It appears that government support and near-monopolies aren’t going to be enough to keep some of the tech giants afloat when the economy collapses:
Amazon is burning billions on Alexa because voice assistants need massive infrastructure but can’t be monetized. Google Cloud is $700 million in the red as of last earnings and heading south to a state of madness like a New Jersey retiree. These are mature products in saturated markets. You don’t need an MBA to know what will happen. But even the dean of Harvard Business School can’t say when.
The big confounding factor is reputation. Take Alexa, which, as has been noted, is overwhelmingly used for a few simple tasks: playing music, setting timers, doing quick queries, switching lights. Shopping and advertising? Not so much. The issue for Amazon over those few popular use cases is that they are very popular. For some demographics among the elderly and disabled they’re now part of their daily life. Millions more are habituated, with Alexa just being quietly useful when hands are full or pulling up a calculator app is just too much hassle.
Amazon’s model was to sell the hardware at or below cost and make the revenue from content and services. It’s a perfectly good model, if those services and content are as engaging as video games, or user data can be folded into ad targeting. None of this is true for Alexa, and it never will be. But if Amazon cuts and runs, hundreds of millions of users have had an intimate part of their life ripped out. One, furthermore, they considered paid for when they bought the gadget in the first place. How badly does Amazon want not to do that? It costs billions. It can’t keep paying. But it can’t just let it go.
Google is in an even worse position, not from the amount of red ink currently bleeding from its Cloud division, but because of its room to manoeuver is far less. There are around 4 billion email accounts in the world, and around 1.8 billion of those are Gmail. When you run a service for that many users, they run you.
Amazon is also getting absolutely hammered by the increase in transportation costs. Given that its core business runs on very thin margins, there is no way it’s not running in the red now. While both companies are being propped up by the US federal government, it’s doubtful that this support will continue once WWIII begins to seriously draw down the resources available to the government.