- Big Tech stocks saw major losses in H1 2022, and more volatility is expected as the US braces itself for a potential recession.
- We’ll take a closer look at the current challenges digital businesses are up against during this period of uncertainty and discuss which changes can be expected for the short- and long-term.
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Toward the end of 2021, the stock markets were thriving and digital transformation was accelerating amid the pandemic. However, the future for all digital businesses is now more uncertain, as a variety of challenges have materialized for Big Tech companies in 2022.
Stock prices fell for leading tech companies—such as Amazon, Meta, Alphabet, and Netflix—after a round of disappointing earnings, and many digital companies have also been negatively impacted by the loss.
Despite the pitfalls, there is much insight that can be gleaned from these recent events. We’ll share the short-term issues that have transpired for Big Tech companies, what long-term shifts are expected, and how these changes could impact your digital business.
Meta woes open opportunities for rivals
Facebook has been far ahead of competitors for years, dominating worldwide digital ad spending and far surpassing rival companies with its billions-strong user base. However, its lead doesn’t ensure it will maintain dominance in social commerce.
Meta platform has started to lose users and ad business—Meta’s stock price has declined by 40% since the start of 2022, per CNBC—which could open opportunities for competitors to make a play in the market.
Tiktok is positioning itself as a fierce competitor in the space, by offering innovative performance-focused ad products, and Snapchat is leveraging augmented reality (AR) and its ability to overlay the real world to oppose the hype of the metaverse.
In addition to larger players, smaller digital companies are also making a play for a spot in the social commerce arena. For example, by using their unique expertise in social discovery and community, companies like Pinterest and Reddit could see worldwide ad revenue increases of 20.0% and 40.4%, respectively, this year, according to Insider Intelligence US Ad Revenue forecasts.
Despite the competition, Meta appears to be staying afloat, as Tinuiti’s Q1 Facebook Ads Benchmark Report shows that its CPMs are still much higher than its competitors’. However, as other social platforms continue to gain traction, and as digital companies brace themselves for an uncertain future, marketers would still be wise to spread their social budgets around to various platforms.
Amazon will maintain its ecommerce dominance despite recent financial results
Along with other ecommerce players—including Shopify, eBay, Etsy, and Wayfair—that saw their stocks plummet in the first few months of 2022, Big Tech giant Amazon had less than stellar ad growth in Q1. Given that the retail giant possesses 40% of the retail ecommerce market share in the US, this is a good indication that the pandemic-driven ecommerce boom is over.
Despite current challenges, we expect that Amazon will draw on the strengths of Prime membership—such as value and convenience—to improve the top line. The online retailer has already taken steps to recapture its market share. Amazon has expanded its physical footprint by moving Amazon Go store locations to the suburbs, and has used Walk Out technology at Amazon Fresh stores to collect first-party data on CPG products, in order to significantly strengthen its advertising capabilities.
What’s more, Amazon is amping up its Amazon’s Buy with Prime strategy to attract smaller D2C brands. While these disruptor companies have historically resisted selling their products on Amazon, in order to make products more accessible and affordable to larger audiences, slow growth and the diminishment of funding could make it impossible for them to hold out against the Amazon ecosystem.
Inflation and economic volatility mean increased competition for streaming services
Rising costs and economic uncertainty make the future of streaming challenging to predict. In order to stay competitive, streaming services must attract and retain consumers while working toward profitability.
Consumers have become overwhelmed by the growing number of streaming options. Less than 1 in 3 (32%) US paid video subscribers paid for three or more services in 2019, and that figure is now 58%, per Nielsen. Consumers who are concerned about the impact of inflation on their wallets could reconsider which services are worth holding on to.
Though big tech streaming giant Netflix is the leader in this market and is expected to continue its reign until 2026, its recent losses open the door for competing players, both large and small, to attract viewers to their services.
The fintech bubble has burst
While global fintech funding reached a record-breaking $131.5 billion last year, these revenue streams have since dried up, causing many fintechs to see their valuation decrease considerably.
These losses suggest that unsustainable fintechs will not last. Instead, we’ll see more attractively priced incumbent companies buy up high-profile fintechs over the next five years. While the number of fintechs is likely to wane, those that remain intact will be able to carve out a deep-rooted space for themselves in the market.