Nigel Walton discusses the accelerated adoption of digital products and 'Big Tech' the clear winners emerging from the COVID-19 pandemic.
The pandemic is having a devastating impact upon the global economy particularly airlines, travel, hospitality, physical retail and even the manufacturing and office real estate sectors as people are confined to their homes.
Despite all the doom-and-gloom surrounding the global recession, there is a clear winner emerging from the pandemic commonly referred to as ‘Big Tech’. The winners are platform companies offering easy-to-use digital products in the cloud. On the consumer side this includes platform companies that deliver online gaming, video conferencing, video streaming, telemedicine, online learning and digital fitness.
Netflix, Disney Plus and Spotify have also seen exponential growth with Disney attracting 50 million streaming subscribers in less than 4 months since its launch. Meanwhile, the UK has seen a boom in the adoption of healthcare apps being used as communication and administrative tools between patients and GPs. According to the Royal College of General Practitioners, remote consultations have increased from 25% to 71% since the beginning of the year with a switch to apps such as Babylon, eConsult, AccuRx and KRY.
Digital fitness has also seen explosive growth with newly launched platforms such as Peloton experiencing demand for connected fitness equipment and personalised health data tracking. The shift towards cloud-based gaming (a relatively new concept in the gaming sphere) has also seen significant growth with 50% of Nintendo’s sales being digital in the first three months of 2020.
The surge in demand for digital products has boosted sales in cloud computing services and software which has benefited the Big Tech firms such as Amazon (AWS), Microsoft (Azure) and Alphabet (Google Cloud), Alibaba (Aliyun) and Tencent (Tencent Cloud) with the market valuations of these firms remaining extremely robust.
Meanwhile, the ad-based business models of Google and Facebook have proven to be highly resilient despite the reluctance of firms to advertise. As the automotive and travel sectors ceased advertising on Google and Facebook they were replaced by video-gaming and e-commerce companies. Meanwhile, the nature of advertising in the pandemic environment has changed in favour of the digital platforms. Instead of broad-based brand advertising the focus has been on campaigns that drive direct results and cash flows. These are direct response advertisements for which platforms are perfectly suited. This also reinforces the terminal shift away from traditional to online media.
Not all tech firms are experiencing beneficial growth conditions from the epidemic. Some firms in the sharing economy with a physical presence are suffering such as the ride hailing and accommodation companies.
Many ride hailing companies are super apps that can pivot to delivering other services
Image credit: Photo by Charles Deluvio. Avaliable on Unsplash via Unsplash Licence
Meanwhile, Fintech (financial technology) has seen high growth in payments as people become house-bound but the peer-to-peer loan platforms are experiencing problems raising capital to lend to customers despite the high demand for funding. They have subsequently pivoted their business model to help small businesses navigate the different government loan schemes to secure alternative funding.
When normality returns after the pandemic has ended, the digital footprint and online practices adopted by global citizens are not likely to disappear. This signifies a global shift to digital services and products that will not only continue but will accelerate the adoption of other technologies such as 5G, the Internet-of-Things and artificial intelligence.
As firms struggle to survive they will be forced to adopt digital practices in order to lower costs and enhance efficiencies. This may well include increased remote working, digitisation of work practices and the roll-out of Industry 4.0 at an even faster pace leading to a large digital divide between winners and the losers. To use a popular technology phrase – Platforms Always Win.