We had a great response to our “DataTrek Technology Survey”, the best turnout we’ve had since starting these regular questionnaires over a year ago. We thank all of you who took the time to complete it! Here’s a brief summary of the headline numbers and a description of the survey:
- 225 completed surveys, hosted by SurveyMonkey
- We randomized all questions where it made sense to do so
- The overwhelming majority of respondents came from DataTrek’s email list (only 6 completed surveys were from our Twitter and LinkedIn networks).
Since the survey was long (12 questions) and we have lots to say about the results, we’ll combine the usual “Markets, Data, and Disruption” format into one discussion of the results. The presentation here includes:
- An exact copy of the questions in the order they were asked
- The most popular answer bolded, if one choice clearly trumped the others
- Our comments
#1: The US House of Representatives and Department of Justice are set to open hearings/investigations into Big Tech companies like Amazon, Apple, Facebook and Google. Do you think these actions will have any material impact on how the stocks of these companies will perform in the second half of 2019? (Choose one)
- Yes: 112 (49.8%)
- No: 113 (50.2%)
Comment: given all the attention potential Tech regulation gets in the financial/business/technology press, we were surprised to see a statistical dead heat here. One camp seems to believe that near-term regulatory risk is already baked into stock prices for 2H 2019. The other does not. That’s what makes a market, as the old saying goes. But this is a remarkably balanced outlook.
#2: In your opinion, which company’s business model is MOST at risk from incremental US regulation? (Choose one)
- Facebook: 66% (148 votes)
- Google: 19% (42)
- Amazon: 8% (18)
- None are particularly vulnerable: 5% (12)
- Apple: 1% (3)
- Twitter: 1% (2)
Comment: No surprise that Facebook was the overwhelming favorite or that Google is solidly in second place given recent DOJ commentary that seemed to target both companies’ business practices. Facebook’s strategy of buying competitors (i.e. Instagram) and Google’s all-encompassing product suite are both under scrutiny. And then there is their collective stranglehold on the online advertising market to consider…
#3: In your opinion, which company’s business model is LEAST at risk from incremental US regulation? (Choose one):
- Apple: 48% (109 votes)
- Amazon: 19% (42)
- Twitter: 18% (40)
- None are safe from likely regulation: 11% (24)
- Google: 4% (9)
- Facebook: close to 0% (1)
Comment: Apple’s positioning as the “good guys” in Big Tech is working, at least according to our respondents’ views. That’s remarkable given the notional App Store monopoly for its hardware products, something the DOJ has implied they will be investigating. Amazon and Twitter came in second, separated by only 2 votes. The first seems right, but going into a US election year we were surprised to see Twitter in a tie with Amazon.
#4: Do you think it is likely that any large US Tech company will be forced to break up over the next 3-5 years? (Choose one)
- No: 49% (110 votes)
- Yes: 42% (95)
- No opinion: 9% (20)
Comment: this one was closer than we thought when we wrote the question, with a sizable minority (42%) answering “Yes”. Given the replies to Question #2, we assume respondents believe the regulators’ target(s) will be either Facebook or Google. Whether that will be good or bad for the stocks, it’s simply too early to tell. But pretty close to half our respondents think such an event is “likely”.
#5: As an investor, do you think the existing regulatory regime has helped or hurt the financial performance of Big Tech over the last 3-5 years? (Choose one)
- Helped: 62% (139 votes)
- No opinion/No Impact: 35% (79)
- Hurt: 3% (7)
Comment: we expected that respondents who answered “Helped” would be more likely to say future House/DOJ scrutiny would hurt 2H 2019 stock performance (Q1). The reality was different: they were slightly more inclined (by 7 votes) to say regulatory risk would have no impact on stock prices. The logical explanation is that this cohort believes regulatory risk is already accurately incorporated into asset prices.
#6: As a user of technology services, how concerned are you personally with maintaining the privacy/security of your data? (Choose one)
- Very concerned: 56% (125 votes)
- Somewhat concerned: 38% (86)
- Not concerned: 6% (14)
Comment: we were surprised that “very concerned” was not more popular given how much attention the issue gets just now. Perhaps there have been so many data breaches in the last few years that respondents have grown inured to the problem.
#7: How familiar are you with Europe’s GDPR regulations? (Choose one)
- Very familiar: 16% (36 votes)
- Somewhat familiar: 46% (104)
- Not so familiar: 20% (45)
- Not at all familiar: 18% (40)
Comment: right now the European Union’s General Data Protection Regulation is the strictest set of protection/privacy rules among western economies. Well over half (62%) of respondents expressed familiarity with the regulations. Several Big Tech companies including Facebook and Microsoft back US adoption of similar rules.
#8: Do you think further regulation of US technology companies will put America at a long-run disadvantage to China’s tech industry? (Choose one):
- Yes: 45% (101 votes)
- No: 46% (104)
- No opinion: 9% (20)
Comment: another close vote here, with no real consensus on the topic.Perhaps respondents who said “No” believe incremental regulation will not damage profits enough to curtail advanced R&D on initiatives like artificial intelligence/machine learning, quantum computing, autonomous vehicles or facial recognition. And, those who voted “Yes” worry that it will. We are in the latter camp, but understand the optimism of the bullish argument.
#9: In your opinion should the US and/or Europe ban Chinese companies from providing 5G hardware/services in their countries? (Choose one)
- Yes: 58% (130 votes)
- No: 26% (58)
- No Opinion: 16% (37)
Comment: the “Yes” camp here outnumbers the “No” by over 2:1, showing a fundamental mistrust of Chinese technology companies like Huawei. We were a bit surprised by the level of that response but it does show popular support (at least among the investor class) for limiting Chinese involvement in global 5G rollouts.
#10: In your opinion have the large US Tech companies become too powerful and/or unaccountable? (Choose one)
- Yes: 60% (136 votes)
- No: 33% (74)
- No Opinion: 7% (15)
Comment: here, we wanted to assess how much respondents might fundamentally agree with the need for some regulatory action against US Big Tech. By almost 2:1 (1.8x to be precise), they believe large tech companies are in fact too powerful/unaccountable. How regulators “fix” this problem remains unclear, but the response here points to a bedrock belief that there is actually a problem to address.
#11: Do you think 2020 US election politics play a role in Washington’s current scrutiny of Big Tech? (Choose one)
- Yes: 85% (191)
- No: 11% (24)
- No Opinion: 4% (10)
Comments: this question delivered the most lopsided response of the entire survey. Respondents see the current regulatory threat as at least politically motivated, with upcoming elections just over a year away. That puts a piece of the regulatory threat into the category of “political talk”. Given how far apart the 2 parties are just now, perhaps the Big Tech regulatory bark will be worse than any eventual bite.
#12: Are you personally or professionally overweight any US large cap sectors that have significant exposure to Tech Stocks? (Choose one)
- Technology (37% Microsoft/Apple): 39% (87 votes)
- Consumer Discretionary (25% Amazon): 22% (49)
- Communication Services (40% Google/Facebook): 20% (44)
- None of the above: 55% (123)
Comments: when it comes to playing technology at a sector level, respondents are favoring “Tech” over other groups with outsized single-stock weightings. Given their responses about regulatory risk at Google and Facebook, it makes sense Comm Services comes in last.
We’ll finish up with 3 takeaways that pull these questions together into a few common themes:
First, at a macro level there is no consensus among our respondents on the question of what’s next for Big Tech when it comes to incremental regulation.
- A 50% / 50% split of opinion on whether regulatory headlines will materially affect 2H 2019 stock prices (Question #1)
- A 49% / 42% split on the question of an eventual breakup of any Big Tech company (Question #4)
- A 46% / 45% split of opinion about whether regulating Big Tech may have unintended long-term geopolitical consequences (Question #8)
Second, respondents do believe there are important issues that may require regulation:
- 60% believe that large US tech companies have become too powerful/unaccountable versus 33% who do not (Question #10)
- 94% are at least “somewhat” concerned about the privacy/security of their personal data (Question #6)
- 58% believe Chinese companies should be prohibited from supplying 5G hardware/services versus 26% who do not.
Lastly, respondents believe regulatory issues are company specific:
- They believe Facebook’s business model is most at risk (66%, Question #2).
- Apple is least at risk (49%, Question #3)
Finally, thanks again to those who took our survey!