Mar 27, 2020

Axios Login

Congratulations on making it through another week. See you again Monday. Be safe.

Today's Login, meanwhile, is 1,335 words — a 5-minute read.

1 big thing: Tech giants set to lose billions in ad revenue

Illustration: Aïda Amer/Axios

Tech giants like Google, Facebook and others are expected to lose billions of advertising dollars this year thanks to economic disruptions caused by the coronavirus pandemic, analysts tell Axios' Sara Fischer.

Why it matters: The losses aren't expected to cripple these companies, but they will put a dent in the otherwise unprecedented growth that several have experienced for the past few years.

Driving the news: All advertising-based businesses face risk from the coronavirus, but those that depend on advertising dollars from small businesses, which are mostly shut down for now, will be particularly affected in the short term.

  • "In the first half of the year, digital media vendors will feel the heat," says Vincent Letang, executive vice president and director of global forecasting for Magna Global, the media buying unit of global ad agency IPG. "But I still think they will recover more strongly than traditional media in the second half."

Be smart: Advertising on social media and search, which is how the dominant tech platforms make their money, is expected to take a big hit in the short term for two reasons:

  1. They are self-serve, meaning anyone can buy those ads through an automated platform at any time without a prepared contract. As a result, unlike with TV ad contracts, there are no cancellation policies that brands have to adhere to when pulling the plug.
  2. Those ads are mostly purchased by small businesses that are shut down. "Hundreds of thousands of small businesses who probably count for 70% of social and search, they will stop advertising for weeks as they are closed," says Letang. "For some of them, it will be hard to come back, as many won't have liquidity to start marketing."

By the numbers: Analysts at Cowen & Co., an investment management and banking company, estimate that Google and Facebook combined will lose over $40 billion in ad revenue this year due to the virus. They predict the following losses:

  • Facebook: roughly $15.7 billion, 18.8% down from its original estimate
  • Google: roughly $28.6 billion, 18.3% below estimate
  • Twitter: roughly $701 million, 17.9% below estimate
  • Snapchat: roughly $977 million, 31.8% below estimate

The companies have mostly been forthcoming with investors about the expected losses.

  • Facebook said Tuesday that it's seen a weakening in its ads business in countries taking aggressive actions to reduce the spread of the coronavirus.
  • Twitter said Monday that it had withdrawn its revenue guidance for the quarter "due to the growing impact of COVID-19 on the global operating and economic environment and their effect on advertiser demand."

Yes, but: Analysts don't think that companies like Google and Facebook will come out of this crisis much weakened, even with severe advertising losses, because their balance sheets are otherwise pretty healthy.

2. Coronavirus caught startups off guard

Illustration: Rebecca Zisser/Axios

For the last couple of years, startups have been preparing for a recession, but the coronavirus pandemic and its effect on the economy are unlike anything they predicted, Axios' Kia Kokalitcheva reports.

Why it matters: Even companies that had recession plans and have been modeling burn rates, cash flow, and dips in business are throwing those projections out the window and taking drastic measures.

Case in point: TripActions, a company whose app lets employees book their business travel, laid off three hundred employees this week — roughly a quarter of its staff, per Protocol.

  • Last October, co-founder and CTO Ilan Twig told Axios that the company had been preparing for a recession with cash in the bank and modeling potential decreases in business travel.

Between the lines: Whatever TripActions predicted about a recession was much milder than what it's facing right now, as business travel has essentially dropped to zero across the U.S.

"This situation is one that virtually no one was prepared for," says Shift co-CEO George Arison, whose company recently announced salary cuts and furloughs.

  • "I mean, who would have ever thought that our entire economy would be 'shut down' for a month or longer?"

The big picture: Companies are rushing to stretch budgets for as long as possible, given the fog of uncertainty hanging over the economy.

Go deeper: Sequoia Capital calls coronavirus "the black swan of 2020"

3. China's travel ban could slow tech products

Now that the coronavirus seems to be under control in China while it spreads elsewhere, China has announced a fresh ban on foreigners coming into the country — a move that could further complicate life for U.S. tech firms that rely on that country for manufacturing.

Why it matters: Many companies — notably Apple, but also Google, Facebook, Fitbit, GoPro and others — design their hardware in the U.S. but manufacture it in China. Typically, new products require close collaboration between U.S. firms and their Chinese manufacturing partners.

Driving the news: China will temporarily suspend entry for foreign nationals with visas or residence permits beginning at midnight on March 28, the Ministry of Foreign Affairs announced Thursday.

Between the lines: The real key is how long the ban lasts, analysts say, noting that most companies had already paused travel to China. Another factor is the number of China-based engineers the company employs.

  • "Some jobs are harder to do remotely like being an engineer working on a new product but there is always a mix of local versus HQ people on most teams," Creative Strategies analyst Carolina Milanesi told Axios.

What's happening: A Nikkei report this week said Apple would likely have to delay the launch of new iPhones by months due to the virus outbreak.

4. 3D printing no panacea for medical gear

The nationwide shortage of medical equipment to fight the coronavirus pandemic seems like a breakthrough opportunity for 3D printing technology. But in this urgent crisis, its uses are limited, Axios' Joann Muller reports.

Why it matters: America needs to manufacture tens of thousands of ventilators and billions of face masks and other protective gear in the next few weeks, and then distribute them in a hurry to hospitals around the country to ward off the worst-case public health scenarios.

Reality check: Industrial-scale 3D printing could help in a few scenarios, like making fast prototypes or fabricating plastic face shields. But it will not save the day when it comes to the most urgent needs, which are ventilators and N95 respirator masks.

How it works: There are an estimated 47,000 industrial-scale 3D printers installed in the U.S., according to Forbes, most of them idled at the moment due to coronavirus-related industry shutdowns.

  • With the proper digital instructions, companies and even do-it-yourselfers can start fabricating objects almost immediately using a 3D printer.
  • But the technology is not as fast, or as consistent, as traditional manufacturing methods, says Carnegie Mellon engineering professor Jack Beuth, an expert in the field.

Even more daunting are the regulatory hurdles that make 3D printing impractical for making medical device components.

  • Manufacturing life-saving equipment is subject to rigorous certification protocols, which takes time.
  • "You can't just say, 'I'm going to print it, it looks good, we're good to go'," said Beuth.

Yes, but: There is still a role for 3D printing technology to help in the fight against the virus.

  • Ford, for example, is prototyping transparent face shields for medical workers and first responders, with the goal of producing more than 100,000 per week.
  • Carbon, a Silicon Valley 3D printing company, is making face shields and test swabs, writes Forbes.
  • HP has designed 3D-printed parts, including hands-free door openers, mask adjusters and face shields, per Forbes, and is working on parts for a field ventilator.
5. Take Note

On Tap

  • It's the weekend. Time to travel to a far-flung corner of your apartment.

Trading Places

  • Maria Weaver is joining Niantic as chief people officer.
  • Facebook has had yet another departure from its board, with Jeffrey Zients, CEO of The Cranemere Group, stepping down. The company is adding former ambassador and Deputy Treasury Secretary Robert Kimmitt as its new lead independent director.


6. After you Login

Who let the dogs out? The Atlanta Humane Society. And they let them run around the Georgia Aquarium. Bonus, there's video.