As soon as the American digital giants announce the loss of momentum and significant, and above all, layoff plans (52,000 recorded in the United States at the end of October by Crunchbase), as soon as the sirens sound in the distance to wanted to sound the end of the tech. But technology is not dead. For EY Fabernovel and its experts, who have been tracking and deciphering digital giants through its GAFAnomics study for many years, it is important to take a step back to understand that it is not, tech but more than all their (new) innovative players are alive and well. .today and will be tomorrow. On the other hand, we are undoubtedly nearing the end of the innovation cycle among mono-business digital giants.
Macro-economic context: tech is an important part of the global economy
Present in all industries from automotive to mass distribution, through health or even public players, but also with pure digital players like Airbnb, from giants to the smallest companies, today’s tech is becoming an important part of the global economy. Nor has it escaped anyone that between international tensions, the environmental crisis and the period of inflation, the latter has been affected.
It is true that during the health crisis, the digital giants were able to continue their outrageous growth. The covid crisis has allowed them to benefit from the transfer of attention time and digital uses in a physical world that has almost stopped, whether by offering teleworking solutions such as Zoom or dematerialized that is entertainment at home. Disney+ photo. These companies have continued to invest heavily – especially in recruiting talent – to expect this double-digit growth even though usage and attention spans have gone off screens at the end of the crisis, restoring brutality in more traditional businesses.
From general inflation forcing us to rationalize our costs, to the desire to consume better – or less – to meet the climate challenges we face: saving is important today. With rising energy costs and the greater cost of maintaining a mature business, these are new variables that are suddenly colliding with the hyper-growth model of these giants. Although some are doing better than others: Apple’s current valuation of 2.15 trillion dollars is almost equal to that of the rest of GAFA combined. This context only reinforced the reluctance of investors where the short term takes precedence over the long term and where economic superlatives are heard more than justified, which directly allows the valuation of the giants this. Proof of this is the Meta, which fell by $730 billion between September 2021 and October 2022 reaching $269 billion.
The online advertising market has been turned upside down after the health crisis
For digital giants that haven’t initiated change to diversify their models and remain dependent on advertising revenue, the slowdown is even more severe. Due to the health crisis, advertisers are more dependent on media platforms, reallocating most of their marketing budget to online advertising and ensuring their economic performance. The e-commerce boom has increased advertising acquisition costs but also the average cost per click for advertisers.
By the end of 2021, the first signs of a reversal in this trend appeared. First, with the opening of the Chinese giant Tiktok to advertising by reaching a critical mass of users, which caused a huge windfall in the market. It has also become more difficult for platforms to pursue precise advertising targeting to Apple users, who will now be able to stop tracking their applications. But also, this period of health crisis and evolution of data confidentiality has accelerated the awareness of advertisers to regain control over data and hold themselves platforms for the sale and distribution of their products in order to operate their own advertisements. The price of advertising therefore reversed and fell again, taking its place in the performance of the historical giants of social networks.
A favorable period for new innovative and good tech players
If the hyper-growth model of these Silicon Valley giants seems to be at a tipping point, the tech market in the United States is far from shrinking. Looking at the data published in November 2022 by the US Bureau of Labor Statistics, which takes into account the entire tech market in the United States at the end of September, we notice that the unemployment rate in the sector has reached a very low level. 2.1%, although the number of published offers decreased slightly. One thing is certain, it is that innovative and creative companies do not know recession. It is true that the task is more complicated for the GAFAs because their model of growth and innovation – which is based in part on super acquisitions – has been questioned by the American government and the anti-trust committees that have already blocked the some take. projects. An opportunity for new entrants, especially if we take the example of tech start-ups that specialize in supporting companies that want to stay on course for a world at 1.5°C, is emerging. Tech companies that put ethics and rationality at the heart of their model stand out and grow. Rather than the death of technology, wouldn’t this be the start of a new cycle of innovation focused on ending monopolies and building better models for the future? If we still don’t have an answer, I’m calling it, early for 2023. See you in a few months.
About the author: Diego Ferri, Chief Strategy Officer of EY Fabernovel
Diego Ferri is Director of Strategy and Communications at EY Fabernovel. He evolved over 10 years in the French digital ecosystem. After graduating from the École Polytechnique, the École des Mines de Paris and the University of São Paulo, he founded the company Shotgun, which specializes in selling party tickets online. He joined the finance team of EY Fabernovel in 2015 and progressed to operations management. Since 2019 in charge of EY Fabernovel’s strategy, he manages, among other things, the launch of new market offers and the constant analysis of the main movements in the world of innovation. Member of organizations such as APCI or FrenchTech, it contributes to the dissemination of digital culture with the aim of creating new rational ideas and seeing the emergence of new European digital champions.
About EY Fabernovel
EY Fabernovel is an international company, expert in strategic transformation consulting and in the creation of innovative products and services.
Created in 2003 by Stéphane Distinguin, Fabernovel became EY Fabernovel on July 5, 2022, the result of the merger with EY Consulting to become a leader in the convergence of digital and ecological transitions in Europe. The company consists of Talents at the forefront of innovation on three continents (in Europe in Paris, Lyon, Nantes, Toulouse, Bordeaux, in the United States in San Francisco and in Asia in Shanghai, Suzhou and Singapore).
Multidisciplinary teams, consisting of developers, designers, creatives, analysts, data engineers, marketing specialists bring their beliefs and solutions throughout the digital value chain, from the consulting stage to the production stage of the benefits -profitable product every day, to marketing campaign and promotion of innovation strategies.
About EY Fabernovel’s GAFAnomics studies
Since 2006, Fabernovel has been conducting GAFAnomics public studies to contribute to the readability and accessibility of the digital revolution and the main economic changes. They are an opportunity for everyone to research the topics of innovation, gain height in digital technology and develop analytical frameworks on the successful recipes of GAFA, unicorns and Chinese giants. These studies make it possible to understand all the competitive dynamics of this new economy, its performance factors and its development strategy. (Re)discover the latest studies:
• GAFAnomics special issue: the transformation of VSEs into ETIs, an opportunity for the European economic fabric
• GAFAnomics – Quarterly 2021: The urgency of rebalancing Big Tech (Q1), The ever-growing digital giants (Q2), Towards new, better standards of experience? (Q3), New pricing power of tech giants, towards a more sustainable model? (Q4) // 2022: towards a tech “Black Friday”? (Q1)
• GAFAnomics books: “Understanding the superpowers of GAFA to play on equal terms”, “The 16 most beautiful mistakes of digital transformation” published by Eyrolles (2020)
• Is Tesla the disruptor we need? (2020)
• WeChat, the shape of connected China (2019)
• Slack, the future workplace (2019)
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