Settled on exponential growth, the kings of the internet don’t take blows well. In what could be a historic week, Amazon, Netflix y Spotify have reported, for the first time since they reached the category of leaders in their respective sectors, a slowdown in their growth.
The incipient inflation worldwide as a result of the invasion of Ukraine by Russia and the return to normality of consumers after the confinements of the pandemic have deflated a bubble that, without being punctured, is beginning to stabilize. The question now is how the markets will react in the medium and long term; if they will bet that this is a conjunctural bump or if you think that these platforms have started to touch ceiling.
For the moment, the setback of this first quarter of 2022 has not been well received. And that even in all cases there has been a loss of business volume. This is the case, for example, of Amazon, which on Thursday saw how its shares fell 11.9% on Wall Street after the first negative quarterly close since 2015. But why is the world’s largest market losing money?
Amazon, which is calculated to be worth €1.4 trillion, increased its sales by 7% in the quarter to March 31 of this year, and, even so, recorded net losses of 3.6 million euros in that period compared to profits of 7.6 million in the same quarter of the previous year. The numbers in red, however, do not only have to do with their activity, but also with their failed investment in Rivian Automotivethe electric vehicle company with which he hoped to revolutionize its distribution.
In any case, the consequences of the war and the rising cost of Energy have caused production and distribution costs to rise as well, which has reduced profits. Andy Jassyexecutive director of the company founded by Jeff Bezos, pointed out after the publication of the data that Amazon had had to deal during this time with “unusual growth and certain challenges”, that is, with the inflation derived from the invasion of Ukraine and the return to normality after the pandemic.
Seeing the crisis coming, Amazon decided a few months ago to raise the price of the subscription to Prime, its ‘premium’ service, in the United States, a movement that, however, what it did was transmit more unsafety to the markets. Something similar has happened to Netflix. The streaming giant announced last week that in this first quarter of 2022 it had lost subscribers for the first time in the last decade, which caused its shares to fall by 35%.
The balance of 200,000 fewer users on the platform is not so alarming if you take into account that they expect to lose 2 million more for the next three months. The data, which triggered all the alarms in the American company, caused Netflix to consider introducing advertising, reducing investment in marketing and its own productions and getting new subscriptions from those who already use its platform. In other words, the company’s idea seems to be to put an end to shared accounts and thus generate new accounts.
Is the model sold out?
The question that Netflix’s crash has left the company out of the company, however, has not been, what is the best way to win more subscriptions again, but if the model has exhausted its ability to grow exponentially, since the end of confinements of the pandemic makes it very difficult to maintain the same rhythm than in 2020 and 2021.
A question that, logically, all technology companies want to avoid. This is the case of Spotify, which, after registering this week a 12.6% drop of its shares and seeing how between February 2021 and February 2022 the price of its shares was divided in half, he assured his investors that his case was “completely different” from that of Netflix. However, like the video streaming giant and Amazon, one of the things that has happened to the music flagship is that it has had to lower its growth expectations for the coming months.
All this despite the fact that in the first quarter they broke a personal record reaching 422 million active users, that is, 19% more than one year for another. Some slightly inflated figures, yes, due to an error admitted by themselves that would have made them have around 3 million more users each month.
Between now and the end of next quarter, Spotify, which has 82 million songs, 4 million podcasts and a presence in 183 markets around the world, expects to grow to just 428 million active users, including both subscription and those who pay for access by listening to advertising.