Evan Spiegel, co-founder and CEO of the social network ‘Snap’, wrote in a letter – the company feels powerless in the face of the new economic reality of 2022. He may have been referring in that letter to the state-troubled US tech sector as a whole. According to many, US digital platforms are currently undergoing losses, massive cuts, and restructuring after years of global dominance.
Nasdaq, a statistics agency based in the United States, says that over the past year, about 30% of American Internet service companies have faced a disaster. According to Dow Jones Averages, stocks of companies with relatively weak tech assets fell less than 10%. Meanwhile, tech companies have laid off more than 45,000 workers this year, according to statistics from Crunchbase. The turbulent situation of the world economy is accused of being the origin of such a situation.
That being said, most people now spend calculatedly due to rising inflation. On the other hand, most ISPs also offer limited services. This has overall reduced the use of technology and the tendency to use internet-based services for a long time. According to many, although the revenues of the world’s largest technology companies are relatively high, they are not exempt from the current economic crisis. Tech giants like Alphabet, Amazon, Apple, and Microsoft have collectively lost $2 trillion in the past year.
After the boom of technology companies on the US stock market in 2001, three types of business models emerged. First, app-based transportation services. Second, is the online entertainment system. Third, to deliver targeted advertisements to users themselves. Companies like Uber and DoorCash, Netflix and Spotify, and Snap and Matter have relied on these business models over the past few years. Despite performing well in recent years, they have lost two-thirds of their market capitalization in the past year.
It is feared that the situation will worsen. Despite being the world leader in ridesharing, Uber is expected to lose another quarter of its core cash flow. The company has lost $2.5 billion over 13 years, roughly half of its current market value. Food delivery leader DoorDash is also among the losers. On the other hand, Spotify and Snap are also on the list despite the usual revenue growth.
Netflix started its journey on a small scale in 1990, but since 2007 Netflix has grown extensively as an online entertainment platform. Over the past 10 years, Netflix has lost more subscribers than it has gained. As a result, their shares also fell by 20%. On the other hand, Meta’s annual revenue has declined for two consecutive quarters. As there are apparently great differences between these institutions, their problems are also distinct. But a closer look reveals that organizations face three types of problems: mistaken belief in network effects, insufficient and significant barriers to entry, and reliance on other platforms.
Transportation service providers like Uber will do well if there are significant barriers to entry. If the network effect is strong, the online entertainment media business will be good. Moreover, in order to survive, these app-based organizations need to reduce their reliance on a particular mobile carrier or any other app, or else their situation could worsen due to any of these three elements.
Source: SAH – Written By BDNewsOne Staff