There’s been a lot of negative press about Apple’s revenue guidance and their future after their CEO connected their recent revenue shortfalls to the Chinese economy.
That prompted me to take a quick look at some of the tech giants of today – Amazon, Alphabet, Facebook and Apple to see which of them looked sturdy enough over the next few years. The only criterion going into this is examining their current sources of revenue and whether anything looks likely to threaten those key sources in the next few years.
(You could argue that Uber, Mobike and so on are also tech giants but given that none of them makes money yet or has gone public I’d argue that their success isn’t proven and they could be just a tech bubble, not a giant, so I’ve left them out. Also, to be honest, I don’t really see them as possessing any technological advantage so they’re not really tech companies, are they?)
Facebook is an advertising business. The question that arises is, will clients stop advertising on Facebook, or at least reduce their dependence on it enough to significantly affect the business?
Two broad things could lead to such a situation:
- A rapid change in Facebook (and associated social media) user statistics and losing a core audience to other media
- Issues with data, measurement or effectiveness leading to advertisers abandoning Facebook
At this moment, Facebook’s broad user base with higher penetration in the younger age groups (18-29) makes it unlikely that they will become irrelevant to consumers in the next few years.
Also, despite the Cambridge Analytica scandal, neither consumers nor advertisers seem to be getting out of Facebook – although periodically problems around measurement crop up and create credibility issues for them. There are also some concerns with GDPR that a lot of Facebook targeting data will become unavailable, making it less valuable for advertisers, but at least at this moment this doesn’t seem to be happening. P&G’s much talked about exit from Facebook also doesn’t seem to have deterred their revenue growth, much of which comes from “performance marketing” campaigns where FB has some very strong metrics to win budgets with.
Overall, however, as a pure advertising business, FB competes with Alphabet and other media companies, so it is not exactly a blue ocean or greenfield venture any more.
Alphabet
Despite all their various experiments in other fields, Alphabet is, basically, Google. Google is, basically, all about advertising revenue. While the bulk of this revenue is attached to Google owned properties, the Google Network properties are also a noticeable proportion of the total.
What’s likely to happen in the future? Will advertisers walk away from Google? Or will enough consumers stop using it that it will become less attractive to advertisers?
Google has built an entire ecosystem consisting of their own killer apps – search, map, acquisitions like Youtube and a small thing called the Android OS that dominates mobile and creates an opportunity for them to be a dominant ad network around the world. On the one hand, it’s unlikely that any one development or trend could weaken all of that. However, there are always competitive OS’s coming up. There are murmurs of “better” search engines like Duck Duck Go. Unlike Facebook, Google has less of a hold on users since most people don’t store their historical data with them – yes, perhaps on Mail and Drive but that’s different than having generated several years worth of personal photos and posts on Facebook.
It is conceivable that over the years, individual players will compete with and pull ahead of Google, which would weaken it’s hold. Android OS is it’s strongest asset at the moment but we have seen that operating systems can be overtaken in time and there is no shortage of competitors in this arena.
Apple
Apple has a huge dependence on iPhones, followed to a smaller extent by other device sales.
Will consumers stop buying iPhones? We’re seeing in China that this is already happening. There are lots of reports around how Apple hasn’t had product innovation in a while now and are starting to imitate other phone makers instead.
All of which suggests that if they don’t find a way to innovate product or the business model soon, Apple could be in deep trouble in a very short time.
Amazon
Amazon’s business is built mainly on online retail revenue – both their own as well as 3rd party seller services. However, it’s interesting to see them constantly trying new things and growing them – physical retail and AWS being prime examples.
Will there come a time when being an online retailer and running Black Friday promotions doesn’t do the trick? Entirely possible, but it’s clear that Amazon is constantly thinking ahead and looking beyond just the world of online retail for the future. This is clearly a company that will be around and successful for a long time to come as they build revenue in new areas.
What’s the conclusion from all that? If you’ve succeeded by doing one thing and you’re still pretty untouchable at it, that’s great. If you’ve succeeded by doing one thing and are using, that success to fund more things that you’re good at, that’s great too. If you’ve succeeded by doing one thing but other people are catching up and you’re struggling to maintain your lead, then there may not be a lot of time left in which to reinvent yourself for the future.
(* I did consider Microsoft as one of the companies in the mix but the way they report their revenue by “Productivity and Business Processes, Intelligent Cloud and More Personal Computing” makes it hard to separate B2B, B2C, advertising revenue, hardware, software and service revenue streams.)
(** All the numbers quoted here are from company financial reports to be found online in the investor relations sections of their websites)
The Change Manifesto 