As the Covid-19 outbreak upends daily life in the U.S. and elsewhere, many key businesses owned by tech giants are going to be stung, while a few of them could get a boost.
Recent trends in China and South Korea provide some reason to hope that (with the help of strong public and private-sector responses) the outbreak could subside in 2-to-3 months’ time. But until that point comes, the impact (needless to say) stands to be enormous, as travel restrictions are imposed, employers ask employees to work from home, large public gatherings are cancelled or banned, people limit their trips to stores and business activity gets impacted a slew of other ways.
Here’s a quick run-down of how the Covid-19 outbreak stands to impact various end-markets and industries that tech giants operate in.
To the extent that the outbreak motivates consumers to visit bricks-and-mortar stores less frequently and instead order online, it could provide a boost to e-commerce activity. Indeed, Amazon has been contending with shipping delays for same-day and next-day deliveries due to high order volumes.
At the same time, the outbreak could disrupt fulfillment and logistics operations, and also make some consumers hold off on large discretionary purchases. While many white-collar Amazon employees can work from home in the event that local Covid-19 cases make it necessary, the same doesn’t hold for warehouse workers and delivery drivers.
Online Ad Sales
Which Tech Giants Are Exposed: Alphabet, Facebook, Amazon and (to a small extent) Microsoft. Apple is indirectly exposed via its cut on Google search ad revenue involving the Safari browser.
Google has a large travel ad business that’s bound to be stung in the near-term, and both Google and Facebook sell a lot of ads to local businesses that could see sales pressures. In addition, economic downturns tend to do a number on brand advertising and other types of discretionary ad buys.
Amazon’s ad business could hold up relatively well, since it depends heavily on e-commerce ads that are meant to immediately drive transactions.
Consumer Hardware Sales
Diminished offline retail activity naturally isn’t good for consumer hardware purchases. That certainly holds for a company like Apple, which relies heavily on retail foot traffic -- whether to its own stores, or those of mobile carriers and big-box retailers -- to drive both sales and greater customer awareness of its hardware.
On the bright side, with Chinese manufacturing activity improving in recent weeks, the damage done by Covid-19 to Asian supply chain activity for consumer hardware OEMs might not last very long.
Enterprise IT Spending
Enterprise software and cloud services firms generally haven’t yet reported seeing a major impact from Covid-19. However, with the outbreak leading industry conferences to be cancelled and also preventing salespeople from meeting with existing and potential customers in person, and with companies likely to delay discretionary IT purchases amid macro uncertainty, some impact is likely.
Data center hardware vendors are already having a rough time. But a lot of the sales pressures responsible for this predate the Covid-19 outbreak.
Mobile App and Online Media Activity
Which Tech Giants Are Exposed: All of them (to varying degrees)
This is one area where the Covid-19 outbreak is likely to drive an uptick in activity among consumers who find themselves spending more time in their homes and apartments (and the various screens placed inside of them). Data from app analytics firm Apptopia on Covid-19’s impact on Chinese and Italian app activity drives this home.
App Store and Google Play transaction activity could benefit, as could engagement social media apps and various streaming services. On the other hand, discretionary ad buys that are tied to some of these apps and services could take a hit.