The Pandemic’s Tech Boom Is Slowing Down, And Companies Are Trying To Throttle Expectations
As many businesses struggled through the pandemic, the tech industry—led by the big five of Google, Apple, Amazon, Microsoft, and Facebook—consistently put up brilliant numbers. This was not entirely unexpected, given how virtual sources of entertainment became the norm. This boom continued through 2020 and until now in 2021.
But these big 5 tech entities are softening the ground already, talking about more “normal” numbers, indicating that the pandemic-driven tech boom is slowing down. This is coming at a time when stock prices for these tech giants are at some of their highest levels ever.
It is an interesting time for tech companies and social media platforms. The pandemic pushed millions online, most of them new to a virtual world. But now that the numbers are coming down, what can we expect from tech companies and social media platforms in the short and long term? How do we see the scenario evolving? Let’s explore this.
What Was The Impact Of The Tech Boom?
Social media and tech companies saw users signing up to the tune of millions in the pandemic. Social media added 520 million new users, a growth of 13% from July 2020 to July 2021. Many of these new users joined popular networks like Facebook, Whatsapp, and Instagram, while others also took to newer platforms like TikTok and Twitch.
Microsoft saw an upsurge in users both from its Azure cloud business, due to the WFH trends, and its collaboration tools and Office product line. They had a record-breaking year, with revenue growth of 18% year-on-year from 2020 to 2021.
Amazon was perhaps the best place to deal with the pandemic. The e-commerce business became a crucial part of life as buying online became the norm, and we all ventured into new hobbies and home decor. Their cloud services business took off even more, thanks to the cloud-based technology boom. The net result is that, from June 2020 to June 2021, the revenue stood at $443.298 Billion, a 37.76% increase year-over-year. Over the period from June 2020 to June 2021, Apple also recorded a 27% rise in revenue, reaching $347.155 Billion.
Is The Boom Really Ending?
The experts say yes! Q2 of 2021 was another big quarter for most big tech and social media companies, but there was a clear strategy to prime the markets with the idea that the numbers may not be as brilliant the next time. This did not really help, but there is a general consensus that the pandemic-led boom is now coming to an end.
The hyper-growth over the past year has now been exposing supply chain issues globally. Tech companies are also grappling with a global chip shortage that is likely to disrupt sales as well. Apple warned that the chip shortage could affect iPhone and iPad sales globally in the 3rd quarter. This warning led to a 2% drop in Apple stock prices.
Roku also declared a drop of 1 billion hours in streaming compared to the last quarter, which pushed stock prices down by as much as 6%. Facebook and Amazon also mentioned the expectation of a slower Q3.
More people are returning to a somewhat normal life, and there is also clear fatigue for online life now. More people are also returning to offices, as vaccination numbers are also rising. All these changes are likely to contribute to a lower number of hours spent online.
So The Boom Is Ending. Now What?
This slowdown will push the companies to rethink their strategies—some of these changes are already visible. Here’s how we think this will play out for social media and tech companies.
Social Media Platforms
For social media platforms, the biggest shift will be from a focus on new user acquisition to a focus on user engagement. This will be an ongoing struggle, as users are looking for great content and have around 8.6 accounts on average today.
Sustaining the level of new user acquisition and engagement post the pandemic was always going to be difficult. Over the last few years, these platforms have also been slowly pivoting towards focusing more on content. This shift in focus is aimed at improving the engagement on these platforms.
The most significant shift has been how social media platforms are supporting content creators. Twitter announced its Super Follows initiative, where users can charge their followers for additional content. There are similar plans from almost all social media platforms—YouTube’s partner program and Facebook’s content creators announcement. All these initiatives are geared towards one thing: incentivizing content creators on the platform.
It is good content that is bound to keep users engaged, and content creators are the best bet for attracting and keeping users online. There is also a push for a greater variety of content on each platform. Over time, new formats like stories and short videos have become quite popular, and you can find these across all social media platforms. This move is also clearly aimed at keeping users on the platform and not looking for newer platforms for new content types.
Social media platforms have also found a great ally in e-commerce. Most platforms are on a mission to make shopping on social media easy and accessible. Shoppable posts, AR and VR integrations, and more marketing tools are available to e-commerce marketers. This significant push is likely to keep the revenue flow consistent, despite the slowdown in numbers.
The majority of social media revenue still comes through ads and promotions. This makes it vital for social media platforms to keep engagement high and ensure good content remains easy to find. The hope would be that the trends in favor of online buying continue, and more people are comfortable shopping online.
For Tech Companies
Tech companies such as Amazon, Google, and Microsoft have a lot of work to do in order to ensure that their gains during the pandemic are not lost. For most organizations, this was the first taste of remote work. This meant that they had to quickly adapt technology solutions to improve productivity and collaboration.
Digital transformation plans accelerated as a result of the pandemic, and an array of cloud services benefited. More than this, the virtual way of work and life also resulted in a host of new cloud solutions. Music & entertainment, Ed-tech, and gaming are areas that saw major investments by different companies.
The biggest challenge for cloud service providers and other cloud-based SaaS providers is driving consistent adoption and usage. As more people return to offices, there is a risk that we will return to our old ways and perhaps not make use of these tools and collaborative platforms.
This is the area that tech companies will have to focus on. And it is not an easy task. As in the case of social media platforms, engagement and experience will play a major role. Users need to realize the value of using some of these tools even when there are alternatives available.
While handling the scale of demand was the challenge during the past year, the next one is about assimilating the gains and delivering user value. This is true across the board and would probably impact all tech platforms that saw massive growth. Communication apps like Zoom and MS Teams, and work-tech apps, and enterprise tools also had a lot of growth during this time, owing to new organizations signing up. These new users will probably come at a slower rate now that offices have begun to function.
For most B2B businesses, the time ahead would have to focus on helping customers who are onboarded find success so that they reap benefits in the long term too. It is a difficult challenge for many apps that were essential for pandemic life but are not so important when regular life returns.
While we talked about the boom slowing down, it is also important to note that this will be a gradual shift. People want to return to their normal lives as they remember them from the pre-pandemic days. While we have to accept that it may be a little too early to expect things to go back to normal, it is also true that there is going to be a distinct change from the kind of life we had in the past year.
There is also going to be a lasting impact from the pandemic. Not everything will return to the way it was. Remote jobs are sure to stay, and it is also likely that e-commerce will continue to be the popular choice. These changes mean that there are still opportunities for continued growth, but it will be a lot more difficult.
As people get busy and have less time for leisure, they will also be looking for more quality entertainment. Social media platforms are already working to ensure that creators can make the best content and users can easily find it.
How this all plays out is anyone’s guess. But if we are to guess, for all the growth and dizzying heights, the coming months will be more challenging to navigate as users return to normal life. We will wait and see how technology and social media evolve in a more hybrid world.