This article comes from the WeChat public account: Jingwei Ventures (ID: matrixpartnerschina) , author: Matrix Partners Home Jun, head Figure from: vision China

The new crown epidemic has caused people around the world to stay at home, and Internet traffic is growing in an unprecedented way.

Facebook CEO Zuckerberg said:

“Recent visits have far exceeded the peak of traffic-New Year ’s (New Year’s Eve) growth, and every day Almost all have record performances. “

Internet traffic in the United States is increasing at a rate of 20% per week Increased by 20% ~ 40% Congestion has even prompted the European Union to ask streaming companies such as Facebook, Netflix, and YouTube to reduce their clarity.

In the past 30 days, the voice and video calls of Facebook Messenger and WhatsApp have doubled, and the local news on Facebook (local news) The total number of video views surged by 247%, and the average number of views per video increased by 118%, which is due to the large amount of video itselfIncrease.

YouTube is similar. Views of local news videos increased by 62%, and national news videos (national news) increased by 51%.

Twitter ’s first quarter DAU is expected to reach 164 million, which means a net increase of 12 million, which is the largest single quarter increase in history, a 60% increase from previous expectations. Video engagement on Twitter is also soaring, with global news up 150% and local U.S. news up 196%.

The growth brought about by this epidemic is unprecedented, as can be seen from the more stable TV consumption. According to Nielsen statistics, US TV consumption has recently increased by 60%, and this may not be the highest point.

Hurricane Harvey in 2017 (Hurricane Harvey) During the Houston TV consumption in the Houston area increased by 56%; New York ’s 2016 Blizzard This has led to a 45% -49% increase in the region, and the effect of the epidemic is equivalent to a global hurricane or snowstorm.

If the economy stays for a long time, no company will be spared

Many technology giants cannot directly profit from the growth of news information flow.

Internet giants like Facebook, which rely on SMEs ’advertising revenue, are standing at such a crossroads. On the one hand, they are enjoying a surge in demand. Bandwidth cost) , on the other hand, it is facing the impact of declining revenue.

Last week, some Wall Street analysts made a second or third price cut for companies whose revenue comes from online advertising. According to J.P. Morgan’s calculations, if global real GDP declines by 2.4% in 2020, global advertising expenditure may fall by 11.5%.

The Internet Advertising Bureau recently conducted a survey of 390 heads of advertising, and the results show that 74% of people believe that the impact of the new crown epidemic on advertising is greater than the 2008 financial crisis.

By the second quarter of this year, 70% of the respondents have adjusted or suspended their advertising expenditures in the future. Between March and June this year, traditional media advertising expenditures will fall by 39% and digital advertising expenditures will fall by 33 %.

The categories with the largest decline in advertising expenditures include travel, physical retail, automotive and entertainment, while e-commerce, streaming and health care declined less. J.P. Morgan predicts that the overall growth rate of the online advertising market in 2020 will be negative 1%, and growth will resume in 2021.

Prediction of the impact of various industries, compared with the 2008 financial crisis

Almost all of Facebook ’s revenue comes from advertising, and 75% of it comes from small and medium-sized enterprises, which has caused J.P. Morgan to reduce its growth forecast for 2020 by 27% and even by 20% by 20%.

Google ’s situation is not much better. 25% of Google ’s advertising revenue is directly threatened. As governments around the world have announced stricter segregation policies, many SMEs are facing a cash flow crisis, especially aviation and travel companies, and these types of advertising account for Google ’s total advertising revenue. 10% ~ 15%.

Due to the long decision-making cycle of traditional TV advertising, (50% ~ 80% reached the delivery agreement half a year to a year ago)It is difficult for large corporate customers to cut TV ads in the short term, but digital ads such as Facebook are sold through real-time auctions, which exacerbates short-term pressure. For example, the digital advertising expenditures of travel agencies fell by 51% month-on-month in the first half of March. Among them, large hotels took the lead to drop by 96%.

And internet companies that are having a hard time are also lowering their advertising budgets, such as Booking, Uber, and Lyft. J.P. Morgan lowered Uber and Lyft ’s 2020 S & M expenditures, totaling $ 3 billion, while Booking reduced it by $ 1 billion.

The suspension of sporting events will undoubtedly have a huge impact. Live sports is the mainstay of live broadcast programs, which accounted for 88 of the top 100 programs in 2019. The postponement of the Tokyo Olympics has affected the bulk of advertising spending. NBC has provided $ 1.25 billion in advertising resources commitments for this, and Facebook, Google, Snapchat and Twitter have all benefited from this, especially Twitter-RBC Capital Markets expects that Twitter Q2’s revenue will fall 27% year-on-year.

So even if the traffic end rises strongly, the epidemic is not a good thing for technology giants. Wall Street has lowered its revenue expectations and target prices. The main contributing industries of Facebook advertising are e-commerce, FMCG, entertainment, media, retail, and games, several of which have been greatly affected by the epidemic. Research firm Socialbakers predicts that Facebook will charge 30% less for each click of an ad in March.

JPMorgan predicts that Facebook ’s total revenue will increase by 6% in 2020, down 13% from the previous forecast, and the PE valuation of 2021E will be 15-21 times, depending on whether the epidemic causes the economic trend to be V-shaped or U-shaped .

For Google, although search is still a must-buy item for advertisers, Google ’s revenue is heavily dependent on the travel and retail fields (Travel accounts for 10% ~ 15% of its advertising revenue) , so it is more affected than Facebook. For example, J.P. Morgan greatly reduced its forecast for Google.

Google ’s main contributing industries are tourism, e-commerce, retail, and professional services in order (Professional Services) , and forecast total revenue growth in 2020 Only 1%. The 2021E’s PE valuation is between 17-25 times, depending on whether the epidemic causes the economic trend to be V-shaped or U-shaped.

In addition to Facebook, Google, Twitter, and booking, there are many technology companies that suffer more damage. Uber and Lyft bear the brunt, and taxi rates in some cities in the United States have fallen by 40% to 50%, and may further increase in the future. Catering review site Yelp is also very fragile because many restaurants or bars have withdrawn their digital advertising budgets.

Of course, a small number of technology companies can benefit from the epidemic.

In addition to ZOOM (See our previous analysis: “US stocks plunged 4000 points, but ZOOM skyrocketed by 50% against the market, and the market value exceeded$ 29 billion, what did this company do right? 》 , but ZOOM has also recently started to be troubled, and may lose some users due to encryption problems), people take food out The demand for services is soaring.

As the epidemic spreads to combat business, Uber shifted most of its energy to Uber Eats (its food delivery business) and tried to expand to grocery Store and convenience store distribution. With the epidemic leading people to stay at home, global Eats orders increased by 50% year-on-year, and New York and the San Francisco Bay Area led the US market. But Eats ’income does not offset the losses in the taxi business.

Grubhub benefited from its dominant position in New York City (The epidemic is currently very serious in New York) , and the business volume has also increased. However, in order to protect restaurants that were severely hit by the epidemic, Grubhub has cancelled some of the commissions collected from local restaurants.

Tencent ’s situation may also be better. A third of Tencent’s revenue comes from games, and this part benefits from the growth brought by the epidemic. But advertising that contributes one-fifth of revenue will be hit by the economic slowdown, and the revenue of the cloud computing department and the transaction volume of the mobile payment business have been damaged by the epidemic.

The technology giant that expanded against the trend in the epidemic is Amazon, because physical stores are gradually closing, a large number of consumers are pouring into e-commerce platforms for shopping, and Amazon has also seen a significant increase in demand. Link newly hired 100,000 employees.

In 2019, the United States closed a total of more than 9,000 large physical stores. The forecast for 2020 is 15,000. After the new crown epidemic has passed, some physical stores may not be reopened.

Now, the new crown virus has forced people to stay at home, which has brought soaring traffic to Internet companies, and some countries have even experienced slower Internet speeds. But the increase in traffic does not save most Internet companies from the epidemic. Although Facebook has seen record usage, Google and Twitter have also experienced a surge in traffic, but their income depends on SME advertising.

If global real GDP declines by 2.4% in 2020, global advertising spending may fall by 11.5%, and many Internet companies ’business models are built on advertising, and revenue in 2020 will be greatly reduced. Keeping an eye on cash flow and book cash is the standard action of CEOs this year.

Reference:

J.P. Morgan: Engagement is Ramping, but Advertisers Are Pulling Back


This article comes from WeChat public account: Jingwei Ventures (ID: matrixpartnerschina) , author: Matrix Partners Home Jun.