Overheard

• "Any company that does not own and operate their own cloud has to pay margins to someone else … They're just going to be structurally disadvantaged against a company like Microsoft." — Microsoft's Kareem Choudhry thinks Azure presents a big cloud gaming advantage.
• "We've seen a slight uptick in nonperforming loans among our SME and young credit borrowers after COVID." — Ant Group CEO Simon Hu also told Bloomberg that he wants Ant to be a fintech infrastructure company.
• "The coronavirus has accelerated Russian consumers' transition to online shopping, and more of them now need quick last-mile delivery." — Yandex.Taxi head Daniil Shuleyko is repurposing taxi drivers for grocery deliveries.

The Big Story

Will the Facebook ad boycott hurt its business?

"A week ago it seemed to be a trickle, and now it seems to be a flood." That's how William Merchan, chief revenue officer of marketing intelligence platform Pathmatics, described the burgeoning Facebook boycott movement to me.

• He's right, of course. Unilever, Coca-Cola, Starbucks and Verizon have all joined the boycott in the last week, refusing to spend on Facebook (and, in some cases, other social media platforms) because of its approach to hate speech.
• That's spurred volatility in Facebook's stock price, which plunged last week before investor confidence returned over the course of this week.

Financial analysts appear to agree with investors. "[The boycott is] not going to have an impact in the medium to long term," Wedbush's Brad Gastwirth told me.

• The thinking: Big brands account for a very small percentage of Facebook's revenue (the top 100 advertisers account for 6% of its revenue, according to Pathmatics). Facebook's business is primarily driven by direct-response advertising from smaller brands, which can't afford to halt advertising.
• That seems to be Mark Zuckerberg's view, too. He's reported to have told employees that the boycott "isn't going to make that big of a difference economically," saying that "all these advertisers will be back on the platform soon enough."
• A Facebook spokesperson told me: "We invest billions of dollars each year to keep our community safe and continuously work with outside experts to review and update our policies," adding that "we know we have more work to do, and we'll continue to work … to develop even more tools, technology and policies to continue this fight."

But Zuckerberg highlighted one way in which this really could harm Facebook, according to the same Information report: "It hurts us reputationally."

• Advertising executives that I spoke to agreed. Brendan Gahan, chief social officer at ad agency Mekanism, told me that there are "ripple effects" that could affect Facebook. For one, this saga will likely "impact recruitment and retention," he said. It could also lead Facebook's stock to be perceived "like a cigarette company" in the longer term, he said, leading investors to pull back.
• Most interesting is that advertisers might use this opportunity to experiment with other platforms, like TikTok. "They might think twice about bringing … the same amount of money back" to Facebook, Gastwirth said.
• Snap, Pinterest and YouTube were mentioned to me as other potential beneficiaries. But the most likely winner "is probably Instagram," Merchan said, noting that some advertisers have been vague in their statements about whether they're pulling back from Facebook the company or Facebook the app … which is weird.

To appease advertisers, Facebook will need to make changes. Stephan Loerke, CEO of the World Federation of Advertisers, told me that brands want common standards of what constitutes harmful and violent content and a way to manage their risk across different platforms. He said the WFA's Global Alliance for Responsible Media would announce the initial steps it's taking to address that in the next couple of weeks.

• Stop Hate for Profit has its own list of demands, some of which Facebook has addressed — but most of which it hasn't.
• It's unclear whether brands care about those exact same things, though: While Loerke told me that this is a "societal safety issue," rather than just a "brand safety" issue, the things he said brands wanted were … all about brand safety.

So far, advertisers seem frustrated in Facebook's attempts to rectify things. Unless the company changes, this could snowball even more: A survey of WFA members found that a third of big brands are likely to suspend advertising as a result of all this, with a further 41% still undecided.

• At the start of the week, I thought this might all have been cleared up by Tuesday morning. But it now looks like this might continue to plague Facebook throughout the summer.

Up to Speed

• Monday: Shift said it would go public via a SPAC merger. Lululemon bought Mirror for $500 million. Uber was reported to be in talks to buy Postmates for $2.6 billion. India banned 59 Chinese apps, including TikTok. Grocery app Xingsheng Youxuan reportedly raised from Tencent at a $3 billion valuation. Edtech company Zuoyebang raised $750 million.
• Tuesday: Discord raised at a $3.5 billion valuation. Google bought North. Jamf filed for an IPO. The FCC said Huawei and ZTE were threats to national security. Prosus was reported to be in talks to buy eBay's classifieds business.
• Wednesday: Dun & Bradstreet raised $1.7 billion in its IPO. Anduril raised at a $1.9 billion valuation. VMware bought Datrium. Tesla became the world's most valuable car manufacturer. The U.K. called for a new organization to regulate Google and Facebook. TransferWise said it would offer investment products.
• Today: The EU asked companies whether Google buying Fitbit would hinder competition. Lemonade listed, having raised $319 million in its IPO. Prosus was reported to be in talks to buy Just Eat Takeaway's stake in iFood.

Diving Deeper

'I wish we were ready to go public'

Yancey Spruill knows all about IPOs: As CFO of DigitalGlobe and SendGrid, he's been through the grueling process twice. And in his current position as CEO of DigitalOcean, he's yearning to do it again.

• "I wish we were ready to go public today," he told me, saying that market turmoil provides a great opportunity to hit the markets. "In some ways, I'd rather [IPO] in a bad market because I think you get a lot more attention from investors."
• He recalled DigitalGlobe went public in the "awful market" of May 2009, saying the IPO was massively oversubscribed "because we didn't have the competition." Taking SendGrid public in 2017, he said, was trickier.

But he doesn't think every company should IPO now. It's about having a "great company that has a sustainable strategy to grow profitably," he said. Profitability is a big thing for Spruill.

• "It's a philosophy, and it sort of governs how you manage an organization," he said. "Profitability is a good lever, a focusing mechanism on putting discipline on the company and the teams to … think about prioritization." The focus it inspires, he thinks, creates a better team.
• "My history suggests you don't sacrifice the growth opportunity by constraining it earlier," Spruill said, suggesting that profitability should become a focus once a startup is above $100 million in revenue.
• And though he doesn't think a company needs to be profitable before it IPOs, he does think a path to profitability needs to be present. "I think the definite slowdown you've seen in tech IPOs over the last six quarters is related to the out-of-whack relationship between growth and profitability," he said.

DigitalOcean isn't ready to go public yet, Spruill said, partly because he only took over as CEO last year. "We've got to get the company ready," he said.

• And his advice for any CFOs also trying to get ready for an IPO? "Hire a really strong team."

Money Talks

Markus Harder, Contentful CFO

What's one thing people didn't pay enough attention to this week?

Lesbians Who Tech & Allies delivered a stellar "Virtual Pride Summit" with top-tier speakers from business, politics and the arts. Watch some of the recordings on diversity, racial justice and their intersection with technology for a fresh perspective.

What's your favorite Excel trick?

Forget sumif, sumifs, vlookup, hlookup, countif and about five to 10 other functions because this one replaces them all! My favorite function is sumproduct — the Swiss Army knife of Excel functions. Here's an example of a beautiful layout for a complex sumproduct with several conditions: =SUMPRODUCT((range1),(range2),--(range3="condition1"),--(range4="condition2"), ...)

Using a double negative (double unary) to create the conditions speeds up calculations as it converts every array in 1s and 0s. As with every good Swiss Army knife, you can do almost anything — I just haven't figured out how to open wine bottles with it yet.

Has COVID-19 been net good or bad for the tech industry?

Nothing about the COVID-19 global crisis can be called "good," but for the tech industry, particularly for enterprise software such as Contentful, that is a central element in digital transformation projects, it's a net accelerator. It has forced the world to transform rapidly to adapt to a new, digital way of doing business.

What tech stock do you have your eye on?

I follow BioNTech with a lot of interest. Its product portfolio is based on the belief that every cancer patient's tumor is unique and therefore each patient's treatment should be individualized. In collaboration with Pfizer, it was one of the first companies to develop and start human trials for a COVID-19 vaccine. BioNTech is the most recent success story of a German tech company successfully listing on Nasdaq.

What piece of financial advice should a founder ignore?

"Raise the largest amount of money possible at the highest valuation possible." If you do this, you might take pride in the moment; however, the strings attached to this money can drag down your business. Taking venture capital only makes sense if: (1) you're chasing a substantial market opportunity, (2) you have positive and/or improving gross margins, or (3) you have a market that's ripe for disruption with potential excess returns over the long run. A founder chasing a unicorn valuation will often end up with a very binary outcome — only one of which is good.