Tech is Back: The Information’s Weekly Newsletter

In a normal year, our events programming would go into hiatus just about now as vacations started rolling and people headed to the beach. But this is not a normal year, and there’s a lot to discuss and plenty of time to do it. So, our (virtual) events are picking up.

Next Tuesday, the team and a soon-to-be-announced special guest or two are going to discuss our annual fall IPO and M&A forecast. On Thursday, Juro is going to interview two of the most important figures in China tech—investor Kai-Fu Lee and top China tech banker Fan Bao—on the current tech investing climate in China. I can’t think of a more relevant interview for this moment.

On August 23, we’ll delve into the opportunities for startups outside the Bay Area with a wide variety of speakers, including Patrick Spence, the CEO of Sonos.

And of course in September, Jessica Toonkel and I will be hosting the second WTF: Women in Tech, Media and Finance with an amazing roster of speakers including Glossier CEO Emily Weiss, Maria Lorenz, an EVP at Sofi and former VP of Global Delivery Experience for Amazon, Jenna Lyons, the former president of J.Crew, and Facebook’s Chief Diversity Officer Maxine Williams. I am especially excited about a major new networking component to this two-day women’s event. You can learn more here.

And my suggested read, if you missed it, this week’s big stories about Amazon’s trouble health venture.

Tech Is Rebounding: The Winners, Losers and Risks

Back in March, there was something particularly cruel about how the pandemic affected Airbnb. As its bankers were finishing up paperwork to file for a direct listing, a way to go public when your cash coffers are so full you don’t need more cash, travel ground to a halt.

The company said revenue would likely take a 50% hit in the near-term. And it did the unthinkable for a fast-growing Silicon Valley tech company: laid off 25% of its employees. Airbnb borrowed $2 billion at stiff terms from private equity investors. The public listing, which some employees had waited a decade for, would have to wait—indefinitely.

Yet it turns out now that even a pandemic that kept most Americans locked up in their homes (and afraid of other people’s germs) is unlikely to kill Airbnb, a business based on staying in other people’s properties (potentially exposed to other people’s germs).

Revenue has started to rebound as people seek a break from cities. CEO Brian Chesky told employees this week that an IPO this year is still possible, expressing some disbelief himself about the positive news he was reporting. (As an aside, check out Cory's scoop about a major exec departure that happened this week.)

Indeed, it seems, just a few months after business ground to a halt, there is now a plausible argument that the pandemic may even help the company over the long term, acclimating more customers to rentals versus hotels.

A similar optimism is playing out, in a more moderated way, across many tech companies, whose fate is diverging sharply from much of the rest of the economy. For many, both underlying business growth and their stock prices are ticking up—in some cases sharply.

Advertising revenues are recovering at Alphabet and Facebook, Nick reported last week, as companies resume their digital spending and compete for ad space, which drives up prices. Alphabet’s stock price is near its record high, and Facebook has surpassed its, enriching both companies’ employees and the companies’ own currency for future deals. The pandemic has also been a boost to both companies’ fledgling hardware businesses, as people eat up video communication hardware at home.

Amazon booked more revenue than investors expected last quarter, and has also seen a major run up in its share price. Moreover, the steady death of brick and mortar retailers surely benefits the online retailer over the long-term.

Netflix this week beat its own projections for subscriber growth in its most recent quarter and is clearly pulling business from cable TV, where cord cutting is expected to accelerate.

And the enthusiasm is trickling down. The positive performance of tech stocks—and the stock market overall—is raising expectations for private tech companies, many of whom have been raising money at record prices. In many cases, demand for services—like productivity and online learning software—are booming. (Oh, did I mention that Microsoft is now worth $1.5 trillion.)

In some cases, tech businesses are able to scale up and down operations faster than their traditional competitors, helping their bottom line. That was the case at Rent the Runway, which the Wall Street Journal covered last week with the to-the-point headline "How is Rent the Runway Still in Business?" (Answer: a thorough and quick restructuring.)

To be sure, it isn’t all good news for tech. Many early-stage companies are struggling to launch their businesses and raise money without a business track record, particularly without meeting potential new investors in person.

For many enterprise software companies, customers are having a hard time paying their bills, which hurt last quarter's earnings and will likely be a factor again. Tech companies aren’t immune from the rest of the economy.

Some types of business, Uber and Lyft for instance, are still suffering, although, as I have said repeatedly, these companies are not really tech companies.

And maybe, ultimately, the good news for tech companies could bring worse news. Because if regulators were already leery of the power of large tech companies, it is not clear how they will feel if they are profiting while others suffer. For that reason, along with the fact that no one knows what the future will bring, I expect tech companies to temper their optimism as they report their quarterly earnings in the next week or so.

But make no mistake: A pandemic that spared few parts of the economy in the initial phases is already declaring new winners and losers.

This Week's The Information Articles:

• Venture Capital Firms Pushed to Take Historically Black Colleges as LPs by Kate Clark
• Amazon Alum’s Exit From TV Firm Shows Pitfalls for Tech Execs in Media by Jessica Toonkel
• BuzzFeed’s Peretti on How Pandemic Squashed 2020 Profit Hopes by Jessica Toonkel
• TikTok Agreed to Buy More Than $800 Million in Cloud Services From Google by Kevin McLaughlin and Amir Efrati
• The Escalating War Between Our Physical and Digital Realities by Sam Lessin
• ByteDance Plans to Double Down on China Expansion While TikTok Sale Possible by Yunan Zhang, Shai Oster and Juro Osawa
• Online Education Company Udemy Seeks Funding at $3 Billion Valuation by Kate Clark
• Top Airbnb Executive to Depart Amid Broader Shakeup by Cory Weinberg
• What’s Ailing an Amazon Health Venture by Paris Martineau
• Autonomous Trucking Startup Plus.ai in Talks to Raise $60 Million by Yunan Zhang
• The Information’s Takeover Target List by The Information Staff
• Coursera Raises $130 Million Amid Flurry of Ed Tech Deals by Kate Clark
• The Information’s 411 — Haven Help Me by Cory Weinberg