Coronavirus scrambles tech's ecology
The coronavirus crisis has reset the tech industry's ecology with the speed and force of a meteor hitting a planet.
The big picture: Just as the industry's tools and services have shaped our experience of this disastrous moment, the pandemic has reshaped the industry itself in a matter of weeks.
Here's Silicon Valley's new food chain:
Big Tech's giant apex predators will strengthen their dominance while facing new threats.
- Google, Amazon, Apple and Facebook have fat war chests, hordes of data and armies of engineers.
- They had all that before COVID-19's onslaught, but now they have one more precious asset. Overnight, the American public has come to see their services as lifelines rather than luxuries.
- That may seriously dim enthusiasm for regulators and lawmakers to try to break these companies up. But it raises the odds that the government will favor treating them like public utilities.
In the middle ranks of the industry, where freshly IPOed newcomers on the way up pass middle-aged firms on their way down, chaos and carnage loom.
- Companies' fates will largely depend on how exposed their business models are to virus-era risks.
- Those tied to real-world interactions, live events and in-person contact will struggle. See: Airbnb, Uber and anything to do with travel and entertainment.
- Those that enable online replacements for in-person interaction will thrive. See: Zoom, food deliverers and some gaming providers and streaming outfits.
- Backend infrastructure plays will thrive if their tech is unique and useful enough.
- Companies that already went public will face brutal judgment from a new, bottom-line-conscious market. Those that missed the IPO window will race to become cashflow-positive.
- Successful operations will find happy endings in acquisitions, while money losers and slow adapters will wither or get bought in fire sales.
Tech's teeming underbrush of small startups will grow less crowded and more diverse.
- Small companies that made business plans in the pre-coronavirus days have ripped them up.
- Those who can will pivot to some new plan that makes sense in the new world. Those who can't will shut down.
- Investors who've experienced previous downturns will use this time to place longer-term bets on new technologies.
- Nimble newcomers will exploit freshly revealed market niches, drawing on a large population of newly available talent and sipping from the surplus of loose cash that's looking for higher returns.
The bottom line: The scale, reach and power of tech's giants looks less like a danger and more like a public good at this pivotal moment.
- Amazon has become a delivery lifeline for many homebound families and individuals.
- Apple's and Google's devices and Facebook's social networks keep us in touch when we can't see one another in person.
- Entertainment from Netflix, Google's YouTube, Amazon and other streaming players keeps us from going nuts as we shelter in place.
All this will give these companies a freer hand to pursue new markets, buy up potential competitors and fend off regulators than they had before.
Yes, but: In the new world, they'll face new dangers to their preeminence.
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