14 ms·

I believe the doom-n-gloom around all of tech is rather overblown. There are sectors of tech that will absolutely struggle. Gig-economy companies won't ever me

by screye 4y ago

I believe the doom-n-gloom around all of tech is rather overblown. There are sectors of tech that will absolutely struggle. Gig-economy companies won't ever meet their valuation. Negative PE ratio startups are realizing that hyper-scaling is not as infinite as they believed, and that means their earnings might never catch up to their price. Social media companies are finally facing stiff non-American competition (Tiktok). Lastly, it is nice to see the crypto scams be snuffed out. But, people have been calling all 4 of these out since before Covid. Now, the biggest movers in tech seem to be in a healthy position. AMZN*, MSFT, AAPL and GOOG sit comfortably at the same average PE ratio as the S&P500. Those are value stock numbers for companies that are all leading innovation while having solid unit economics. They are front runners in areas that are their biggest risks (AI, Silicon) and their current offerings are essential tools to everyone globally. AFAIK, the adoption rates for cloud compute and mobile-silicon devices is only going to go up from here. [AMZN] - AMZN does the weird profit-reinvesting thing, so they report lower margins on the highest revenue across tech. Thus the lower PE ratio. See it as you wish.

laidoffamazon 4y ago
From the way people talk on this forum about economic conditions in this country you'd imagine the unemployment rate is 10%, nobody is hiring, and the market is down 50%.
- cplusplusfellow 4y ago
  The media consumed by the typical member of this audience would lead you to believe that. For some reason, everyone is trying to organize a recession.
- SantalBlush 4y ago
  The recession talk is delusional. Every economic metric but inflation is in good shape. These people don't know what they're talking about.
  - fullshark 4y ago
    Inflation means interest rates will be up, which is bad news for silicon valley and profitless startups in particular. The economy might be ok (very debatable) but if interest rates stay high and the VCs pump and dump of unprofitable unicorns on the public markets has ended...
    - laidoffamazon 4y ago
      Yes, it's not great for lots of business models. But the dotcom boom happened when the effective federal funds rate was much higher than it is now. I think (and perhaps I'm very wrong!) we'll settle back into a 2018, 2017 tech industry minus companies like OpenDoor rather than a early 2021 euphoria
- ashwagary 4y ago
  If they are forward looking statements they are correct to be worried. A significant correction seems to be in our near term future.
  - laidoffamazon 4y ago
    The trend being lessening inflation over the last 6 months and a resilient labor market?
birdymcbird 4y ago
Overly rosy take on big tech. I’ll use Google as example. Their execs are in full panic right now over OpenGPT. What was last major innovation at Google.. chrome? 20% of company drives profits while 80% is a decorated R&D lab chock full of benefits, upset about cutbacks in their free oatmilk lattes, even though they’re not coming to office anyway. these guys will double their attrition targets if not have full blown layoffs. ads drives their profits, but search has been in decline for years now. google right now is a bloated bureaucratic whale that needs to hit the gym and get in shape. Step 1 is to get off the damn couch.
- goldenchrome 4y ago
  You underestimate the staying power of monopolies.
  - birdymcbird 4y ago
    No, but i think you do have a point. Googles board and company execs had convinced themselves they’re an untouchable money printing machine. This year, they’ve been violently woken up.
    - goldenchrome 4y ago
      They have tens of thousands of top engineers, billions in the bank, half a dozen products used by over a billion people and their main product is ads for people who use the internet. Companies always face existential threats but as far as moats go, Google has one a mile wide. Their downfall will be slow and obvious and even after their decline in cultural relevance they’ll still churn out billions of dollars a year.
  - fzzzy 4y ago
    Like AOL and MySpace?
    - goldenchrome 4y ago
      No, like Exxon and IBM.
lumb63 4y ago
I agree that those companies are in “a healthy position”, but there are massive risks to their operations: AMZN: IIRC, AWS is the majority of their profit. This is web infrastructure; all the negative PE ratio startups and gig economy companies going under will hurt AWS. They have similar risks to GOOG (see below). MSFT: Does anyone have a clue how MSFT is making money? The last few Windows updates have been free, and I would guess they are buttressed by Office 365. How they convince IT departments to adopt this buggy, slow, expensive software, is beyond my comprehension. What’s the sales pitch? “Hey, have you ever wished you could pay every month for Office? It will have similar functionality to Office from 20 years ago, and you can pay us every single month!” On second thought, their Azure services probably have similar profitability and risks to AWS; maybe that’s what is keeping them afloat. AAPL: At least Apple produced physical products, but we have seen their products, e.g the iPhone 14, hurt by supply chain issues and lower demand in the face of a recision and high inflation. They’re not innovating; the iPhone 14 was mocked for being the same as the previous model. If frugal consumers go by the wayside, who is driving profits? The (now-laid-off) tech employees who make enough to afford their luxury products? Maybe some, but less than at present. Apple has made efforts to grow their SaaS revenue the last few years and that is prone to risks from lower consumer demand. A budget-minded consumer will not be paying for all the Apple services when they are hurt by layoffs. GOOG: Ah, my favorite. Let’s set aside the legion of small companies they bought to fuel growth and decrease competition, e.g. Nest, Fitbit, Waze, YouTube, etc. Corporate Alphabet is producing the majority of profit by ad revenue. What happens when demand for advertising decreases due to lower consumer demand? They’re also trying to enter the cloud space, but are far behind AWS and Azure. There are also broad risks facing tech company. The main ones which come to mind are data privacy and other regulations, anti-trust actions. If future events do not favor big tech, those companies could have a long way to fall.
- Tanoc 4y ago
  As far as I know for Microsoft, a large chunk of their revenue comes from the licensing for Visual Studio, the Azure service and the fees required for certification, and surprisingly the Xbox division. Corporate entities buying licenses for Visual Studio would likely be tens of thousands of dollars each since the Enterprise level license starts a little under two grand. And Xbox with it's recent push into mobile style games likely makes Microsoft unimaginable amounts of money. Roblox in 2021 is estimated to have made $1.9b based on it's microtransaction model, and Microsoft gets a cut of that. The FIFA games generate an average of $1.5b every year. With the recent acquisition of Activision-Blizzard and thus mobile giants like King Games, it's likely that Microsoft could rake in $30b a year from the Xbox division, an increase of seven or eight billion. And with the autonomy model of the owner, publisher, developer ladder Microsoft likely has to do little to no investment as the parent company in order to receive that income.
EGreg 4y ago
You forgot the biggest one. Advertising revenue. That’s what Facebook and Google were supported by. And it has been a zero sum game in a race to the bottom for years. They just didn’t diversify much, same as Russia or Venezuela with their oil economies. Most companies built around zero-sum games are eventually going to stop growing as you run out of other people’s money. But that’s OK — they are already HUGE! The real problem is the public stock market (also a zero-sum game, mostly) creating a bubble and pushing them to extract rents from their ecosystem harder and harder. It’s fine to raise money in order to grow, but investors end up reselling shares for more and more money and represent a class of people who extract rents from a multi sided market. (By contrast, true utility tokens pegged to the dollar that can be sold to actual customers and are a way to raise money that is more economically sustainable and doesn’t create speculative bubbles.)
- haliskerbas 4y ago
  Search ads and social ads are two different games I would say.
  - asah 4y ago
    And google didn't fail to diversify for a lack of trying !!! It's just that ads continued growing faster than anything else could catch up.
    - deleted 4y ago
      [deleted]
  - EGreg 4y ago
    Either way, it’s a zero sum game. The productive sectors of society (businesses with goods and services) spend on advertising to attract customers away from each other. The majority who don’t have massive budgets for optimizing soon realize the ROI is negative on ad spend, and stop. Same as traders who get liquidated after trying futures.
- MilStdJunkie 4y ago
  There's a general fear that customers eventually will realize that the Google / FB ad dollars aren't actually creating new business. These gatekeepers - the Googles/Apples/FBs/etc - can predict where consumers are about to go[1], but the total numbers don't go up. It's sort of like the difference between coupons in the local paper, versus coupons that your ad man hands out next to the front door of your business. Everyone who gets a coupon was coming here anyway. The dark side of this is how your business can suddenly disappear from view if you stop buying into the Web-Ad-Hive-Mind. That's way worse than the coupon guy hanging outside the front door - that's more like someone in fake construction vests putting up cones around your parking lot. [1] Giving them something that looks like magic powers to individual businesses, particularly those that aren't particularly computer savvy. "Holy smokes!! 95% of the people who Google reaches went to my pizza place! They must be soooooo good at convincing people my pizza's the best!"

by screye 4y ago

laidoffamazon 4y ago

From the way people talk on this forum about economic conditions in this country you'd imagine the unemployment rate is 10%, nobody is hiring, and the market is down 50%.

cplusplusfellow 4y ago
The media consumed by the typical member of this audience would lead you to believe that. For some reason, everyone is trying to organize a recession.
SantalBlush 4y ago
The recession talk is delusional. Every economic metric but inflation is in good shape. These people don't know what they're talking about.
- fullshark 4y ago
  Inflation means interest rates will be up, which is bad news for silicon valley and profitless startups in particular. The economy might be ok (very debatable) but if interest rates stay high and the VCs pump and dump of unprofitable unicorns on the public markets has ended...
  - laidoffamazon 4y ago
    Yes, it's not great for lots of business models. But the dotcom boom happened when the effective federal funds rate was much higher than it is now. I think (and perhaps I'm very wrong!) we'll settle back into a 2018, 2017 tech industry minus companies like OpenDoor rather than a early 2021 euphoria
ashwagary 4y ago
If they are forward looking statements they are correct to be worried. A significant correction seems to be in our near term future.
- laidoffamazon 4y ago
  The trend being lessening inflation over the last 6 months and a resilient labor market?

birdymcbird 4y ago

Overly rosy take on big tech. I’ll use Google as example. Their execs are in full panic right now over OpenGPT. What was last major innovation at Google.. chrome? 20% of company drives profits while 80% is a decorated R&D lab chock full of benefits, upset about cutbacks in their free oatmilk lattes, even though they’re not coming to office anyway. these guys will double their attrition targets if not have full blown layoffs. ads drives their profits, but search has been in decline for years now. google right now is a bloated bureaucratic whale that needs to hit the gym and get in shape. Step 1 is to get off the damn couch.

goldenchrome 4y ago
You underestimate the staying power of monopolies.
- birdymcbird 4y ago
  No, but i think you do have a point. Googles board and company execs had convinced themselves they’re an untouchable money printing machine. This year, they’ve been violently woken up.
  - goldenchrome 4y ago
    They have tens of thousands of top engineers, billions in the bank, half a dozen products used by over a billion people and their main product is ads for people who use the internet. Companies always face existential threats but as far as moats go, Google has one a mile wide. Their downfall will be slow and obvious and even after their decline in cultural relevance they’ll still churn out billions of dollars a year.
- fzzzy 4y ago
  Like AOL and MySpace?
  - goldenchrome 4y ago
    No, like Exxon and IBM.

lumb63 4y ago

I agree that those companies are in “a healthy position”, but there are massive risks to their operations: AMZN: IIRC, AWS is the majority of their profit. This is web infrastructure; all the negative PE ratio startups and gig economy companies going under will hurt AWS. They have similar risks to GOOG (see below). MSFT: Does anyone have a clue how MSFT is making money? The last few Windows updates have been free, and I would guess they are buttressed by Office 365. How they convince IT departments to adopt this buggy, slow, expensive software, is beyond my comprehension. What’s the sales pitch? “Hey, have you ever wished you could pay every month for Office? It will have similar functionality to Office from 20 years ago, and you can pay us every single month!” On second thought, their Azure services probably have similar profitability and risks to AWS; maybe that’s what is keeping them afloat. AAPL: At least Apple produced physical products, but we have seen their products, e.g the iPhone 14, hurt by supply chain issues and lower demand in the face of a recision and high inflation. They’re not innovating; the iPhone 14 was mocked for being the same as the previous model. If frugal consumers go by the wayside, who is driving profits? The (now-laid-off) tech employees who make enough to afford their luxury products? Maybe some, but less than at present. Apple has made efforts to grow their SaaS revenue the last few years and that is prone to risks from lower consumer demand. A budget-minded consumer will not be paying for all the Apple services when they are hurt by layoffs. GOOG: Ah, my favorite. Let’s set aside the legion of small companies they bought to fuel growth and decrease competition, e.g. Nest, Fitbit, Waze, YouTube, etc. Corporate Alphabet is producing the majority of profit by ad revenue. What happens when demand for advertising decreases due to lower consumer demand? They’re also trying to enter the cloud space, but are far behind AWS and Azure. There are also broad risks facing tech company. The main ones which come to mind are data privacy and other regulations, anti-trust actions. If future events do not favor big tech, those companies could have a long way to fall.

Tanoc 4y ago
As far as I know for Microsoft, a large chunk of their revenue comes from the licensing for Visual Studio, the Azure service and the fees required for certification, and surprisingly the Xbox division. Corporate entities buying licenses for Visual Studio would likely be tens of thousands of dollars each since the Enterprise level license starts a little under two grand. And Xbox with it's recent push into mobile style games likely makes Microsoft unimaginable amounts of money. Roblox in 2021 is estimated to have made $1.9b based on it's microtransaction model, and Microsoft gets a cut of that. The FIFA games generate an average of $1.5b every year. With the recent acquisition of Activision-Blizzard and thus mobile giants like King Games, it's likely that Microsoft could rake in $30b a year from the Xbox division, an increase of seven or eight billion. And with the autonomy model of the owner, publisher, developer ladder Microsoft likely has to do little to no investment as the parent company in order to receive that income.

EGreg 4y ago

You forgot the biggest one. Advertising revenue. That’s what Facebook and Google were supported by. And it has been a zero sum game in a race to the bottom for years. They just didn’t diversify much, same as Russia or Venezuela with their oil economies. Most companies built around zero-sum games are eventually going to stop growing as you run out of other people’s money. But that’s OK — they are already HUGE! The real problem is the public stock market (also a zero-sum game, mostly) creating a bubble and pushing them to extract rents from their ecosystem harder and harder. It’s fine to raise money in order to grow, but investors end up reselling shares for more and more money and represent a class of people who extract rents from a multi sided market. (By contrast, true utility tokens pegged to the dollar that can be sold to actual customers and are a way to raise money that is more economically sustainable and doesn’t create speculative bubbles.)

haliskerbas 4y ago
Search ads and social ads are two different games I would say.
- asah 4y ago
  And google didn't fail to diversify for a lack of trying !!! It's just that ads continued growing faster than anything else could catch up.
  - deleted 4y ago
    [deleted]
- EGreg 4y ago
  Either way, it’s a zero sum game. The productive sectors of society (businesses with goods and services) spend on advertising to attract customers away from each other. The majority who don’t have massive budgets for optimizing soon realize the ROI is negative on ad spend, and stop. Same as traders who get liquidated after trying futures.
MilStdJunkie 4y ago
There's a general fear that customers eventually will realize that the Google / FB ad dollars aren't actually creating new business. These gatekeepers - the Googles/Apples/FBs/etc - can predict where consumers are about to go[1], but the total numbers don't go up. It's sort of like the difference between coupons in the local paper, versus coupons that your ad man hands out next to the front door of your business. Everyone who gets a coupon was coming here anyway. The dark side of this is how your business can suddenly disappear from view if you stop buying into the Web-Ad-Hive-Mind. That's way worse than the coupon guy hanging outside the front door - that's more like someone in fake construction vests putting up cones around your parking lot. [1] Giving them something that looks like magic powers to individual businesses, particularly those that aren't particularly computer savvy. "Holy smokes!! 95% of the people who Google reaches went to my pizza place! They must be soooooo good at convincing people my pizza's the best!"