But Facebook and its fellow internet titans have a huge advantage over most other companies: piles of cash.
Googles parent Alphabet had $117 billion on hand at the end of March, while Facebook had more than $60 billion greater than the gross domestic products of Lebanon, Slovenia or Tanzania. Amazon reported $24.3 billion in free cash flow. That money will help the companies to stave off the layoffs and closures that have sent unemployment soaring to Great Depression levels.
Google and Facebook could have revenue decline 20 or 25 percent year-over-year, and not have to worry about going out of business, said Mark Mahaney, managing director at RBC Capital Markets. More than any other ad-driven business model, Google and Facebook can afford whatever comes out of Covid.
Yelp a longtime critic of Google with antitrust regulators laid off one-third of its workforce and furloughed another 1,100 employees this month as its revenue from small-business ads shriveled. TripAdvisor, another Google detractor, said it will lay off 900 employees and furlough many of its remaining U.S. workers. Uber, which competes with Google sibling Waymo in developing self-driving cars, is also considering steep layoffs, The Information reported this week.
The plight is even worse for media companies whose ad dollars were already dwindling amid competition from Google and Facebook. Some estimates place the number of U.S. journalists laid off because of the pandemic at more than 33,000. News Corp. one of the most vocal anti-Google publishers suspended print editions of 60 of its newspapers in Australia, though U.S. operations and the flagship Wall Street Journal have yet to see cuts.
Startups are also aching, with roughly 30,000 of their workers laid off across the country since the beginning of March. In a note Monday, the National Venture Capital Association said investments in fledgling companies is likely to drop significantly, adding that companies will shut down at a higher rate than what is inherent to this risky industry.
And Amazon is poised to have many fewer competitors when the outbreak ends: As many as 100,000 retail outlets are likely to close in the next five years, UBS research analysts suggested in a note last week, as the coast-to-coast shutdowns hasten the trend of shoppers moving online. Some long-established retail names may never recover from the pandemic: The Gap, the San Francisco clothing chain that owns Old Navy and Banana Republic, said last week that it expects to shutter some locations permanently, while J.C. Penney skipped paying interest on bonds this month the first step toward a bankruptcy filing.
Even when the economy recovers, the big guys will be the first to reap the benefits.
Facebook and Google are poised to bounce back faster than other ad-supported businesses, said Jasmine Enberg, senior analyst at eMarketer. Their platforms allow marketers to essentially flip a switch on online ads, so as easily as they could halt them, they can get them running again. The two companies already control 60 percent of the online advertising market, eMarketer estimates.
Whenever there's economic uncertainty, advertisers tend to turn to these tried-and-true platforms and they're less likely to be experimental, she said. Facebook and Google, at this point, are considered to be essential platforms for advertisers.
Amid the last recession, tech companies used their reserves to buy up businesses at a higher clip than normal, with Google scooping up a record 36 companies, according to an analysis by CIO Dive.
Now, the big tech companies will once again have a chance to go bargain hunting scarfing up talent, intellectual property and rival businesses at much reduced prices. Both Zuckerberg and Alphabet CEO Sundar Pichai said during an earnings calls this week that they would look to invest throughout the downturn, even while slowing hiring in areas other than engineering and product management.
One of the harder issues for antitrust will be how to manage mergers and acquisitions coming out of this crisis, said Gene Kimmelman, a senior adviser for the advocacy group Public Knowledge. Certainly, the big tech firms are sitting on boatloads of cash and they could buy if they thought it made sense. There may be a lot of floundering smaller players.
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How the virus could boomerang on Facebook, Google and Amazon - POLITICO
