Digital Gabe
Cutting Edge Commentary On All Things Media

How The Big Five Make Their Money

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Here’s an amazing stat to wrap your mind around.  The five biggest US tech firms generate $800B in revenue each year, which is more than the GDP of oil superpower Saudi Arabia.  In rank order by revenue the group includes Apples ($266B), Amazon ($233B), Alphabet/Google ($137B), Microsoft ($110B), and Facebook ($56B).

Because these companies are lumped into the tech sector, it’s easy to assume they all make money about the same way.  But as it turns out they have vastly different business models.  To help sort things out Visual Capitalist has created a set of infographics to illustrate how each of the big five makes their money.  Here’s a summary of their findings:

  • Apple is amazingly dependent on the iPhone which generates 63% of their revenue. No wonder last week’s launch event was all about diversifying into services instead of more hardware.
  • Amazon is half eComm and half a kitchen sink of businesses ranging from Entertainment to Cloud Services. Interestingly, Amazon is by far the least profitable of the five with a 4% profit margin compared to over 20% for the other four.
  • Alphabet is very focused on digital advertising, which accounts for 70% of their revenue. Over 80% of that ad revenue still comes from display search – so do you think these guys are getting nervous about voice search yet?
  • Microsoft once used to be overly dependent on its Office software products (the way Apple is on the iPhone now), but they’ve done a great job of diversifying over the past decade. Office now brings in 25% of their revenue, with the other 75% split amongst numerous publishers and web services.
  • Facebook is even more dependent on ad revenue than Alphabet, with an astonishing 98.5% of top line rev coming from Facebook and Instagram ads. This explains why the company goes into meltdown mode whenever the slightest disruption occurs on their ad platform.

So there you have it – five ultra-successful companies with five very different business models.  Not sure if you guys enjoy geeking out on this stuff as much as I do. 🙂

 

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