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The Daily Dispatch
Weekly Special Feature
April 22, 2022
Metamorphosis: Facebook and big-tech competition
By: The Economist (Published on February 4, 2022)
staggering profits,” America’s Federal Trade Commission
wrote in its lawsuit.
Examine the firm’s fourth-quarter results, though, and its
position seems rather vulnerable and its profits somewhat
less staggering. It comes across as a business with
decelerating growth, a stale core product and a cost-control
problem. The number of users of all of Meta’s products,
which include Facebook, Instagram and WhatsApp, is
barely growing. Those of the core social network fell
slightly in the fourth quarter compared with the third. Net
Source: Getty Images
income dropped by 8% year on year and the firm suggested
that revenue would grow by just 3-11% in the first quarter
There comes a time in every great bull market where the of 2022, the slowest rate since it went public and far below
dreams of investors collide with changing facts on the the average rate of 29% over the past three years—and
ground. In the subprime boom it was the moment when below the growth rate necessary to justify its valuation.
mortgage default rates started to rise in 2006; in the dotcom
bubble of 2000-01 it was when the dinosaurs of the Meta’s troubles reflect two kinds of competition. The first is
telecoms sector confessed that technological disruption within social media, where TikTok has become a formidable
would destroy their profits, not increase them. There was a competitor. More than 1bn people use the Chinese-owned
glimmer of a similar moment when Meta (the parent app each month (compared with Meta’s 3.6bn), a less toxic
company of Facebook) reported poor results on February brand that is popular among young people and superior
2nd, sending its share price down by 26% the next day and technology. Despite attempts by Donald Trump to ban it on
wiping out well over $200bn of market value. That national-security grounds while he was president, TikTok
prompted a further sell-off in technology stocks. has shown geopolitical and commercial staying power. Just
as the boss of Time Warner, a media behemoth, once
Along with low interest rates, a driver of America’s epic bull dismissed Netflix as “the Albanian army”—an
run of the past decade has been the view that big tech firms inconsequential irritant—Silicon Valley and America’s
are natural monopolies that can increase profits for decades trustbusters have never taken TikTok entirely seriously. Big
to come with little serious threat from competition. This mistake.
belief explains why the five largest tech firms now comprise
over 20% of the S&P 500 index. Now it faces a big test. The second kind of competition hurting Facebook is the
intensifying contest between tech platforms as they diversify
Since listing in 2012 Meta has exemplified big tech’s prowess into new services and vie to control access to the customer.
and pitfalls. For a glimpse of the caricature, consider the In Facebook’s case the problem is Apple’s new privacy rules,
American government’s antitrust case against it first which allow users to opt out of ad-tracking, in turn
launched in 2020. It describes an invincible company in a rendering Facebook’s proposition less valuable for
world where technology is perpetually frozen in the 2010s: advertisers.
“this unmatched position has provided Facebook withThe Daily Dispatch
So are Meta’s problems a one-off or a sign of deeper Meta’s mishaps signal that two changes need to happen,
ructions within the tech industry? Strong results from although only one will. One relates to Mark Zuckerberg, its
Apple, Alphabet, Amazon and Microsoft in the past two leader and pantomime villain. He is pushing for a leap into
weeks may lead some to conclude there is little to worry the metaverse in which the firm is now investing $10bn a
about. Apple’s pre-eminence in handsets in America and year. His reputation with shareholders rests on successfully
Alphabet’s command of search remain unquestionable. Yet completing similarly bold moves in the past: the
there are grounds for doubt. acquisitions of Instagram and WhatsApp in 2012-14 and a
shift from desktop to mobile around the same time. The
The competition between the big platforms is already trouble is that Mr Zuckerberg’s and his firm’s toxic
intensifying. The share of the five big firms’ sales in reputation will impede its expansion into new terrain: its
markets that overlap has risen from 20% to 40% since plan for a digital currency flopped because governments
2015. Total investment (capital spending plus research and objected (this week the venture announced that it was
development) for the quintet has soared to $300bn a year, winding down). Mr Zuckerberg is a liability, but controls
as they search for new vistas such as virtual-reality Meta’s voting rights, enjoys a pliant board and so is
metaverses or autonomous cars. These promise growth but probably going nowhere.
will also lead to more overlap, disrupt existing products and
depress short-term returns. Meanwhile, venture-capital The second change involves how investors and
funds invested $600bn last year. Some of this will go up in governments think about big tech, and indeed the
smoke, but some will finance competitors who will stockmarket. The narrative of the 2010s—of a series of
eventually pose a threat. natural monopolies with an almost effortless dominance
over the economy and investment portfolios—no longer
And, if you look closely, pockets of strain are emerging neatly reflects reality. Technology shifts and an investment
beyond social media. Video-streaming has turned into a surge are altering the products that tech firms sell and may
bloodbath as half a dozen firms throw huge sums at a cash- lead to a different alignment of winners and losers. And, as
hungry business that has few barriers to entry. According to in previous booms, from emerging markets to mortgages,
the Wall Street Journal, customer churn has exceeded 50% high returns have attracted a vast flood of capital, which in
for some streaming services in just six months, one reason turn may lead to overall profitability being competed down.
why Netflix’s share price has dropped by 33% so far this Given the enormous weight of the technology industry in
year. Some other aspiring tech platforms are showing signs today’s stockmarkets, this matters a great deal. And the
of stress: Spotify said this week that subscriber growth mayhem at Meta shows it is no longer just an abstract idea.
would slow down and PayPal walked away from its goal to
have 750m users by 2025. ______________________________________________
Source: The Economist (2022). ‘Metamorphosis: Facebook
Even in e-commerce, where Amazon remains pre-eminent, and big-tech competition. Available at
serious challengers such as the supermarket giants (Walmart https://www.economist.com/business/2022/02/04/meta
and Target) or rival online platforms (Shopify) are making morphosis-facebook-and-big-tech-competition
their presence felt. In any case, Amazon’s thin margins and
vast investment levels suggest that consumers may be
getting a better deal than investors. Although a strong
showing from the cloud division divulged on February 3rd
may buoy the e-empire’s market value by more than half as
much as Meta lost, the cloud business is unlikely to stay as
lucrative for ever. Alphabet, Microsoft and Oracle are
already trying to compete away some of Amazon’s lofty
cloud margins.The Daily Dispatch
April
Feb.22,
2, 2022
2017 Philippine Stock Market Update
TODAY’S TOP NEWS
BDO, BPI registered strong profit growth in Q1
BDO, the country’s biggest bank in terms of assets, said net
income rose 13% in the first quarter to P11.7 billion from a
year ago, driven by core businesses. BPI said profit climbed
59.6% in the first quarter to P8 billion from a year earlier on
higher net interest income, lower loss provisions and
normalized tax expenses.
Previous Close: 1 Yr Return:
NGCP to invest P160b until 2025 7,061.49 12.04%
Transmission operator National Grid Corp. of the Open: YTD Return:
Philippines filed an application with the Energy Regulatory 7,067.93 -1.00%
Commission to spend P160 billion for capital expenditures
52-Week Range: Source:
until 2025. NGCP said in a statement about P111.4 billion of
6,080.94 - 7,552.20 Bloomberg
the total capex for the 5th regulatory period is for
transmission projects. Foreign Exchange
Vista Land plans to exit socialized & mass housing As of April 21, 2022
Vista Land & Lifescapes Inc. plans to exit the socialized and US Dollar Philippine Peso
economic mass housing business to focus on high-end
horizontal and vertical development and take advantage of 1 52.40
increasing per capita spending of Filipinos. Chairman
Manuel Villar Jr. said the company would initially launch 44 BVAL Reference Rates
Vista Estates over the next 12 months. As of April 21, 2022
‘Online gaming to aid Solaire recovery’
Tenor Rate
Billionaire Enrique K. Razon Jr. on Thursday said the
1Y 1.866
online gaming segment of his gaming business will become a
significant revenue contributor to Bloomberry Resorts Corp. 3Y 4.277
Razon said the company started the online gaming segment 5Y 5.339
of Solaire Resorts and Casino at the height of the pandemic 7Y 5.879
in November 2020.
10Y 6.063
FedEx to expand Clark operations–DTI 20Y 5.790
The Department of Trade and Industry said that FedEx will
expand its operations in Clark City to allow it operate as a
Daily Quote
transshipment point for packages. Trade Secretary Ramon
M. Lopez said FedEx will expand its operations by “around "If you're too rigid in your thinking you may miss
five times” more than its capacity. The company’s $30m some wonderful opportunities for storytelling.“
facility in Clark opened in October 2021. -- Vince GilliganThe Daily Dispatch
MORE LOCAL NEWS
BPI profit soars by 60% to P8 billion CTA affirms PLAI’s P115.2-M refund
Ayala-led Bank of the Philippine Islands (BPI) posted a 60 The Court of Tax Appeals (CTA) affirmed the granted claim
percent jump in net income to P8 billion in the first quarter for refund of Premium Leisure and Amusement, Inc. (PLAI)
of the year from P5 billion in the same quarter last year. The of P115.2 million in erroneously paid income tax for the
country’s fourth largest lender in terms of assets said total calendar year 2015. The CTA en banc said there was no new
revenues climbed by 4.3 percent to P25.4 billion from reason given by the petitioner to reverse or modify the CTA
January to March this year First Division’s decision.
6% annual growth needed to pay pandemic debt AyalaLand Logistics to hike capital stock
The Philippine economy has to expand by more than six AyalaLand Logistics Holdings Corp. stockholders on
percent every year until 2028 to ensure that the government Thursday approved an increase in the company’s authorized
can repay the debts piled up by the Duterte administration capital stock of up to P10 billion to fund its growth plans.
during the COVID pandemic. This will be “used as funding source for the company’s
expansion projects and growth plans,” Francis M. Montojo,
CFO of the company, said.
PLDT, Smart back SIM card registration Radisson Hotel Group plans Asia-Pacific expansion
Telco giant PLDT Inc. and its wireless arm Smart Radisson Hotel Group plans to add 150 hotels in Asia-
Communications Inc. are hoping that the registration of Pacific this year as it banks on travel, tourism, and economic
SIM cards in the country will still push through after the recovery in the region, its CEO said on Thursday. Radisson,
proposed law mandating it was vetoed by President Duterte. one of the world’s largest hotel groups, is in the midst of a
five-year plan to double its properties to 3,200 hotels in 120
countries by 2025.
2nd worst hit by price shocks in emerging markets PRC to spin off horseracing business to subsidiary
The Philippines is expected to be the second worst hit Philippine Racing Club, Inc. (PRC) announced on
among emerging markets (EMs) as the Russia-Ukraine war Wednesday that it will focus on real estate development,
continues to reverberate through commodity price shocks with its horseracing business to be spun off to a wholly-
and heightened inflationary pressures. owned subsidiary. “PRC will no longer pursue the renewal
of its horseracing franchise under its own name,” the
company said in a disclosure.
Ukraine war to affect ICTSI’s operations ADB raises $4 billion from dual bond issuance
Listed port operator International Container Terminal Manila-based Asian Development Bank (ADB) has raised $4
Services, Inc. (ICTSI) said on Thursday that it expects the billion from a dual dollar bond issuance, the proceeds of
ongoing Russia-Ukraine war to have an impact on its which will form part of its ordinary capital resources. The
performance, mainly due to trade disruptions among multilateral lender priced a three-year global benchmark
countries. bond worth $3 billion, and a 10-year global benchmark bond
worth $1 billion.The Daily Dispatch
TODAY’S TOP ASIAN NEWS TODAY’S TOP GLOBAL NEWS
Halal cosmetics company raises US$55m in Series C Boring Co. raises funding at nearly US$6b valuation
BELIEVE has raised US$55 million through a Series C ELON Musk's tunnelling startup Boring Co. has raised
round led by new investor Venturi Partners, announced the US$675 million in a funding round led by Vy Capital and
consumer products company in a press statement on Sequoia Capital. The round values the startup at US$5.675
Thursday (Apr 21). billion, the company said in a press release on Wednesday
(Apr 20).
Keppel says restructuring on track Musk secures US$46.5b in funding for Twitter bid
SINGAPORE - The delay in announcing the combination ELON MUSK has secured US$46.5 billion in funding to
of Keppel Offshore & Marine (O&M) and Sembcorp buy Twitter and is considering a tender offer for its shares, a
Marine is due to the complex nature of the transaction but a filing with US regulators showed on Thursday (Apr 21).
statement will be made soon, said Keppel chief executive
Loh Chin Hua at a briefing on Thursday (April 21).
China oil giant CNOOC soars in Shanghai debut Warner Bros shutting down CNN+ streaming service
SHANGHAI (REUTERS) - China’s CNOOC saw its stock WARNER Bros Discovery is shutting down its CNN+
surge as much as 44 per cent in its Shanghai debut on streaming news service, Variety reported on Thursday (Apr
Thursday (April 21) in defiance of overall market weakness, 21), citing 2 people familiar with the matter.
as investors sought safety in the oil giant amid lofty energy
prices and quickening inflation.
Myanmar announces exemptions from forex order Goldman Sachs raises US$3.5b for real estate bets
SINGAPORE - Myanmar's junta will exempt businesses GOLDMAN Sachs Group's asset-management arm raised
operating in the country's sole special economic zone (SEZ) US$3.5 billion for its latest fund dedicated to global real
and all other approved businesses from a draconian foreign estate investments.
exchange order, a top economics official said on Thursday
(April 21).
Markel aiming to grow Asia business to S$136m Global bond rout extends with Fed hikes priced in
SINGAPORE - Global specialist insurer Markel SYDNEY (BLOOMBERG) - Global bonds added to this
Corporation is looking to grow its business in Asia from the year's epic rout as traders brace for the Federal Reserve to
current US$75 million to US$100 million (S$136 million) in raise interest rates at the most aggressive pace since 1982.
gross written premiums over the next 12 to 18 months by The policy-sensitive two-year Treasury yield climbed as
expanding its marine and renewable energy business while much as six basis points on Friday (April 22) to 2.74 per
meeting growing demand for cyber insurance. cent, the highest since late 2018You can also read
