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The pain is just starting for tech companies focused on small businesses

March 31, 2020, 1:56 PM UTC

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Last week, I brought you a couple of stories of companies, DocuSign and PagerDuty, optimized for the all-of-a-sudden acceleration of the shift from physical to digital. Those companies have a lot going for them, though they’ll still be affected in a calamitous economic downtown. Today, I point you to two digital pioneers, Thumbtack and Yelp, whose revenues are so concentrated on small businesses that the current crisis can’t help but hurt them.

Thumbtack, a private company, is kind of the eBay for hyperlocal service providers like DJs, plumbers, and the like. It announced Monday that it is laying off 30% of its workforce, or 250 people, because the rapid decline in its business has been so dramatic. “There’s been an exogenous event that has placed a tax on human contact,” says the company’s CEO, Marco Zappacosta. He told me the cuts were to every team and at every level. He’s cut his salary altogether, and the company’s top executives will slash pay by 25%.

Thumbtack is an economic mirror of what social distancing has wrought. It says events-related job postings are down 80% year over year. House cleaning is down 66%. But the economy hasn’t shut down completely. Zappacosta says lawn care and other outdoor work has remained “robust” and the company’s home systems category, including installation of air-conditioning units, is down only 5%.

As for Yelp, it faces a double whammy. It makes its money on advertising, a market in freefall. (Marketing was among the first expenses to go at Thumbtack.) And about two thirds of its revenue comes from small businesses, including job-listing ads that compete with Thumbtack, and the category for which it is best known, restaurants.

On March 19, Yelp withdrew its earning guidance for the first quarter and all of 2020. Shweta Khajuria, an analyst with the investment bank RBC, says that while Yelp “should be okay” thanks to its more than $400 million in cash and positive free cash flow before the crisis, it is “very exposed” to the woes of small businesses.

Yelp has said nothing publicly about layoffs—or anything else since its initial warning. Its 3,600-person sales force makes up more than half the company’s workforce. Khajuria says it is one of only seven of the 40 Internet and e-commerce companies RBC covers that its analysts haven’t been able to talk to directly. Yelp said it wouldn’t grant interviews, citing prohibitions on discussing financial information until it reports results from the quarter that ends today. The company’s shares have been more than halved since mid-February and dropped 6% Monday on a day the market jumped.

As bad as things already are, the pain is just starting, and no sector of the economy will be spared.

Adam Lashinsky

@adamlashinsky

adam.lashinsky@fortune.com

This edition of Data Sheet was curated by Aaron Pressman.

NEWSWORTHY

Lives on the line. Amid concerns about a lack of protective gear for medical workers, some tech workers are also raising alarms. A group of Instacart delivery workers called for a strike on Monday over coronavirus safety issues (Instacart said its operations were unaffected). And about 60 workers walked out of an Amazon fulfillment center in New York, saying the e-commerce giant wasn't doing enough to protect them. Amazon then fired the leader of the strike, Chris Smalls, saying he repeatedly violated social distancing guidelines. Smalls says he was fired in retaliation for his labor activities.

No more excuses. Now that we've all learned about "zoombombing" and Zoom's hidden Facebook connection, New York's attorney general is stepping in to try and fix things. Letitia James sent a letter to the company noting her concerns about Zoom's security and privacy policies. On Monday, Zoom CEO Eric Yuan tried to address the controversies in a blog post as the company also clarified its privacy policy. "Zoom does not mine user data or sell user data of any kind to anyone," Yuan writes.

Pffft. In "we haven't quite closed the book on that disaster" news, WeWork agreed to sell Meetup, its social networking business, for a fraction of the $156 million it paid for the unit in 2017, Fortune reports. While the office-space startup is cratering along with the economy, Meetup is pivoting from helping arrange in-person gatherings to virtual ones.

Houston, we've had a problem here. Speaking of financial disasters, Internet-from-space startup OneWeb filed for bankruptcy on Friday. Another SoftBank-backed startup floundering for cash, OneWeb had planned to launch hundreds of satellites this year but only got about 74 into orbit before running out of money. SpaceX's Starlink is still going strong, with 360 satellites up and running and thousands more on the way.

You are not entitled to your own facts. Adam has been on the case of social networks doing more now to stop the spread of misinformation than they did before the pandemic. Another example: After giving right-wing politicians a wide berth for years, Twitter deleted two tweets from Brazilian President Jair Bolsonaro that shared videos undermining social distancing measures.

I think you're just what I needed. While coronavirus dominates the news, tech companies are still trying to find airspace for new products. Microsoft unveiled a revamp of its subscription consumer Office suite on Monday that tries to make the package more appealing and useful for regular folks and families. Now called Microsoft 365, instead of Office 365, pricing is unchanged at $7 a month for an individual or $10 for a family plan. "We want to help you and your family across work, school, and life," VP Yusuf Mehdi wrote in a long blog post highlighting the new and updated apps.

FOOD FOR THOUGHT

Few companies have discouraged working from home as strongly as Apple. The company has many secrets to protect about unreleased products, obviously, but also favors a culture of personal interaction. Nick Bastone and Wayne Ma have the inside scoop for The Information on how Apple and its employees are coping with the current remote requirement.

In the weeks since, some teams at Apple have found it harder to adjust to the new arrangements than others, especially those teams who are required to handle prototypes, many of which are locked away in secure labs on Apple’s campus in California.

Employees can no longer use Apple’s 3-D printers and milling machines, nor can they conduct stress and drop tests of their designs. One employee said prototyping in Cupertino had mostly stopped. At first, Apple didn’t have a protocol in place for employees to bring components from future products home with them, but more recently it has established a process for doing so in some instances, two employees said.

ON THE MOVE

Former Boeing exec David Carbon is going to Amazon to run the company's Prime Air drone unit, replacing Gur Kimchi...Slack's former chief product officer, April Underwood, who left the company last year, has signed on with Obvious Ventures as a venture partner...Meri Williams has stepped down as chief technology officer at British online banking startup Monzo.

IN CASE YOU MISSED IT

Your next potato chip may be flavored by artificial intelligence By Katie Sehl

A startup is building computer chips using human neurons By Jeremy Kahn

Governments worldwide are remote voting because of coronavirus. Why is the U.S. Congress resisting it? By Jeff John Roberts

Where do clothing rental and subscriptions like Rent the Runway fit in a world that works from home? By Gabby Shacknai

The coronavirus pandemic is changing broadcast and streaming TV as we know it By Radhika Marya

The Coronavirus Economy: How the private jet business changed overnight By David Meyer

(Some of these stories require a subscription to access. There is a 50% discount for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.)

BEFORE YOU GO

Innovation continues amid the pandemic. NASA is inching closer to the first test flight of its experimental all-electric airplane, the X-57 Maxwell. The agency released some realistic-looking artist renditions on Monday of the X-57 in air that got me thinking, wrongly, that the first test flights had finally started. But not quite yet. I'll be sure to share that video as soon as it surfaces. 

Aaron Pressman

@ampressman

aaron.pressman@fortune.com