Consumer Behavior Trends and Inflation Data Analysis, Google's Data Loss and SEO Algorithm Leaks

[00:00:02] It's Monday, June 3rd, 2024, and I'm Dave Sobel.

[00:00:05] Three things to know today.

[00:00:07] Consumer behavior and inflation trends,

[00:00:09] the U.S. and Eurozone inflation data,

[00:00:11] and corporate pricing pressures.

[00:00:14] Google's data loss and SEO algorithm leaks,

[00:00:17] what IT providers and small businesses need to know,

[00:00:20] and some significant channel moves.

[00:00:23] Microsoft and VMware team up,

[00:00:24] Red Hat rebrands their partner program,

[00:00:26] and Tech Data acquires OrcaTech.

[00:00:30] This is the Business of Tech.

[00:00:32] Hope everyone had a lovely weekend,

[00:00:34] and as we face a new week, there's some new data to review.

[00:00:38] Inflation in the U.S. showed a slight deceleration in April,

[00:00:41] suggesting a potential gradual cool-down.

[00:00:44] The Personal Consumption Expenditures Price Index

[00:00:48] indicated a decreased core inflation

[00:00:50] and a modest rise in consumer spending.

[00:00:53] However, core inflation is still running

[00:00:55] at a 4.1% annualized pace

[00:00:58] above the Federal Reserve's 2% target.

[00:01:01] The data also revealed decreased consumer spending,

[00:01:04] particularly on goods like vehicles,

[00:01:07] and a decline in real disposable incomes.

[00:01:10] Inflation in the Eurozone saw a surprising increase in May,

[00:01:14] rising to 2.6% from 2.4% in April,

[00:01:18] making the first uptick this year.

[00:01:20] Core inflation, excluding food and energy,

[00:01:23] also rose to 2.9% from 2.7%,

[00:01:27] potentially creating a dilemma

[00:01:29] for the European Central Bank.

[00:01:32] The trend of companies losing their ability

[00:01:34] to raise prices without impacting demand

[00:01:37] is becoming apparent.

[00:01:39] It's supported by anecdotal evidence

[00:01:41] from corporate earnings calls

[00:01:42] and the Federal Reserve's Beige Book observations.

[00:01:47] In recent months, these reports have become widespread

[00:01:49] and aligned with indicators showing

[00:01:51] an increasing number of households

[00:01:53] falling behind on credit card and auto loan payments.

[00:01:57] This trend is occurring as pandemic-era savings

[00:02:00] are increasingly depleted

[00:02:02] and nominal wage gains have receded

[00:02:04] from their highs in 2022.

[00:02:06] The Beige Book, which contains

[00:02:08] business economic observations,

[00:02:10] showed that eight of the 12 Fed regions

[00:02:13] reported anecdotes of a more price-conscious consumer.

[00:02:17] Retailers in areas served by the San Francisco Fed

[00:02:19] have reported a limited ability

[00:02:21] to pass higher costs onto consumers.

[00:02:25] And sentiment is divided.

[00:02:27] Despite 72% of Americans

[00:02:29] reporting personal financial well-being,

[00:02:32] only 22% rate the national economy as excellent or good.

[00:02:37] This gap has nearly doubled since 2019.

[00:02:40] Historically, negative consumer sentiment

[00:02:43] correlated with economic slowdowns,

[00:02:45] but currently, the negative perception

[00:02:48] doesn't align with positive economic data

[00:02:50] as people continue to spend.

[00:02:52] However, this discrepancy could indicate a vulnerability

[00:02:56] as a sudden economic downturn

[00:02:58] could trigger widespread pessimism

[00:03:00] and impact consumer spending.

[00:03:03] Amidst all this, VentureBeat is reporting

[00:03:05] how the B2B SaaS industry

[00:03:07] is experiencing disappointing earnings

[00:03:09] with many companies reducing guidance

[00:03:12] or failing to meet investor expectations.

[00:03:15] There is speculation that large language models

[00:03:17] could disrupt the software ecosystem,

[00:03:20] potentially rendering traditional SaaS models obsolete.

[00:03:23] However, the difficulty of fully automating tasks

[00:03:26] and the limitations of LLM

[00:03:27] suggests this shift may be far-fetched.

[00:03:30] The decline in B2B SaaS revenues and earnings growth

[00:03:33] could be attributed to overhiring during COVID

[00:03:36] and increased scrutiny on costs.

[00:03:39] Why do we care?

[00:03:41] So the discrepancy between personal consumption

[00:03:44] and core inflation means that while inflation is cooling,

[00:03:47] it's not happening fast enough to provide immediate release.

[00:03:50] The decreased consumer spending,

[00:03:53] particularly on goods like vehicles

[00:03:54] and the decline in real disposal incomes

[00:03:56] highlights a cautious consumer base.

[00:03:59] We care because of the impact on our customers,

[00:04:03] mainly if they serve consumers directly.

[00:04:07] We should also note that consumers,

[00:04:08] and thus also likely small business customers,

[00:04:11] are indicating a shift in consumer behavior

[00:04:13] toward greater price sensitivity.

[00:04:15] This trend is further corroborated

[00:04:17] by increasing household delinquencies

[00:04:19] on credit card and auto loan payments.

[00:04:21] And it suggests financial strain among consumers

[00:04:24] as pandemic savings dwindle and wage growth slows.

[00:04:27] So watch your price increases.

[00:04:30] Finally, let's note that the company's venture beat

[00:04:33] is talking about includes Salesforce, Asana,

[00:04:36] Atlassian, Datadog, Snowflake, Twilio, and Workday,

[00:04:40] which would all be critical products

[00:04:42] in the productivity layer.

[00:04:44] And that's why we care.

[00:04:48] And two pieces of notable Google news.

[00:04:51] Google accidentally erased a customer's account

[00:04:53] and data backups, causing a two-week disruption

[00:04:56] for Australian pension fund, Unisuper.

[00:04:59] A misconfiguration caused the incident

[00:05:02] during the provisioning of Unisuper's private cloud services,

[00:05:05] which resulted in the account being marked

[00:05:07] for automatic deletion.

[00:05:09] Google has detailed the issue

[00:05:10] and implemented remediation steps

[00:05:12] to prevent it from happening again,

[00:05:14] emphasizing that it was an isolated incident

[00:05:16] with no systemic risks for other customers.

[00:05:19] Unisuper was able to recover its data using backups

[00:05:23] from a different provider.

[00:05:25] Google has confirmed the authenticity

[00:05:28] of leaked internal documents that reveal details

[00:05:30] about the data it collects and its search ranking algorithm.

[00:05:34] The documents provide insight into the factors

[00:05:36] that influence search results,

[00:05:38] but also highlight the complexity

[00:05:39] and potential outdatedness of the information.

[00:05:42] The documents mentioned features like good clicks,

[00:05:45] bad clicks, and last longest clicks,

[00:05:48] tied to nav boost and glue.

[00:05:51] They also suggest that Google uses Chrome browser

[00:05:54] click streams to power search results

[00:05:56] and employees allow lists in travel COVID politics.

[00:06:01] The key takeaways include the importance

[00:06:03] of building a strong brand,

[00:06:05] the potential devaluation of expertise and trustworthiness,

[00:06:08] the significance of user intent and navigation patterns,

[00:06:11] the diminishing importance of classic ranking factors,

[00:06:14] and the challenges small businesses face in SEO.

[00:06:19] Why do we care?

[00:06:21] While not a common case,

[00:06:22] the Unisuper case highlights the need

[00:06:24] for robust backup and disaster recovery strategies.

[00:06:27] Providers should ensure clients

[00:06:29] have multiple independent backup solutions

[00:06:31] and regularly test data recovery procedures.

[00:06:34] The approach minimizes the risk

[00:06:36] of data loss and service disruptions.

[00:06:38] Data in the cloud needs protection too.

[00:06:42] I also wanna highlight the changes in Google search.

[00:06:45] If you're not aware,

[00:06:46] some significant changes are happening in SEO

[00:06:49] and around AI.

[00:06:51] Small businesses may find it increasingly difficult

[00:06:53] to compete in SEO due to the complexity

[00:06:56] and nature of Google's algorithms

[00:06:58] downplaying smaller sites.

[00:07:00] What would happen if Google traffic went to zero?

[00:07:04] That's why we care.

[00:07:06] And a few channel updates.

[00:07:10] Microsoft and VMware have announced a partnership

[00:07:12] that allows subscribers

[00:07:13] to the VMware Cloud Foundation Suite

[00:07:16] to use their entitlements

[00:07:17] on Microsoft's Azure VMware solution.

[00:07:20] This license portability scheme enables users

[00:07:23] to apply their license capacity

[00:07:25] to resources of their choice,

[00:07:27] ensuring that the cloud capacity

[00:07:29] they've already committed to can be utilized.

[00:07:31] The deal puts Microsoft alongside Google Cloud

[00:07:34] in offering VCF license portability,

[00:07:37] while AWS currently does not have this capability.

[00:07:41] Red Hat is revamping its partner program

[00:07:43] by launching a new partner program framework.

[00:07:45] The framework aims to cater more effectively

[00:07:47] to its partners' individual needs and preferences.

[00:07:50] As part of the change,

[00:07:51] Red Hat is moving away from categorizing partners

[00:07:55] and instead focusing on providing

[00:07:56] a customizable experience.

[00:07:58] A key element of this new framework

[00:08:00] is the introduction

[00:08:00] of a partner practice accelerator program.

[00:08:05] Tech Data, a TD CITX company,

[00:08:06] has acquired Orca Tech,

[00:08:08] an independent value-added distributor

[00:08:10] in Australia and New Zealand.

[00:08:12] This acquisition enhances Tech Data's security portfolio

[00:08:16] and technical capabilities,

[00:08:17] adding hyperscaler marketplaces with AWS and Microsoft.

[00:08:22] Why do we care?

[00:08:24] Licensing changes in the ever-changing world

[00:08:26] of VMware matter,

[00:08:27] and with the uncertainty around them with Broadcom too,

[00:08:30] this was worth preparing.

[00:08:32] Red Hat's shift to a customizable partner program

[00:08:34] reflects a broader industry trend

[00:08:36] toward personalization and tailored experiences.

[00:08:40] And we see ever-increasing service capabilities

[00:08:42] in distributors, just to date a point there.

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