Alphabet’s growth slowed in Q1, but search remains the premier advertising product: protected against privacy changes, and poised to grow on a return to travel.
Investors focused on YouTube’s disappointing growth. Its exposure to brand advertising has slowed it relative to search, and it now has to compete with an increasingly formidable TikTok. User subscriptions could be a hidden strength.
The US remains the core of Alphabet’s business as uncertainty and energy price jumps hit Europe.
TalkTalk is reportedly for sale, with Vodafone and Sky the obvious potential buyers, and a fairly aggressive price requested.
TalkTalk would bring synergies and enhanced market position to either Vodafone or Sky, but also integration and other issues.
Consolidation may bring a degree of market calming, although the more major battles would remain between the infrastructure-based players BT/Openreach, VMO2, and the altnets.
The UK government is on the cusp of introducing legislation that will force online platforms to monitor and mitigate the presence and spread of harmful and illegal content, in a regulatory first for big tech.
Affected companies should take note: they will need to prepare for a higher level of transparency and communication with regulators, and larger service providers will require expanded moderation, user verification and research capabilities.
Users should be protected as platforms balance complex competing duties. News publisher content has a carveout, but publishers may experience butterfly effects as the online environment is reshaped.
Amazon has capitalised on the pandemic’s boost to ecommerce, reporting 67% global revenue growth from 2019 to 2021. While Shopify’s impressive trebling of B2B revenues was from a lower base, at 44% of Amazon’s Marketplace it is closing the (still huge) gap
Shopify appeals to brands around the world, leveraging the open internet to establish a direct-to-consumer (D2C) business, undermining Amazon’s position as the B2B ecommerce one-stop-shop in 17 markets
Shopify is not a direct platform competitor to Amazon, which boasts a captive audience of Prime members and fulfilment. Shopify’s expansion to fulfilment in North America is the first threat to Amazon’s grip
Market revenue growth accelerated to just under 2% in Q4, with broadband growth holding up despite the ending of most pandemic restrictions.
Backbook pricing pressure should continue to retreat in 2022, and ultrafast speed premia should also bolster ARPU as FTTP roll-outs accelerate.
The price increases due in April will further support growth, with BT in particular to benefit, and all will have to be wary of customer backlash.
VMO2 finished 2021 with muted revenue and EBITDA growth, but stronger subscriber progress, with underlying ARPUs a touch weak but not totally out-of-line with industry trends.
The company has a (justifiably) high level of confidence that this can be turned around in 2022, with a significant boost from price rises, the waning of some temporary effects and backed up by solid subscriber dynamics.
Expecting to not be impacted at all by Openreach’s FTTP roll-out into its current and prospective footprint would however be too confident, and for this reason we remain sceptical of VMO2’s accelerated roll-out ambitions.
TikTok has reached a billion users worldwide just four years after its global launch, much quicker than social media rivals, though its ban in India is a drag on growth.
TikTok’s popularity with under-25s has contributed to a hollowing-out of Meta’s active userbase. During the pandemic, TikTok also expanded its reach among older demographics, cementing its position within the mainstream and posing a further threat to Meta.
TikTok could earn twice as much revenue as Snap in 2022, making it the first app to break out of the mid-league in years, with a huge runway for growth backed up by ByteDance’s remarkable success in China.
Sky’s performance across 2021 significantly improved, driven in Q4 by a nice c.5% growth rate in UK consumer revenues and the advertising rebound, but effects of the pandemic are still being felt with EBITDA down 30% on 2019.
The decline in Group revenue accelerated in Q4 due to the severe shock to the Italian operation from its loss of most premium football coverage, although we see upsides in a possible rights reshuffle.
In 2022, Sky can leverage growth vectors including bigger content bundles, Glass, advertising innovations and broadband. Consolidating SVOD and telecoms markets may be more favourable to price increases.
BT had a solid Q3, with some mixed results but key metrics all improving, and a (perhaps unsurprisingly) slow post-lockdown recovery the only negative.
The price increase in April should drive dramatic (for BT) revenue and EBITDA acceleration at Consumer, Openreach and BT as a whole, and easily cover pressures within BT’s own cost base.
Longer-term growth is dependent on FTTP performance, which continues to look promising with improving metrics across the board in the quarter, and no news is good news in terms of ISPs signing with competitor networks.
Alphabet's stunning growth reflects a shift online that has outlasted pandemic restrictions. Google search is at the heart of online commercial activity
YouTube's slower growth is not yet cause for concern: it is still the biggest website in the world, with growth potential through subscriptions and transactable ads, as well as more brand spend
Alphabet might struggle to balance privacy concerns in the context of the online advertising ecosystem. The future of personalisation in ads is uncertain as Alphabet cancels one of its cookie-replacement technologies