Big tech is having a bit of a boom. As hundreds of millions of people have been sheltering in their homes in hopes of slowing the spread of, tech’s become an even more indispensable part of our lives. That’s led to greater power, wider-reaching influence and more profits for tech companies that were already among the most powerful in the world.
Apple, Amazon, Facebook and Google each reported financial results in the past week with profits and revenue that, while lower than what they could’ve been before the coronavirus tipped us into a worldwide recession, were still huge. Investors still had to hear that Apple’s iPhone sales fell, that and advertising revenue dropped, and that Amazon is spending big to keep warehouse workers safe. But there were bright spots too.
Most telling, each company found that its respective niche in our lives has become more important during lockdown.
Many companies saw their app stores, video services and games — often seen as side businesses — take on new importance, as people seek new forms of entertainment and ways to connect. Once-boring businesses like the video chat app Zoom have become cultural touchstones, sparking competition with Microsoft’s Teams video chat and Google Meet, which are giving away limited access to consumers to become the next go-to when setting up a birthday party or digital hangout.
“If everyone’s suffering financially a little bit, and we have a lot of time, it’s a great opportunity for them to throw a bunch of free stuff at us to get us hooked,” said Roger Kay, an analyst at Endpoint Technologies Associates. “We can’t un-rely on this stuff.”
What this will all mean when the crisis is over is uncertain. Before the coronavirus, lawmakers around the world were mulling regulations designed to rein in the awesome power wielded by these companies. Those rules could include privacy laws that restrict advertising businesses. Law enforcement agencies have threatened device makers, demanding a way to crack into a suspect’s iPhone. Meanwhile, the Department of Justice, Federal Trade Commission and others are looking into potentially breaking up Apple, Amazon, Google or Facebook.
But those concerns have largely faded from the public as most consumers worry about getting sick or where their next paycheck may come from. Analysts say the companies are flexing their power. The most dramatic example of this was when Apple and Google announced plans to build coronavirus tracking technology into our phones, potentially helping warn people who may’ve been close to someone later found to be infected.
“In one announcement, they bring out something that could potentially serve half the planet,” said Bob O’Donnell, an analyst at Technalysis Research. “It ignores country boundaries and political boundaries — boom, just like that.”
The larger question these companies will face won’t just be how much more they’ll be welcomed into our lives. It’s how they can turn their sudden fortune into regained trust once we return to normal.
“The good news is the tools are there for people to use,” O’Donnell added. “It’s also going to raise concerns among people who say they have too much power.”
In February, Apple was one of the first tech companies to sound an alarm about the impact of the coronavirus, when it started noticing a dip in sales and manufacturing in China. The company warned investors that it likely wouldn’t meet its projected sales targets.
While the iPhone’s sales did fall, down nearly 7%, to $28.9 billion, its revenues from services and wearables, two categories that’ve been rising steadily for years, jumped 16.5% and 22.5% respectively.
“When you consider all the ways COVID-19 has touched Apple, our customers and the way we work, this may not have been the quarter it could have been absent this pandemic,” Apple CEO Tim Cook said Thursday during a conference call with analysts. “But I don’t think I can recall a quarter where I’ve been prouder of what we do, or how we do it.”
Looking ahead, big tech isn’t so upbeat. Apple didn’t offer detailed guidance about its sales or profit for the coming quarter, citing uncertainty around the coronavirus. Neither did Google or Facebook, though the two internet giants did warn that the advertising business won’t return to normal for a while.
Chip giant Qualcomm said phone shipments will likely drop about 30% around the globe in the June quarter. Apple rival Samsung, meanwhile, said phone and TV sales will “decline significantly” because of the coronavirus. CCS Insights, a market researcher, said phone sales around the globe will likely hit a 10-year low this year.
An uncertain financial environment, however, hasn’t stopped many of the large tech companies from finding ways to dig even deeper into our lives. Amazon’s online grocery services have gotten more orders than they can handle. The company also said the number of people watching Prime Video shows and movies for the first time nearly doubled in March. At Google, though the search giant’s ad business has suffered as companies like travel giant Expedia slash their spending, the ad business at Google-owned YouTube has grown 33% while the video giant keeps us entertained. And at Microsoft, it’s the Xbox video game console, whose Xbox Game Pass subscription service notched more than 10 million subscribers.
Of course, the companies still rely on their core businesses for a bulk of their revenue, like the iPhone for Apple, advertising for Facebook and search ads for Google. In some cases, such as with Facebook and Google, analysts and executives warn that the advertising business won’t return to normal for a while. But these other, smaller units have shown their importance amid the turmoil.
Tech companies seem to know their moment in the sun could end, and some have attempted to answer questions or allay concerns while they can.
As Apple and Google have discussed their contract tracing technology, they’ve regularly published information about the tech publicly; set up media phone calls and taken questions from the press; and even rebranded the tech as an “exposure notification” tool. Analysts attribute these moves in part to trying to get people to trust the system, which will be opt-in when it launches later this year. The two companies even promised they’ll dismantle the program once the coronavirus threat subsides.
Amazon used the top of its first-quarter earnings press release to lay out all the ways it’s investing in improved safety conditions for employees and in increased capacity and better price control for consumers, addressing mounting criticism on both fronts.
And while Facebook could seemingly do no right in 2019, having dealt with the fallout from the Cambridge Analytica scandal and from political misinformation on its site, a lot of people have jumped back on the bandwagon during the lockdown.
Our embrace of big tech, despite all its flaws during the past couple of years, could give these companies a do-over to win back some trust, analysts say. In each case, the big tech companies have started initiatives to show they’re helping fight the coronavirus. Apple and Google are building their exposure notification system, as well as donating. At Amazon, the company is . And Facebook has much quicker than it did during the 2016 election, and it’s from being organized on its platform.
“This is a unique moment for them to reinsert themselves into the public good,” said Ben Bajarin, an analyst at Creative Strategies, and to show that “their role in consumer’s lives and their dominance as a company is not just used for their own corporate benefit, but also to provide some good back into society as well.”
Even if they don’t pull that off, the past couple of months have been a reminder of how dominant companies like Apple, Amazon, Google and Facebook are. Now, Bajarin said, it’s a matter of whether they take this opportunity to get back in our good graces.
“I’m hoping they do capitalize on this moment,” he added. “But they could totally screw it up.”