Can Millennials be considered a disruptive force?

Social distancing is impacting the consumption of technology services and accelerating the transition towards a more digitally connected society. For example, Zoom has quickly become a leading business application, rising from 100Million to 300Million daily active users during the month of April, and seeing 1Q20 revenues increasing 78% vs. the previous quarter.

Such a technological revolution is also experiencing a stronger, longer-term tailwind from changing demographics: today Millennials represent the largest generation cohort ever, and they are entering their prime years of professional activity. Together with the younger “generation Z”, Millennials can be considered as a truly “digital native” generation with clearly different consumption habits than previous generations.

Millennials' consumption preferences are a disruptive force that can change the investment opportunity landscape at a speed never witnessed before. For example, last year the videogame “Call of Duty” racked up 100 million downloads in just one week, becoming the largest mobile game launch in history from a player base standpoint.

The unprecedented pace of technological change is also leading to new community formations in a matter of weeks, if not days: the video-sharing app TikTok was downloaded 315 million times in the first three months of 2020, registering the highest number of downloads for any app in the same period.

The media landscape is also being disrupted by the new generations’ consumption habits. A sample of this transformation was given in 2019 when an “in-game” concert within videogame Fortnite Battle Royale registered an estimated 10 million viewers and merchandise sales estimated at $30Million.

This paradigm change in consumer behavior will continue to gain momentum even post-Coronavirus crisis. As new user habits grow secularly, and businesses start being receptive of such changes, we will find ourselves at the early stages of a multi-year evolution in user mobility and connectivity, which will generate outstanding long and short investment opportunities.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.  It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.

Investment Opportunities From Digitalization

To overcome the short-term impact of an economic recession, which historically has been just a temporary disruption, investors should focus on the attractiveness of investment opportunities arising from the current environment to achieve superior long-term performance. In today’s world, digital infrastructures and smart work arrangements are becoming vital for companies that want to operate efficiently amid the global shutdown. The current trend has the potential to reinforce the long-term paradigm shift towards digital services such as Cloud solutions, data storage and data processing.

Bloomberg- The Cloud service market size currently estimated at $264.8billion is projected to reach $927.51billion by 2027, rising at a CAGR of 16.4% between 2020 and 2027. Meanwhile, spending on Cloud computing reached a record high in Q4 2019 globally compared to the same period in 2018, with few established Companies dominating the worldwide market: Amazon’s AWS, Microsoft’s Azure, Alphabet’s Google Cloud, IBM Cloud and Alibaba.

E-commerce giant Alibaba recently announced the plan to invest $28billion (200billion yuan) over the next three years to reinforce its position in the Chinese Cloud market. According to Reuters, Alibaba already controls 46.4% of the Chinese Cloud market share. The Cloud division has become one of Alibaba’s fastest growing initiatives: revenue in 2020 rose 62% to 10.7billion yuan ($1.54billion) from the last quarter 2019.

It is interesting to note that despite none of these companies were born as a Cloud company service, they are now positioning themselves to benefit from the unprecedented opportunities provided by the digitalization of business services within all productive sectors. As the digitalization process continues across sectors, the Cloud business can become a major long-term growth driver for Companies which are able to secure a competitive advantage and build barriers to entry. A selective, active investment strategy can be the most appropriate way to benefit from such a long-term investment opportunity.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.  It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.