For all of their
commonalities, it seems that there is less of a mould for how these tech giants
end up generating cashflow.
Company
|
Revenue (2018)
|
Net Income (2018)
|
Margin
|
Combined
|
$801.5 billion
|
$139.0 billion
|
17.3%
|
Apple
|
$265.6 billion
|
$59.5 billion
|
22.4%
|
Amazon
|
$232.9 billion
|
$10.1 billion
|
4.3%
|
Alphabet
|
$136.8 billion
|
$30.7 billion
|
22.4%
|
Microsoft
|
$110.4 billion
|
$16.6 billion
|
15.0%
|
Facebook
|
$55.8 billion
|
$22.1 billion
|
39.6%
|
Together, the Big Five
tech giants combined for just over $800 billion of revenue in 2018, which would
be among the world’s 20 largest countries in terms of GDP. More precisely, they
would just edge out Saudi Arabia ($684 billion GDP) in terms of size.
Meanwhile, they generated
a total of $139 billion of net income for their shareholders, good for a 17.3%
profit margin.
In the broadest sense,
three of the tech giants make money in the same way: you pay them money, and
they give you a product or service.
Apple (Revenue in 2018: $265.6 billion)
·
Apple generates a
staggering 62.8% of its revenue from the iPhone
·
The iPad and Mac are
good for 7.1% and 9.6% of revenues, respectively
·
All other products and
services – including Apple TV, Apple Watch, Beats products, Apple Pay,
AppleCare, etc. – combine to just 20.6% of revenues
Amazon (Revenue in 2018: $232.9 billion)
·
Amazon gets the most
from its online stores (52.8%) as well as third-party seller services (18.4%)
·
Amazon’s fastest-growing
segment is offline sales in physical stores
·
Offline sales generate
$17.2 billion in current revenue, growing 197% year-over-year
·
Amazon Web Services
(AWS) is well-known for being Amazon’s most profitable segment, and it counts
for 11.0% of revenue
·
Amazon’s “Other” segment
is also rising fast – it mainly includes ad sales
Microsoft (Revenue in 2018: $110.4 billion)
·
Microsoft has the most
diversified revenue of any of the tech giants
·
This is part of the
reason it currently has the largest market capitalization ($901 billion) of the
Big Five
·
Microsoft has eight
different segments that generate ~5% or more of revenue
·
The biggest three are
“Office products and cloud services” (25.7%), “Server products and cloud
services” (23.7%), and Windows (17.7%)
Both Alphabet and Facebook also generate billions of dollars of
revenue, but they make this money from advertising. Their platforms allow
advertisers to target you at scale with incredible precision, which is why they
dominate the online ad industry.
Alphabet (Revenue in 2018: $136.8 billion)
·
Despite having a wider
umbrella name, ad revenue (via Google, YouTube, Google Maps, Google Ads, etc.)
still drives 85% of revenue for the company
·
Other Google products
and services, like Google Play or the Google Pixel phone, help to generate
14.5% of total revenue
·
Other Bets count to 0.4%
of revenue – these are Alphabet’s moonshot attempts to find the “next Google”
for its shareholders
Facebook (Revenue in 2018: $55.8 billion)
·
Facebook generates
almost all revenue (98.5%) from ads
·
Meanwhile, 1.5% comes
from payments and other fees
·
Despite Facebook being a
free service for users, the company generated more revenue per user than
Netflix, which charges for its service
·
In 2018 Q4, for example,
Facebook made $35 per user. Netflix made $30.
So while the tech giants may have many similarities, how they
generate their billions can vary considerably. Some are marketing products to
you, while others are marketing you as the product.
Reference:
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