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Earnings

Amazon earnings: Strong sales, but costs are going up

Amazon earnings: Strong sales, but costs are going up
  • Q1 revenue: $75.5 billion (26% YoY, -14% QoQ, vs. $73.6 billion expected)
  • Q1 earnings: $2.5 billion (30% YoY, -24% QoQ, below expectations)
  • Q2 revenue guidance: $75.0 billion and $81.0 billion, in line with expectations

The big number: Amazon will spend the entire amount of operating profit it expects to record during the second quarter — at least $4 billion — "on COVID-related expenses getting products to customers and keeping employees safe," it said in a press release.

People are talking: "I think we've learned that it's easier to get ready for a Prime Day than it is to get ready for something like this, when it all hits at once," CFO Brian Olsavsky said on the earnings call.

Opportunities: Amazon has always been a company less concerned with profit than most of its peers, and the decision to invest all of its expected second-quarter operating profit into personal protective equipment, cleaner facilities, and higher wages for its retail army could buy it some goodwill. Demand for online retail should continue to be quite strong in the second quarter even if stay-at-home orders start to lift around the country.

And Amazon should be able to fulfil that demand: It hired 175,000 employees just in March and April. The company now employs 840,000 people, up 33% from last year.

On the cloud side, AWS continues to post impressive growth on a large number, recording $10.2 billion in revenue during the quarter, up 33%. Rivals Microsoft Azure and Google Cloud are growing faster, but estimates suggest their combined revenue tallies for the first quarter are well below AWS.

Threats: The second quarter might be the biggest test of Amazon's vaunted operational skills in its history.

"It's an odd quarter, because generally the biggest uncertainty we have is customer demand and what they'll order how much of it they'll order," Olsavsky said. "Demand has been strong, and the biggest questions we have in Q2 are more about our ability to service that demand with the products that people are ordering, in a full way."

On other fronts, advertising has been a greater focus for Amazon over the last few years, and it's going to be a rough few months for the advertising market. Amazon is less exposed to that problem than companies like Google or Facebook, but Olsavsky said the company did see a slowdown in advertising demand over the last few weeks of March, as well as "downward pricing pressure."

The power struggle: It will take a lot to displace Amazon from its perch atop the online retail market, but Amazon's ability to control the spread of the pandemic across its massive workforce — larger than the population of four U.S. states — will play as important a role in keeping its operations running as fancy AI algorithms or robotic distribution centers.

Amazon plans to spend $300 million procuring and administering COVID-19 tests for that workforce as part of the aforementioned $4 billion investment. Depending on how the pandemic fares over the course of the year, that effort could wind up costing the company $1 billion, according to reports. That means the company will continue to rely on AWS to generate the lion's share of its operating profit for the foreseeable future, which could give rivals an opportunity to reignite the cloud pricing wars of a few years back.

Protocol | Workplace

In Silicon Valley, it’s February 2020 all over again

"We'll reopen when it's right, but right now the world is changing too much."

Tech companies are handling the delta variant in differing ways.

Photo: alvarez/Getty Images

It's still 2021, right? Because frankly, it's starting to feel like March 2020 all over again.

Google, Apple, Uber and Lyft have now all told employees they won't have to come back to the office before October as COVID-19 case counts continue to tick back up. Facebook, Google and Uber are now requiring workers to get vaccinated before coming to the office, and Twitter — also requiring vaccines — went so far as to shut down its reopened offices on Wednesday, and put future office reopenings on hold.

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Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.

After a year and a half of living and working through a pandemic, it's no surprise that employees are sending out stress signals at record rates. According to a 2021 study by Indeed, 52% of employees today say they feel burnt out. Over half of employees report working longer hours, and a quarter say they're unable to unplug from work.

The continued swell of reported burnout is a concerning trend for employers everywhere. Not only does it harm mental health and well-being, but it can also impact absenteeism, employee retention and — between the drain on morale and high turnover — your company culture.

Crisis management is one thing, but how do you permanently lower the temperature so your teams can recover sustainably? Companies around the world are now taking larger steps to curb burnout, with industry leaders like LinkedIn, Hootsuite and Bumble shutting down their offices for a full week to allow all employees extra time off. The CEO of Okta, worried about burnout, asked all employees to email him their vacation plans in 2021.

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Stella Garber
Stella Garber is Trello's Head of Marketing. Stella has led Marketing at Trello for the last seven years from early stage startup all the way through its acquisition by Atlassian in 2017 and beyond. Stella was an early champion of remote work, having led remote teams for the last decade plus.
Protocol | China

Livestreaming ecommerce next battleground for China’s nationalists

Vendors for Nike and even Chinese brands were harassed for not donating enough to Henan.

Nationalists were trolling in the comment sections of livestream sessions selling products by Li-Ning, Adidas and other brands.

Collage: Weibo, Bilibili

The No. 1 rule of sales: Don't praise your competitor's product. Rule No. 2: When you are put to a loyalty test by nationalist trolls, forget the first rule.

While China continues to respond to the catastrophic flooding that has killed 99 and displaced 1.4 million people in the central province of Henan, a large group of trolls was busy doing something else: harassing ordinary sportswear sellers on China's livestream ecommerce platforms. Why? Because they determined that the brands being sold had donated too little, or too late, to the people impacted by floods.

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Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
Power

The video game industry is bracing for its Netflix and Spotify moment

Subscription gaming promises to upend gaming. The jury's out on whether that's a good thing.

It's not clear what might fall through the cracks if most of the biggest game studios transition away from selling individual games and instead embrace a mix of free-to-play and subscription bundling.

Image: Christopher T. Fong/Protocol

Subscription services are coming for the game industry, and the shift could shake up the largest and most lucrative entertainment sector in the world. These services started as small, closed offerings typically available on only a handful of hardware platforms. Now, they're expanding to mobile phones and smart TVs, and promising to radically change the economics of how games are funded, developed and distributed.

Of the biggest companies in gaming today, Amazon, Apple, Electronic Arts, Google, Microsoft, Nintendo, Nvidia, Sony and Ubisoft all operate some form of game subscription. Far and away the most ambitious of them is Microsoft's Xbox Game Pass, featuring more than 100 games for $9.99 a month and including even brand-new titles the day they release. As of January, Game Pass had more than 18 million subscribers, and Microsoft's aggressive investment in a subscription future has become a catalyst for an industrywide reckoning on the likelihood and viability of such a model becoming standard.

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Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.
Protocol | Policy

Lina Khan wants to hear from you

The new FTC chair is trying to get herself, and the sometimes timid tech-regulating agency she oversees, up to speed while she still can.

Lina Khan is trying to push the FTC to corral tech companies

Photo: Graeme Jennings/AFP via Getty Images

"When you're in D.C., it's very easy to lose connection with the very real issues that people are facing," said Lina Khan, the FTC's new chair.

Khan made her debut as chair before the press on Wednesday, showing up to a media event carrying an old maroon book from the agency's library and calling herself a "huge nerd" on FTC history. She launched into explaining how much she enjoys the open commission meetings she's pioneered since taking over in June. That's especially true of the marathon public comment sessions that have wrapped up each of the two meetings so far.

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Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

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