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Power

Cloud computing was a bright spot during the worst quarter in US history

Cloud providers weren't immune from the larger economic pressures that loom over 2020, but they've weathered the storm and are well-positioned for a recovery.

Data center

Assuming you can see past the current state of the U.S. economy, there is one prominent signal that the big cloud vendors still very much believe in the long-term growth potential of the cloud: capital expenditures.

Photo: Manuel Geissinger/Pexels

In what's now been declared the worst economic quarter in modern U.S. history, the worst thing you can say about the performance of the cloud computing giants is that revenue growth slowed a tad.

After Microsoft reported strong but slowing growth for its Azure infrastructure service last week, Amazon and Google weighed in Thursday afternoon with similar earnings results that indicate cloud computing continues to mature, as multiyear contracts become the norm and cloud latecomers start to dip their toes. It has been 14 years since AWS unveiled its first cloud services, and that business is now on a pace to generate $43 billion in revenue a year, Amazon CFO Brian Olsavsky said on the company's earnings call.

Sure, AWS revenue growth slowed to 29% year-over-year, but AWS still generated $10.8 billion in revenue. For its part, Google Cloud reported a 43% jump in revenue during the quarter, which was slower than the 52% revenue growth recorded for that segment during the first quarter.

On the company's conference call, Alphabet CFO Ruth Porat attributed Google Cloud's slower overall growth to a tough comparison against last year, when Google increased prices for G Suite customers. But she also said that revenue from Google Cloud Platform, the most AWS-comparable line item in the overall Google Cloud bucket, increased at a pace "meaningfully above" the overall number.

These are strange times to be doing business, and Amazon's Olsavsky acknowledged that its customers have different feelings about the current situation.

Companies in industries that are disproportionately affected by the pandemic — like travel — are thinking in the short term and are obsessed with reducing any costs associated with doing business this year, while other companies see the cloud as a lifeline. "One of the best ways to save money is to use the cloud," Olsavsky said, which ignores some short-term switching costs but is generally true in the long run.

Assuming you can see past the current state of the U.S. economy, there is one prominent signal that the big cloud vendors still very much believe in the long-term growth potential of the cloud: capital expenditures.

Amazon's investments are a little hard to gauge because the company spends so much on the fulfillment centers required to deliver same-day toilet paper supplies, but it more than doubled investments in property and equipment during the second quarter. A significant portion of that investment is required to maintain service levels for AWS, as well as to plan for future growth.

Google spent far less on capital expenditures in the second quarter of 2020 compared to last year, but Porat said it spent roughly the same amount of money on servers, delaying the expansion of new offices after announcing earlier this week that employees will be allowed to work from home until the middle of 2021. It will also delay the construction of new data centers thanks to improved server utilization efficiency, she said.

Capital expenditures are an imperfect metric for cloud computing competitiveness, but they are also a competitive moat. Simply put, operating a world-class cloud infrastructure service in 2020 is an expensive undertaking, and any money cloud providers can save on building expenditures for open-floor plan offices amid a pandemic can be redirected toward revenue-generating infrastructure.

That means that whatever short-term concerns continue to make the lives of cloud salespeople more challenging, all three of the big U.S. cloud providers continue to look to the future. A sizable amount of workloads remain locked up in old-school data centers, and there's still little incentive for startups to grow their businesses on anything other than cloud services.

People

Making the economy work for Black entrepreneurs

Funding for Black-owned startups needs to grow. That's just the start.

"There is no quick fix to close the racial wealth and opportunity gaps, but there are many ways companies can help," said Mastercard's Michael Froman.

Photo: DigitalVision/Getty Images

Michael Froman is the vice chairman and president of Strategic Growth for Mastercard.

When Tanya Van Court's daughter shared her 9th birthday wish list — a bike and an investment account — Tanya had a moment of inspiration. She wondered whether helping more kids get excited about saving for goals and learning simple financial principles could help them build a pathway to financial security. With a goal of reaching every kid in America, she founded Goalsetter, a savings and financial literacy app for kids. Last month, Tanya brought in backers including NBA stars Kevin Durant and Chris Paul, raising $3.9 million in seed funding.

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Michael Froman
Michael Froman serves as vice chairman and president, Strategic Growth for Mastercard. He and his team drive inclusive growth efforts and partner across public and private sectors to address major societal and economic issues. From 2013 to 2017, Mike served as the U.S. trade representative, President Barack Obama’s principal adviser and negotiator on international trade and investment issues. He is a distinguished fellow of the Council on Foreign Relations and a member of the board of directors of The Walt Disney Company.
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Building better relationships in the age of all-remote work

How Stripe, Xero and ModSquad work with external partners and customers in Slack channels to build stronger, lasting relationships.

Image: Original by Damian Zaleski

Every business leader knows you can learn the most about your customers and partners by meeting them face-to-face. But in the wake of Covid-19, the kinds of conversations that were taking place over coffee, meals and in company halls are now relegated to video conferences—which can be less effective for nurturing relationships—and email.

Email inboxes, with hard-to-search threads and siloed messages, not only slow down communication but are also an easy target for scammers. Earlier this year, Google reported more than 18 million daily malware and phishing emails related to Covid-19 scams in just one week and more than 240 million daily spam messages.

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Power

Cord cutting in 2020: Pay TV industry lost 5.5 million subscribers

Subscriber defections slowed toward the end of the year, but there's no end to cord cutting in sight.

The pay TV industry is undergoing a bit of a power shift.

Photo: Nicolas J Leclercq/Unsplash

The five biggest pay TV providers lost a combined 5.5 million subscribers in 2020, narrowly staying below the 5.8 million subscribers the companies collectively lost in 2019. Subscriber losses slowed a bit toward the end of the year, but pandemic-related cutbacks still hit the industry hard — and may have led to hundreds of thousands additional cancellations if not for industry-wide billing relief efforts.

The industry is undergoing a bit of a power shift, with pay TV subscribers switching from traditional operators like Comcast and AT&T to tech companies like Google and Hulu and their respective pay TV services. However, a closer look at pay TV trends suggests that these gains may be temporary, as so-called skinny bundles fall out of favor with consumers once operators are forced to increase their price tags to make up for ever-increasing network licensing costs.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Transforming 2021

Blockchain, QR codes and your phone: the race to build vaccine passports

Digital verification systems could give people the freedom to work and travel. Here's how they could actually happen.

One day, you might not need to carry that physical passport around, either.

Photo: CommonPass

There will come a time, hopefully in the near future, when you'll feel comfortable getting on a plane again. You might even stop at the lounge at the airport, head to the regional office when you land and maybe even see a concert that evening. This seemingly distant reality will depend upon vaccine rollouts continuing on schedule, an open-sourced digital verification system and, amazingly, the blockchain.

Several countries around the world have begun to prepare for what comes after vaccinations. Swaths of the population will be vaccinated before others, but that hasn't stopped industries decimated by the pandemic from pioneering ways to get some people back to work and play. One of the most promising efforts is the idea of a "vaccine passport," which would allow individuals to show proof that they've been vaccinated against COVID-19 in a way that could be verified by businesses to allow them to travel, work or relax in public without a great fear of spreading the virus.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

People

Google vows to do better on DEI and firings. Timnit Gebru is not impressed.

Google AI lead Jeff Dean said Google had concluded its investigation into Timnit Gebru's dismissal in an email to employees Friday.

Google has ended its investigation into the dismissal of prominent AI ethicist Timnit Gebru.

Photo: John Nacion/Getty Images

Google has concluded its investigation into the firing of prominent AI ethics researcher Timnit Gebru, and it announced some changes to its hiring, firing and research policies in an email from AI leader Jeff Dean to employees Friday.

While Dean did not share the results of the investigation into the circumstances surrounding Gebru's dismissal, he said that the company would enact new policies to "review employee exits that are sensitive in nature." His email, which was obtained by Protocol, said the company will also begin linking performance reviews for vice presidents and above, in part regarding diversity and inclusion goals, and it will report DEI goals and progress to the Alphabet board of directors in quarterly reviews.

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Anna Kramer

Anna Kramer is a reporter at Protocol (@ anna_c_kramer), where she helps write and produce Source Code, Protocol's daily newsletter. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

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