Technology after the coronavirus pandemic

Many companies made changes to survive the pandemic. For tech companies, the changes were also about seizing opportunities to thrive as life abruptly moved online. Few companies have juggled these risks and rewards in as many industries, across as many countries, as Prosus, an Amsterdam-based conglomerate that in 2019 was spun out of Naspers, the South African tech and media giant.

Prosus’ holdings run from e-commerce and classifieds to food delivery, fintech and more. The group is valued at around $180 billion, which makes it one of continental Europe’s 10 largest companies. It operates in more than 80 countries and owns sizable stakes in the internet giants Tencent of China and Mail.ru of Russia. The companies that Prosus controls employ around 20,000 people, and many more work as contractors or at companies in which Prosus holds smaller stakes.

That breadth gives Bob van Dijk, chief executive of Prosus, a unique vantage point from which to assess the tech industry’s fortunes, particularly in emerging markets like Brazil, Russia, India and China. Will pandemic habits persist? Can regulators rein in Big Tech? Have the markets gotten ahead of themselves? Van Dijk sat down for a virtual interview to assess the tech world’s prospects in the years ahead.

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Some pandemic pivots will stick

Prosus has fared relatively well during the pandemic. In the six months to September, the latest results available, its revenue and profit rose around 30%. Its stake in Tencent alone added nearly $3 billion to its bottom line over that time.

When the pandemic hit, the downturn wasn’t felt evenly across the group’s portfolio. The upturn has similarly reflected how government stimulus, access to vaccines, mutations in the coronavirus, and a host of other factors have varied from country to country.

The hardest-hit markets where Prosus operates remain Latin America and South Africa, while Europe and North America suffered initial hits to their economies followed by spurts of recovery. Asia has largely bounced back.

The pandemic lockdowns changed consumer behaviour, forcing Prosus to adapt in ways that van Dijk believes will be permanent.

“We don’t have any reason to believe they will go away,” he said, adding that the pandemic essentially “brought the future forward by a few years.”

In short, that means greater automation and less human contact.

“In our e-commerce business, we already had drop-off lockers,” van Dijk said. “That’s become very, very prevalent. We figured that people like it. It’s no-contact delivery.”

Spurred by necessity, Prosus’ portfolio companies found other ways to wring efficiencies.

“We found that more of our business can be automated than we thought,” he said. “That was pushing us further down the curve of making a very smooth customer experience that has as few touch points as possible.”

For example, its classifieds business, OLX, began asking customers to inspect the cars for sale themselves, reducing social contact.

“When forced, you can think creatively,” van Dijk said.

Food delivery, unsurprisingly, has been as strong a business for Prosus during lockdowns as it has been for Uber, DoorDash and others. But Prosus companies like Delivery Hero and iFood took steps to help preserve long-term goodwill with its partners at the expense of short-term profits.

In Brazil, for example, “we paid restaurants much quicker than we usually did,” van Dijk said. “From a cash-flow point of view, that was actually pretty important” in keeping restaurants in their good graces, reducing potential tensions between restaurants struggling during the pandemic and online delivery apps seeing demand soar.

It was a similar story in India for classifieds. “We reduced fees substantially, or we waived fees,” he said. “That allowed people to preserve cash. When things started to come back again, there was a lot of appreciation around that.”

A world of tougher tech regulation awaits

Though Prosus is emerging from the pandemic in a position of strength, van Dijk said the company wouldn’t be able to escape a global push by governments to constrain the power of tech giants in antitrust, labor and other areas.

He’s not necessarily fighting the new wave of regulation, and offered a historical analogy: “When the first cars were in the world, there were no rules whatsoever. When there were more cars, that was not fine.” Advances in technology will naturally require the law to catch up, he said, calling the trend toward stricter regulation “a sensible move.”

One major concern among tech giants is the rollout of so-called digital services taxes throughout Europe, meant to collect more revenue from multinational companies that do extensive business in countries without much of a physical presence within their borders. Those wouldn’t apply to Prosus, van Dijk said — “we invest locally and pay taxes” — but he added that the charges could erode the industry’s profit margins.

“I understand where it comes from,” he said, but “sometimes the regulation is a little blunt.”

What could hurt Prosus, van Dijk said, are changes to the gig economy, particularly efforts to entitle delivery drivers to worker benefits. Some drivers prefer the flexibility of being contractors, he said, and “we try to pay people properly regardless of what the legislation is.” As far as he could recall, Prosus has never lobbied against classifying workers as employees, as rivals like Uber have.

Another area to watch is China, which has moved to rein in some of its homegrown internet behemoths. Though officials have focused largely on Alibaba, Tencent hasn’t escaped their gaze: The company, which Prosus bought into back in 2001, was among those fined last month for violating antitrust rules. It is Prosus’ single biggest investment, and a tougher crackdown could batter the conglomerate’s market value.

Despite the stakes, van Dijk downplayed the threat. “Our impression is that China is still very supportive of its tech giants,” he said.

Markets don’t always go up

The enormous financial rescue plans enacted by many governments to combat the pandemic unleashed a torrent of money into the global monetary system. Much of that money made its way into the tech sector.

“Market valuations for technology have become quite full,” van Dijk said. “There’s a lot of money looking for a return.”

Last summer, Prosus was outbid for eBay’s classifieds business, which went to Adevinta of Norway for $9.2 billion. That defeat followed a losing effort to acquire the restaurant delivery company Just Eat, which Takeaway.com bought for $7.8 billion.

Perhaps surprisingly, van Dijk said Prosus hadn’t encountered much competition from special purpose acquisition companies, or SPACs, which have raised nearly $100 billion this year and are very active acquirers of tech companies. This may be in part because SPACs are largely a U.S. phenomenon, although other countries have been trying to court the blank-check firms.

Van Dijk said Prosus might eventually find itself competing with SPACs, particularly for later-stage private companies. In the meantime, Prosus itself invested $500 million in a SPAC last year when the shell company merged with Skillsoft, an education technology firm.

Lately, Prosus has mostly been investing in its existing businesses.

“Putting money into there is still a good idea,” van Dijk said. And a few months ago the company announced that it would buy back $5 billion of its shares.

Things are looking slightly more measured these days, van Dijk said, with valuations coming down “to much more sustainable levels.” For a serial dealmaker, that means opportunity: “It’s easier to do acquisitions in a market that is cooling off.”