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Commercial Awareness Update - May 2020
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<blockquote data-quote="Jaysen" data-source="post: 28653" data-attributes="member: 1"><p><strong><em>Alibaba and the 40 Million Items</em></strong></p><p></p><p>By [USER=4422]@Curtley Bale[/USER] </p><p></p><p><u><strong>The Story</strong></u></p><p></p><p>Chinese e-commerce company, Alibaba, has experienced significant international growth in the face of the Coronavirus pandemic. Global sales have increased by 67% since the start of the year, partly due to the online retailer’s ability to source and distribute face masks. Alibaba has shipped 40 million items of PPE to 150 countries, in addition to donating 101 million masks to the World Health Organisation.</p><p></p><p>Their European expansion is quite the anomaly; several competing companies including eBay and Amazon are currently struggling to meet increasing consumer demand due to logistical challenges and stressed supplier and delivery networks. The company is now undercutting Amazon sellers’ fees to establish a solid foothold in the European market.</p><p></p><p><u><strong>What It Means For Businesses and Law Firms</strong></u></p><p></p><p>Alibaba has experienced huge growth in Europe despite lacking an established market presence until recently. Alibaba’s visitor traffic has increased by 20% in Spain and 14% in Italy. Their app is also the most downloaded in Spain, France and Poland. By providing reliable PPE, customer confidence in the brand is building, and they are now increasingly likely to opt to order other items from delivery from Alibaba, where they may have previously chosen a competitor. If they can continue to show reliability and deliver products in high demand, they could become a market leader in Europe.</p><p></p><p>Alibaba plans to target areas including southern Europe to take advantage of their limited online shopping habits. The company also intends to tap into the African market, as the continent’s huge population represents an enormous potential new customer base. Alibaba believes emerging markets may be key to reaching their target of 2bn global customers by 2036.</p><p></p><p>Alibaba’s growth comes at a time when Amazon looks set to see its entire $4bn Q2 2020 operating profit wiped out by COVID-related expenses. Since the start of the outbreak, Amazon has experienced record sales, however, they are having to make costly adjustments to operations to observe social distancing, as well as recruiting thousands of new staff members to cope with increased demand.</p><p></p><p>Amazon’s recent struggle to meet demand has helped facilitate Alibaba’s European growth. With sustained quality and consistency, the Chinese company looks set to capitalise and become one of the very few winners of the Coronavirus outbreak.</p><p></p><p><strong><em>Big Tech, Big Earnings – But Q2?</em></strong></p><p></p><p>By [USER=3460]@Alice Manners[/USER] </p><p></p><p><u><strong>The Story</strong></u></p><p></p><p>This week saw public companies publish their Q1 2020 earnings. Apple reported higher-than-expected revenue, despite in February warning investors that factory shutdowns in China would lead to a disappointing result. Microsoft put out a similar warning, however the recent uptake in remote-working and cloud-based services contributed to a 27% growth in revenue.</p><p></p><p>Amazon also benefited from the closure of physical stores and the increased demand for cloud computing, announcing a higher Q1 revenue than forecasted. Although, the increased cost involved in meeting customer demand and ensuring safe working conditions has meant they reported lower profits than anticipated. </p><p></p><p><u><strong>What It Means For Businesses and Law Firms</strong></u></p><p></p><p>It is evident that the COVID-19 crisis has brought about changes in consumer and corporate activity, namely an increase in online shopping and remote working. The rapid digital transformation which has occurred over the past two months has played into the hands of many tech companies, leading to some Q1 revenues which exceeded analysts’ initial predictions. However, it is not entirely a positive picture; less time than usual has been dedicated to the privacy concerns surrounding social media platforms and tech companies, which could hit their share price in the long run. It will also be interesting to see how much of the new online activity transpires into permanent change.</p><p></p><p>By contrast, the banking sector did not perform so well – HSBC revealed a 51% decline in profit and hedge funds suffered the worst quarterly outflows since the financial crisis. Additionally, the closure of high-street stores has significantly affected many companies, with Adidas reporting a $198 million shortage in expected earnings. Q2 earnings are likely to paint an even bleaker picture, in light of the increased defaults and growth of “bad loans” on banks’ books, and retail stores being closed for potentially a majority of this quarter.</p><p></p><p>Q2 is likely to deliver exceptionally different earnings; even the tech companies who performed well in Q1 might struggle to deliver. Although it is difficult to forecast further results given the continuing uncertainty, Apple are likely to benefit from longer-term remote contact, with sales of devices including iPad and Macs helping users to stay connected, alongside an uptick in services revenue, including streaming TV. However, the company is reportedly having to delay its release of the iPhone 12 due to manufacturing issues over the summer, which will significantly reduce earnings.</p><p></p><p>At this stage, there are a few indications of who might come out on top in Q2. Those who appear to be thriving in the current conditions may not generate the revenue epected. For example, video conferencing app, Zoom, experienced a phenomenal increase in user numbers and subsequent skyrocket in its share price, however, growing privacy concerns have caused it to plunge. The future of the company is far from certain.</p><p></p><p>Similarly, Netflix and Snapchat have pointed to the pandemic as a source of accelerating growth revenue, however they anticipate muted sales growth following the pandemic – whenever that may be. The uncertain growth trajectory for the apparent ‘winners’ of the pandemic leads to questions over what the next quarter’s results will truly deliver.</p><p></p><p><strong><em>Twitter Reports Slump in Ad Revenue</em></strong></p><p></p><p>By [USER=3115]@Ayah[/USER] </p><p></p><p><u><strong>The Story</strong></u></p><p></p><p>Last week, Twitter announced its Q1 2020 earnings. The social media platform has increased revenue by 3% to US$808m, however one of the starkest features of their report was the slump in advertising revenue. Ad sales fell by 27% in the last three weeks of March, correlating with measures put in place worldwide in response to the global pandemic. Even so, Twitter still exceeded its expected revenue despite the fall in advertising.</p><p></p><p>Like most other social media companies, Twitter has witnessed an increase in user traffic during the pandemic. The company’s daily users grew by 14 million to 166 million during Q1 2020, an increase of 24%. With the potential to reach a larger audience, the resolution of the company’s existing problems surrounding advertising will be key throughout Q2.</p><p></p><p><u><strong>What It Means For Businesses and Law Firms</strong></u></p><p></p><p>Twitter has adopted a more pessimistic outlook than Google and Facebook, warning that advertising sales will continue to be weak. The question of how and why Twitter has been unable to successfully monetise advertising as much as Facebook has long been asked by observers. One possible explanation is the company’s own platform issues.</p><p></p><p>Last November, Twitter stopped platforming all political advertisements on its site. This is the first set of results to not include revenue from political sources. In the run up to the 2020 US election, the impact of the decision to remove political ads may become more apparent.</p><p></p><p>An area of promotion which did not show any signs of weakening for Facebook and Google were those requiring instant results, such as the download of an app, known as “direct response advertising” (‘DR’). Unfortunately for Twitter, the platform has experienced problems facilitating this form of advertising so it will spend the next quarter working on improving its Mobile Applications Promotion, as these products enable advertisers to more effectively promote mobile via Twitter, to increase future ad revenue. The success of DR signals a trend towards video gaming and e-commerce; Twitter must tap into this to offset the downturn in other ads, as Google has similarly done. Twitter has stated that DR will become the company’s “top priority” to utilise their increased addressable market and ensure resilience throughout the economic downturn.</p><p></p><p>The company has recently taken other action to protect its high-volume ad business model during this time. Twitter, alongside Google, has now lifted their earlier ban on advertising messages related to the coronavirus. An accurate assessment of the impact the pandemic has had on advertisements will only be fully realised when Q2 results are released in July 2020.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 28653, member: 1"] [B][I]Alibaba and the 40 Million Items[/I][/B] By [USER=4422]@Curtley Bale[/USER] [U][B]The Story[/B][/U] Chinese e-commerce company, Alibaba, has experienced significant international growth in the face of the Coronavirus pandemic. Global sales have increased by 67% since the start of the year, partly due to the online retailer’s ability to source and distribute face masks. Alibaba has shipped 40 million items of PPE to 150 countries, in addition to donating 101 million masks to the World Health Organisation. Their European expansion is quite the anomaly; several competing companies including eBay and Amazon are currently struggling to meet increasing consumer demand due to logistical challenges and stressed supplier and delivery networks. The company is now undercutting Amazon sellers’ fees to establish a solid foothold in the European market. [U][B]What It Means For Businesses and Law Firms[/B][/U] Alibaba has experienced huge growth in Europe despite lacking an established market presence until recently. Alibaba’s visitor traffic has increased by 20% in Spain and 14% in Italy. Their app is also the most downloaded in Spain, France and Poland. By providing reliable PPE, customer confidence in the brand is building, and they are now increasingly likely to opt to order other items from delivery from Alibaba, where they may have previously chosen a competitor. If they can continue to show reliability and deliver products in high demand, they could become a market leader in Europe. Alibaba plans to target areas including southern Europe to take advantage of their limited online shopping habits. The company also intends to tap into the African market, as the continent’s huge population represents an enormous potential new customer base. Alibaba believes emerging markets may be key to reaching their target of 2bn global customers by 2036. Alibaba’s growth comes at a time when Amazon looks set to see its entire $4bn Q2 2020 operating profit wiped out by COVID-related expenses. Since the start of the outbreak, Amazon has experienced record sales, however, they are having to make costly adjustments to operations to observe social distancing, as well as recruiting thousands of new staff members to cope with increased demand. Amazon’s recent struggle to meet demand has helped facilitate Alibaba’s European growth. With sustained quality and consistency, the Chinese company looks set to capitalise and become one of the very few winners of the Coronavirus outbreak. [B][I]Big Tech, Big Earnings – But Q2?[/I][/B] By [USER=3460]@Alice Manners[/USER] [U][B]The Story[/B][/U] This week saw public companies publish their Q1 2020 earnings. Apple reported higher-than-expected revenue, despite in February warning investors that factory shutdowns in China would lead to a disappointing result. Microsoft put out a similar warning, however the recent uptake in remote-working and cloud-based services contributed to a 27% growth in revenue. Amazon also benefited from the closure of physical stores and the increased demand for cloud computing, announcing a higher Q1 revenue than forecasted. Although, the increased cost involved in meeting customer demand and ensuring safe working conditions has meant they reported lower profits than anticipated. [U][B]What It Means For Businesses and Law Firms[/B][/U] It is evident that the COVID-19 crisis has brought about changes in consumer and corporate activity, namely an increase in online shopping and remote working. The rapid digital transformation which has occurred over the past two months has played into the hands of many tech companies, leading to some Q1 revenues which exceeded analysts’ initial predictions. However, it is not entirely a positive picture; less time than usual has been dedicated to the privacy concerns surrounding social media platforms and tech companies, which could hit their share price in the long run. It will also be interesting to see how much of the new online activity transpires into permanent change. By contrast, the banking sector did not perform so well – HSBC revealed a 51% decline in profit and hedge funds suffered the worst quarterly outflows since the financial crisis. Additionally, the closure of high-street stores has significantly affected many companies, with Adidas reporting a $198 million shortage in expected earnings. Q2 earnings are likely to paint an even bleaker picture, in light of the increased defaults and growth of “bad loans” on banks’ books, and retail stores being closed for potentially a majority of this quarter. Q2 is likely to deliver exceptionally different earnings; even the tech companies who performed well in Q1 might struggle to deliver. Although it is difficult to forecast further results given the continuing uncertainty, Apple are likely to benefit from longer-term remote contact, with sales of devices including iPad and Macs helping users to stay connected, alongside an uptick in services revenue, including streaming TV. However, the company is reportedly having to delay its release of the iPhone 12 due to manufacturing issues over the summer, which will significantly reduce earnings. At this stage, there are a few indications of who might come out on top in Q2. Those who appear to be thriving in the current conditions may not generate the revenue epected. For example, video conferencing app, Zoom, experienced a phenomenal increase in user numbers and subsequent skyrocket in its share price, however, growing privacy concerns have caused it to plunge. The future of the company is far from certain. Similarly, Netflix and Snapchat have pointed to the pandemic as a source of accelerating growth revenue, however they anticipate muted sales growth following the pandemic – whenever that may be. The uncertain growth trajectory for the apparent ‘winners’ of the pandemic leads to questions over what the next quarter’s results will truly deliver. [B][I]Twitter Reports Slump in Ad Revenue[/I][/B] By [USER=3115]@Ayah[/USER] [B] [/B] [U][B]The Story[/B][/U] Last week, Twitter announced its Q1 2020 earnings. The social media platform has increased revenue by 3% to US$808m, however one of the starkest features of their report was the slump in advertising revenue. Ad sales fell by 27% in the last three weeks of March, correlating with measures put in place worldwide in response to the global pandemic. Even so, Twitter still exceeded its expected revenue despite the fall in advertising. Like most other social media companies, Twitter has witnessed an increase in user traffic during the pandemic. The company’s daily users grew by 14 million to 166 million during Q1 2020, an increase of 24%. With the potential to reach a larger audience, the resolution of the company’s existing problems surrounding advertising will be key throughout Q2. [U][B]What It Means For Businesses and Law Firms[/B][/U] Twitter has adopted a more pessimistic outlook than Google and Facebook, warning that advertising sales will continue to be weak. The question of how and why Twitter has been unable to successfully monetise advertising as much as Facebook has long been asked by observers. One possible explanation is the company’s own platform issues. Last November, Twitter stopped platforming all political advertisements on its site. This is the first set of results to not include revenue from political sources. In the run up to the 2020 US election, the impact of the decision to remove political ads may become more apparent. An area of promotion which did not show any signs of weakening for Facebook and Google were those requiring instant results, such as the download of an app, known as “direct response advertising” (‘DR’). Unfortunately for Twitter, the platform has experienced problems facilitating this form of advertising so it will spend the next quarter working on improving its Mobile Applications Promotion, as these products enable advertisers to more effectively promote mobile via Twitter, to increase future ad revenue. The success of DR signals a trend towards video gaming and e-commerce; Twitter must tap into this to offset the downturn in other ads, as Google has similarly done. Twitter has stated that DR will become the company’s “top priority” to utilise their increased addressable market and ensure resilience throughout the economic downturn. The company has recently taken other action to protect its high-volume ad business model during this time. Twitter, alongside Google, has now lifted their earlier ban on advertising messages related to the coronavirus. An accurate assessment of the impact the pandemic has had on advertisements will only be fully realised when Q2 results are released in July 2020. [/QUOTE]
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