Apr 16, 2020

Axios Login

In today's special edition of Login, we look at the deep and lasting ways the pandemic has reordered the tech ecosystem — reshaping the industry's agenda, bringing new opportunities and threats to the fore, and leading us into whatever era will follow tech's long boom of the 2010s.

Thanks to Ina for handing the controls over to me here for the day! She'll be back Friday.

Today's Login is 2,100 words, an 8-minute read.

1 big thing: Coronavirus scrambles tech's ecology

Illustration: Sarah Grillo/Axios

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. (See below.)

2. The new tech agenda

Illustration: Aïda Amer/Axios

The industry's pre-coronavirus agenda isn't vanishing — but its priorities have already been reshuffled.

These agenda items have jumped to the top of the list:

Transforming healthcare. Tech has long viewed the healthcare sector as an over-regulated backwater resistant to digital transformation.

  • Clinical medical technology remains a highly specialized sub-industry, but Big Tech was already moving into personal fitness and medical record-keeping before the crisis.
  • Now, big companies are rushing to use their networks and devices to help solve immediate problems — as with Apple's and Google's surprise alliance to provide contact tracing tech via their rival smartphone platforms.
  • Longer-term, they're seeing opportunities in applying AI techniques to everything from personal wellness to disease control.

Distance learning and the digital divide. With schooling at all levels transformed for now into a remote experience, inequities in online access have moved from a long-term ethical concern to an immediate problem.

  • Rural communities don't always have the connections they need. Lower-income cities and neighborhoods lack the devices they need, for both instructors and students.

Network bandwidth and resilience. The shelter-in-place era has stressed networks in new and unplanned-for ways. So far they've held up well.

Misinformation and media polarization. Critics were already blaming big tech platforms for polarizing U.S. politics and spreading election-warping lies.

  • Now we're worried about bad information online that could cost people their lives — whether through discounting the threat of the coronavirus itself, or through buying into dubious or dangerous remedies.
  • So far, the platforms' efforts to clean up medical misinformation have been far more effective than their attempts to police political misinformation and misleading ads.

Meanwhile, these agenda items have lost some urgency:

Antitrust investigations and enforcement. The virus could slow but isn't scuttling efforts by the Justice Department, the Federal Trade Commission, Congress and the states to investigate monopolistic practices by Big Tech.

Consumer privacy. Despite a cavalcade of data breaches and privacy-protection violations, the American public seems to remain ambivalent about the tradeoffs between protecting their personal information and supporting free, ad-supported internet services, telling survey takers that they care about the issue but rarely modifying their behavior.

  • Relatively tough privacy laws are in place now in both California and the EU, but Congress' effort to pass national rules now looks dead in the water until next year at the earliest.
  • A downturn in the ad market could further accelerate online ad overload and intrusive marketing practices, as revenue-starved publishers approve deals they'd previously have turned down.

Screen overload. Before the coronavirus, many Americans feared that too much time in front of screens was rotting our brains and atrophying our bodies.

  • Nothing about the current crisis actually offers a logical excuse for abandoning those fears.
  • But practically speaking, the demands of remote work, remote schooling, and stay-at-home edicts mean that, like it or not, our screens mediate more of our lives than ever before.
3. Looming threats to big tech

Big Tech's newly bolstered dominance doesn't make these companies invulnerable.

The big picture: Three elements form the ground on which the tech giants built their success — cheap hardware, connectable software and the freedom to innovate. Each of these foundations already faced threats that the virus crisis has now amplified.

Cheap hardware: The tech economy relies on a simple dynamic of efficient manufacturing and process improvement that drives down the prices of expensive breakthrough products until they become cheap and universal.

  • The petering out of Moore's Law — the miniaturization dividend that drove tech for decades — has already slowed this dynamic, while new approaches like quantum computing remain impractical at scale.
  • The other driving force behind cheap hardware — globalization and specifically the transformation of China into the world's tech-manufacturing engine — is now threatened by political tensions over trade and security concerns, as well as by supply-chain disruptions caused by the pandemic.

Connectable software: Our digital civilization is built on software-all-the-way-down stacks of interdependent code. These layers upon layers of programs and libraries talk to each other using application programming interfaces (APIs) — sets of commands that let diverse companies, organizations, and individuals build services that work together.

Freedom to innovate: There's widespread consensus in Silicon Valley that the industry has thrived because it's been left relatively unregulated.

  • Most digital successes have been built by introducing new models that "disrupt" incumbents — whether it was personal computers replacing mainframes, smartphones replacing landlines, online services replacing traditional businesses, or streaming media replacing broadcast and cable.
  • These models have been so successful and popular, and during this crisis they've become so essential, that they've inspired a new argument for regulation.
  • In this view, propounded by a rising chorus of academics, pundits, and politicians, we are now too dependent on Big Tech services to leave them to the market. Instead, we should treat them like public utilities, with public oversight and community responsibilities.
4. Tech's great wheel turns again

For the past decade, everyone in the tech world has wondered how the great boom of the Big Tech era that began in the mid-2000s would end. Now we know.

Why it matters: Recessions are "incumbent killers," says Bruce Mehlman. He's talking about politics, but the same principle holds true in tech.

Flashback: Every past recession and downturn in modern memory has led to the eclipse of tech industry incumbents and the rise of new powers.

  • The brutal recession of the early 1980s kicked off the personal computer era.
  • In the milder recession of the early 1990s, the federal government essentially handed the internet over to the private sector and laid the seeds for the dotcom boom that gave birth to Amazon, while Microsoft cemented Windows' victory over Apple.
  • When that boom turned to bust in 2000-2001, during a mild recession for most of the U.S. that felt like a full-scale depression in Silicon Valley, Microsoft began to lose its chokehold on the industry, while Google began its rise.
  • The Great Recession of 2008-2009 hit tech much less harshly than the rest of the economy. While the industry didn't experience a major reset, the downturn did accelerate the rise of social media in the form of Facebook and Twitter. And the smartphone, introduced by Apple in 2007 just as the financial crisis was germinating, emerged from the recession as a new dominant platform.

What's next: Right now, it's hard to imagine how today's crisis could possibly alter the tech landscape in ways that would displace the power of tech's colossi.

Yes, but: Two midsize companies' recent successes point to ways that newcomers can still outflank the giants with well-conceived and -designed software, smart market positioning and, of course, luck.

  • Plenty of big-company versions of videoconferencing already existed, but it was a less widely known alternative from a smaller company called Zoom that suddenly turned up on everyone's devices when the virus crisis hit.
  • Zoom was simply easier to use than the alternatives offered by Apple, Google, Microsoft and others — although the same choices that made it easy also created privacy problems.
  • Similarly, there's a host of business-messaging services out there for coordinating work, but during the pandemic, the already on-the-rise Slack has seen massive growth in adoption. It plays well with other software, it treats users with respect, and it leaves room for a little fun.

The bottom line: We've only seen the first tremors from the pandemic's tech impact. Whatever's coming next will be as big as it is unpredictable.

5. Take note

On Tap

  • The ACLU is holding a press call to discuss the various proposals for contact-tracing applications for slowing the spread of COVID-19.


  • Apple launched an updated version of its lower-end iPhone SE. The new model, which starts at $399, includes the design of the iPhone 8 paired with the latest A13 Bionic processor. (Axios)
  • Google says it plans to slow hiring this year, as well as reduce other spending. (Bloomberg)
  • GoPro is cutting 20% of its staff and plans to largely shift to a direct-to-consumer model. (Marketwatch)
  • ServiceNow, meanwhile, pledged it won't have layoffs this year. (TechCrunch)
  • The Defense Department said it couldn't definitively say whether the White House attempted to interfere in a key Defense Department cloud contract. Microsoft, which won the bid, published a blog post essentially calling Amazon a sore loser. (Politico/Microsoft)
  • Startup Cocoon, which offers social network sharing for close-knit groups like families, is adding health and wellness features. (Axios)
  • This profile of Cloudflare's third co-founder, Lee Holloway, is a worthy read. (Wired)
  • Facebook will notify users who engaged with coronavirus misinformation. (Axios)
  • Jeff Bezos aims to test all Amazon employees for coronavirus, he said in his annual shareholder letter. (Bloomberg)
  • Apple is reportedly developing high-end modular headphones that go over the ears. (Bloomberg)
  • TikTok is giving parents more control over how their minor children use the app. (Axios)
6. After you Login

This is a pretty amazing Hot Wheels track.