TIMT 2019: Speed, Impact & Transformation

In his keynote session, Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, Makan Delrahim, stressed the virtue of capitalism which, if freely practiced, should be comfortable with the concept of an antitrust process.

“It’s the market who decides whose product is better or worse,” he argues. “Big is not bad. But big behaving badly is bad.

“You could have a beef with capitalism – but that’s a different story. If you believe in capitalism then antitrust should be an acceptable process.”

Makan Delrahim sees the growth of 5G as a healthy game changer for B2C firms looking to disrupt and maximize both customer choice and access.

Broadband, he says, currently limits users to one of two choices. “Once we see what T-Mobile, Verizon and AT&T can do [through 5G], this will have huge competitive impact for the market, and will open it up.”

Nick Stevenson, RBC’s Global Head of Communications, agrees. “5G is incredibly important for our country and the world, which is a significant step-change from 4G. It is defined by the amount of latency within the network which allows for many current use cases.”

But Stevenson thinks the exciting potential lies in future use cases such as autonomous cars, AR and e-health, which will all take advantage of this minimal latency once it gets as low as 2 milliseconds.

He does however caution that the advent of 5G is urban-only in the short term. Across the U.S., it will take time yet for the big players to invest in the significant infrastructure needed for true coverage – not least too for those innovators who are yet to dominate 5G’s applications such as AR and autonomous vehicles.

The ad spend trend still favors these two mammoth industry players – Facebook for its social reach and Google for its dominance in paid search. A key driver of the duopoly’s success lies in their ownership of the search and social formats that are perceived to be the most effective by both large and small advertisers.

Beyond major brands, the accessibility of Google and Facebook’s ad-buying tools attracts smaller enterprises, creating a competitive advantage which has been core to revenue growth as ad landscape becomes more competitive and more complicated.

The lack of legacy infrastructure has long positioned Asia at an advantage in expanding its digital ecosystem to leapfrog innovation in the west. So it is that China’s BATs – Baidu, Alibaba and Tencent – have been rapidly able to create single, integrated social platforms that carry messaging, chat, e-commerce and banking under single platforms enjoyed by huge audiences.

Alibaba’s fintech spin-out, Ant Financial, now tops the world’s league table for valuation, having captured a massive 51% of the Chinese market for internet payments¹. In comparison, the FAANGS have been more siloed – even slow – in comparison to dominate the market.

How do the FAANGS respond? The answer, say analysts, lies in pushing success across existing digital players in the west.

While paid search is still fundamental to driving purchase, the value of deeper, informative branded content spells an opportunity to diverge from the transactional and build a more loyal and informed customer.

Murphy Clark of Red Ventures explained how traditional marketplaces were “more about the Craigslist or the eBay, putting all the [product] in front of consumers and allowing them to make all the decisions.”

“Now, it’s not just about providing a top ten products list, but providing rich data and information.”

Mark Mahaney, RBC’s Lead Internet Research Analyst, took a whistle-stop tour of 2020’s ten most likely tech trends, with streaming representing the biggest development thanks to improved technologies.

Growth in entertainment giants such as Netflix is being matched by a host of newer rivals – 270 video streaming companies are currently active in the market according to the New York Times.

The rise, too online gaming – highlighted by Google Stadia’s launch – underlines this surge in interest across the consumer entertainment sector.

Mahaney also remarked on some significant profitability inflection points the sector will likely see within the next two years – most notable examples demonstrating this healthy market sentiment include Pinterest, Uber and Lyft. Uber itself has been mooted as worthy of inclusion in the select FAANG club of companies.

The Future of Work panel explored the fundamental shift in attitude now happening among those seeking work, and companies designing their process and environment around employees.

On the hiring side, Kathryn Minshew of career development platform The Muse, argued that the balance of power has swung from employer to candidates who care deeply about where they want to work.

The Venture Capital Panel featured key leaders in the space from SoftBank Vision Fund, Greenoaks Capital, and Andreesen Horowitz.

Co-moderator Chip Wadsworth, Managing Director at RBC Capital Markets, noted with the panel how some of the most recent IPOs have not performed as expected: “Many people point back to the private market as a place that has some inflated market valuation levels, and is feeding negatively into the public market.”

The panel also agreed that analysts risk slipping behind the curve if they don’t focus on the Internet at least as much as their verticals. Both the housing market and restaurants are stand-out examples of the changing dynamics of tech – they are driven by the mobile Internet, rationalizing the buying and selling process and cutting out the middle man.

Defining edge computing is a fluid concept as it depends on the activity each tech business ascribes to it, according to Richard Hooper, RBC’s Managing Director for Infrastructure & Computing Investment Banking.

Cloud providers will treat it as part of cloud-based services, he says, while networking firms will apply it to switches and routers – and those on the application side are chiefly concerned about data and where it is being generated.

Edge is many things to many people whether the activity is in applications, middleware, infrastructure or security, adds Hooper. But one clear trend is that business models will all need to change to allow new players – such as from IoT – to enter the market.

Shweta Khajura, RBC Internet Analyst, echoes this point, noting the new arrival of consumer hardware and wearables such as Google’s newly-acquired Fitbit and Amazon’s range of smart products. This will be next year’s big talking point, she predicts.

While the picture might vary somewhat across the globe, there is no doubting software’s growth and continued dominance in the sector, argues RBC’s Matt Hedberg, Managing Director, Software Research.

The rate and pace of innovation, he says, is encouraging. “There have been a lot of questions about the macro and demand environment on a global basis, but the U.S. market is pretty robust.”

Looking forward, security is the watchword in the software space. Personal identity, cloud and email security and digitization’s success all rely on vendors who will be providing appropriate services in safety and security.

Verticals in the TIMT sector are converging rapidly… even overlapping, says RBC’s Sasson Darwish, Managing Director of Technology Investment Banking and Head of IoT Coverage. This triggers a variety of new opportunities and threats in the process.

RBC’s Convergence Lab, he adds, is a response to this fluid environment where the principal themes underlying convergence – whether in retail and media or healthcare and technology – are useful catalysts for M&A, partnership or investment ideas.

Connected cities exemplify these opportunities well, but Darwish cautions against the assumption that it’s an overnight phenomenon. Budgets to invest in this kind of future, he says, are going to have to be sourced from PPP arrangements and other outside investment, spanning everything from logistics to buildings, water, energy and transportation.

¹ Source: Investopedia