What brands can learn from the tech stock fall
As news of the sharpest fall in global tech stocks in seven years broke on Thursday morning, commentators weren’t short of potential reasons why. Leading the charge, the Financial Times summarised it as a Wall Street reaction, dumping stock over fears concerning the US-China trade war and lack of cheap money. Tech stocks led this selling frenzy.
At the time of writing there are already signs that markets are correcting and this may just be a cyclical blip. Indeed, the FT and others have pointed out that investors had been paying a premium for certain stocks, so the sell-off itself may have been part of that correction.
But equally, there could be something else going on. There were some high-profile casualties – Amazon’s stock dropped 6.2% and Netflix’s fell 8.4%. Not all of this can be put down to market jitters. Twitter and Intel both posted disappointing earnings and there are signs that the technology industry may have an image problem.
A series of recent high-profile hacks and data misuse scandals have rocked consumer confidence in technology companies. This was bound to have a knock-on effect somewhere. This coupled with the previously warned about over-valuation of certain stocks, particularly the group known as FAANG (Facebook, Amazon, Apple Netflix and Google), has created a perfect storm.
The extent to which concerns over data privacy and security have contributed to the latest fall in share prices may be debatable. These signs, however, should not be ignored. Increased public awareness of privacy and security issues after major scandals such as the Facebook/Cambridge Analytica one is not going unnoticed by shareholders and should act as a wake-up call to the industry.
Silicon Valley is notoriously resilient and while this may well be business as usual on the stock exchanges, brands can still learn the lessons from it. Companies making mistakes with data and who fail to deal with the PR fallout quickly and efficiently will be punished by their customers and shareholders. Markets may recover quickly; brands and reputations are not so easily fixed.