wish them a happy New Year,” Zuckerberg said. “And we are well beyond” that spike.
Analysts are bullish about Facebook’s prospects because many people turn to it for news in times of crisis and to distract themselves while working from home.
“We believe that many Facebook users have been accessing its properties at meaningfully elevated levels over the last several weeks,” Michael Pachter, an analyst at Wedbush Securities, wrote in a research note last week.
The shift to work at home has also demonstrated the merits of cloud computing when use unexpectedly spikes. For companies managing their internet infrastructures, making adjustments to computing needs on the fly is expensive and complicated. Cloud computing makes it easier.
Amazon, Microsoft and Google, the three major cloud-computing platforms, are swimming in cash and offering deep discounts for renting the underlying infrastructure for a corporate network as well as the software used by employees.
Microsoft has aggressively pushed its new business messaging and collaboration tool, Microsoft Teams, which competes with independent company Slack. On Thursday, Microsoft said the number of users on Teams had grown 37% in a week to more than 44 million daily users. There have been at least 900 million meeting and call minutes on Teams every day.
“We believe that this sudden, globe-spanning move to remote work will be a turning point in how we work and learn,” wrote Jared Spataro, a corporate vice president at Microsoft.
Even Apple, a company with hundreds of closed stores around the world (except now in China), is increasingly looking as if it will emerge from the pandemic in good shape.
Terry Guo, head of Foxconn, which assembles most of the world’s iPhones for Apple, told reporters March 12 that Foxconn’s Chinese factories were resuming production ahead of schedule and were back to normal — well ahead of expectations that would happen by the end of March.
Apple has tried to move away from its heavy reliance on device sales and toward services revenue, which includes app sales and subscriptions to its music and TV services.
For that business, having much of the public in the United States and Europe stay inside is almost certainly good news. Early data shows that people are spending more time watching TV. Apple has spent billions of dollars on original programming for its Apple TV Plus service, hoping to hook people enough to pay $5 a month for it.
More time and money spent on phones is also good news for Apple and Google because they take a cut of most app sales.
Over the first 10 weeks of the year, Apple’s cut of iPhone app sales grew 18% to roughly $690 million, while Google’s share of Android app sales rose 5% to roughly $360 million, according to Sensor Tower, an app data firm.
Over the past two weeks in the United States, their revenues increased more sharply. U.S. iPhone app sales grew 20% to roughly $670 million, while U.S. Android app sales increased 14% to about $380 million, according to Sensor Tower.
“After the financial crisis in 2008, Apple emerged even stronger,” said Ives from Wedbush. “There is no reason it and the other giants can’t do the same again.”c.2020 The New York Times Company