COVID-19 Crisis: Identifying the Best Path Forward
This past week was filled with many, many firsts.
The first time oil traded in the negative, first time Zoom fatigue hit the majority of users, first time people in the U.S. protested a pandemic, and the first U.S. state (Georgia) opened for business post-shutdown. Public discourse this week shifted away from triggering headlines that started with the COVID-19 confirmed case count and barreled right into the complexities of restarting the global economy and whether or not consumers are ready for what comes next. There’s plenty to unpack, so let’s dive in.
Highlights of the week
What comes next
With the Q1 earnings season in full swing, this week’s headlines centered heavily on the initial economic impact of the pandemic and its financial toll on big business. While still important indicators of a company’s overall financial health, firms continue to revoke annual guidance and confess that more light will be shed on their bottom line in Q2 earnings as the lockdown didn’t begin in many countries until halfway through Q1 2020.
Alongside these reports, the drama unfolding around the U.S. Payment Protection Program (PPP) was almost too much to keep up with. In a nutshell, the PPP was created to help struggling small businesses cover payroll and expenses as the coronavirus pandemic disrupts normal operations.
As the clock was ticking and funds were depleting, it came to light that large, publicly traded companies had gotten the majority of the relief funds, instead of small businesses.
In the end, the Program had given out nearly $600M in loans to about 150 public companies before running out of its initial $349B two weeks ago. While the Program had a $10M loan limit, big hotel and restaurant businesses were able to apply through multiple subsidiaries if each location had less than 500 employees.” Ruth’s Chris Steakhouse received the most backlash for receiving a $20M loan through JP Morgan Chase.
Last week, Shake Shack announced it would return its loan but that $10M wouldn’t be accessible until Congress added more funds. This week, new legislation totaling $484B will deliver funding to small businesses, hospitals, and for testing. Publicly-traded companies and institutions are being asked to give back their loans, and an oversight committee is being established that will publicize companies that are approved to access the $320B worth of funds set aside for small businesses.
For millions, government assistance and financial support can’t come fast enough.
An additional 4.4M Americans filed for unemployment last week, bringing the total number to 26M in just five weeks’ time. From The Times, “At all levels, it’s eye-watering numbers,” said Torsten Slok, chief international economist at Deutsche Bank Securities. But as large as the figures have been, they do not capture the full extent of layoffs — or the cascade of economic troubles that they have set in motion.” Meaning, the problems surrounding the jobless claims will affect the shape of economic recovery. If laid-off workers can’t get relief quickly, the time back to normal life (spending, investing, etc.) will be prolonged, extending the nation’s recovery period. It’s a domino effect on a global scale and shows no signs of slowing down.
Furloughs and layoffs are hitting the digital media business hard. So far, Group Nine Media, Buzzfeed, Vox Media, Bustle Digital Group, Cheddar, Maven Media, G/O Media, Protocolo, Vice, and others have resorted to staff cuts to stay afloat as advertisers pull back spend. Speaking of spend, in a surprising move, Google is reportedly cutting 50% of its own marketing budgets and walking away from new office campus agreements, grim reminders that even tech giants are impacted by small business closures and reduced advertiser dollars.
After rumors and newfound reports detailed that the virus had been spreading long before the first confirmed cases were posted, tensions soared as millions of Americans resumed protests concerning the economic shutdown. New autopsies revealed that two residents in California were the first victims of the coronavirus, altering the timeline and the models being used to predict the spread of the disease.
In recent news, an antibody test out of New York found that roughly 25% of participants had virus antibodies, confirming that the coronavirus was likely spreading under the radar in major cities since January 2020. As a result of these findings and a continued lack of testing, it seems that less weight is being given to the tallies tracking confirmed cases around the world.
From here, two logical questions remain at the forefront: When will this end, and how will life change? Both are difficult to answer because “reopening” all depends on how well the virus is contained. As reported by The New York Times, in an American Enterprise Institute report, the authors outlined four goalposts for recovery:
Hospitals in the state must be able to safely treat all patients requiring hospitalization without resorting to crisis standards of care
The state needs to be able to at least test everyone who has symptoms
The state is able to conduct monitoring of confirmed cases and contacts
There must be a sustained reduction in cases for at least 14 days.
So far, no state or country (except, perhaps a few in APAC) can fulfill this criterion. In Europe, Denmark began by opening grade schools and daycare but has received resistance from many parents, signaling that even if most of this criteria can be met, consumers are still wary.
Unfortunately, most everyone has agreed that things (work, business travel, home life, and everything in between) won’t be the same. The idea of life returning exactly to (the pre-coronavirus) normal is discounting the shutdown’s impact on the economic health of millions of businesses and the mindsets of billions of people, especially with 26M Americans filing for unemployment in the last few weeks. Stores and restaurants will reopen and businesses will stabilize and recover, yes absolutely, but it will be slow-moving.
To what degree life will change is one of the biggest questions on everyone’s mind. In a timely piece, Fast Company sought to answer just that by asking VCs, tech executives, and analysts how life would change. A few noteworthy insights below:
Working from home becomes the new normal
“This time will go down as a turning point for the way people work and learn. We have a time machine as China navigates its return back to work—and we’re not seeing usage of Microsoft Teams dip. People are carrying what they learned and experienced from remote work back to their “new normal.” We’re learning so much about sustained remote work during this time.” — Jared Spataro, corporate vice president, Microsoft 365
Digital migration accelerates
“Right now, the virus seems like an accelerator for digital change that was already underway . . . the surprise has been to see the resistance to this digital change suddenly evaporate. What organizations resisted for a decade is now core to survival and innovation. It is exciting, because this digital mindset will persist, and it is highly unlikely companies will try to return to what worked prior to the pandemic.” — Michael Hendrix, partner and global design director, Ideo
Education goes virtual
“The change we are seeing right now in education is not something that is likely to revert back to “normal” in the fall. Although teachers will always be integral to the education process, there will need to be continued flexibility and agility when it comes to things like the delivery of content, testing, and grading. I expect that we will see an increase in blended learning environments that include learning in both the physical classroom setting and online.” — Simon Allen, CEO of McGraw-Hill
Whether these predictions come true remains to be seen, but one thing is for certain: the pandemic is accelerating (digitally-led) change across industries at a faster clip than ever envisioned. For those of us in digital, these digital transformations likely come as no surprise.
A few prominent examples include,
UK Parliament to Hold Virtual Debates Amid Virus Lockdown by The New York Times
China Rolls Out Pilot Test of Digital Currency by The Wall Street Journal
Coronavirus: Facebook’s summer 2020 internship program will be virtual by Business Insider
Now that many people have found their footing amid the short-term turmoil, some businesses are resuming pre-coronavirus business activity, though with post-coronavirus sensitivities. Mergers, acquisitions, and new product launches all made headlines this week in tech and media.
In Asia, Alibaba threw its hat in the ring with its plan to invest 200 billion yuan ($28B) over the next three years on hardware and software to better compete in the global cloud market. From The Information,
“Alibaba ranked a distant fourth in global spending on cloud services last year, capturing $5.2 billion, putting it behind Amazon, Microsoft, and Google. Alibaba is particularly strong in China, which is expected to become the second-largest market after the U.S. by 2021, according to IDC.”
Google announced a huge change to Google Shopping. From The Verge, “Google is making a significant change to its Google Shopping platform by letting any business owner that sells products online list their inventory for free. Usually, an e-commerce operation would need to pay for ad placement on Google Shopping. But the company says it will now let anyone who operates a website or manages a store on a marketplace platform list without paying. Google still plans to charge companies for top placement as promoted listings.”
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Walmart is selling its on-demand streaming service Vudu to Fandango, Facebook invests $5.7B in Jio, a digital platforms company in India, and WarnerMedia announced HBO Max is coming May 27th and will cost $15 a month. In Fortnite (otherwise known as the metaverse), Epic Games hosted the first virtual Travis Scott concert, garnering over 12M concurrent viewers. This surreal performance was the first in Scott’s “virtual tour” with more concert dates planned throughout the month, giving us plenty to look forward to in the weeks ahead.
Posted by Abby Long
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