What is 1% Smarter?
The recent BigTech hearing before the House Judiciary antitrust subcommittee has been all over the news.
If you have a spare five and a half hours here is the full hearing. 😋
Before I dive in a just couple of quick points.
- BigTech can mean a few different things depending on what you are referring to. GAFAM, FAANG or GAFA (also known as the “Gang of Four” or the “Four Horsemen”). This article refers to the latter as they were the participants in the congressional hearing.
- The purpose of this article is to get some perspective on just how big are. I did some research as I was wondering that myself and I’ve put together some notes here, which aren’t intended to be comprehensive by any means. 👇🏻
High level numbers
I referred to this handy Axios article for some of the data in this first section. Note the data is as of July 27, 2020
Combined market cap of the four behemoths: a whopping $5 trillion. For context this is the list of the top 10 countries by GDP per the World Bank (2019).
Notice that if these four companies were a country they would be ranked either third or fourth in the world!
Granted this might not be an entirely fair comparison as we are comparing a stock and a flow. So on to the next one.
Combined revenue as of fiscal year 2019: $773 billion. Using this and comparing with the GDP of nations they still fare well. They would still make the top 20.
So to let that sink it, it means the total produced output of just four companies exceeds the productive capacity of approximately 90% of the countries in the world. In other words if they were a country they would be in the top 10% of richest countries.
Combined cash reserves of the four tech giants: $420 billion. This is an immense “war chest” of cash they are sitting on, far greater than Smaug’s treasure horde according to syfy.com (yeah someone actually did some math and estimated the value of Smaug’s treasure! Though the number seems low to me?). 😎
This is one reason why they can simply buy up competitors or up and coming startups (here is a nice infographic of some of their mega-acquisitions). Just like when you buy a house, you can leverage your cash 5x-10x by borrowing money against it. At a conservative leveraging of 5x that is a purchasing power of north of $2 trillion. And this doesn’t even include other ways of financing a purchase.
Some notable acquisitions include:
- Acquired Whole Foods for $13.7 billion in 2017
- Acquired Zappos for $1.2 billion in 2009
- Acquired Twitch for $970 million in 2014
- Acquired Motorola for $12.5 billion in 2012
- Acquired Nest for $3.2 billion in 2014
- Acquired YouTube for $1.7 billion in 2006
- Acquired WhatsApp for $22 billion in 2014
- Acquired Oculus for $2 billion in 2014
- Acquired Instagram for $1 billion in 2012
- Acquired Beats for $3 billion in 2014
- Acquired Dialog Semiconductor for $600 million in 2018
- Acquired Shazam for $400 million in 2017
- The dominant market leader in e-commerce with 50% of all online sales going through the platform.
- Nearly 50% market share of the cloud computing market.
- 75% market share of live-streaming with Twitch
- Amazon is additionally the market leader in the area of Artificial Intelligence-based personal digital assistants and smart speakers (Amazon Echo) with 69% market share. Google is second with a 25% market share (Google Home).
- Amazon also owns over 40 subsidiaries including Audible, ComiXology, Goodreads, IMDb and many others.
- Apple sells high-margin smartphones and other computing devices, sharing a duopoly with Google in the field of mobile operating systems: 27% of the market share belonging to Apple (iOS) and 72% to Google (Android). That is a combined 99% of the entire market!
- Apple is an interesting case in that they don’t entirely dominate in terms of raw market share. As Tim Cook noted in the congressional hearing (see below): “in fact we don’t have a dominant share in any market, or in any product category where we do business.”
- But that only tells part of the story as Apple sells high-margin products which is also why they are known to sell more expensive products. So a better measure of their dominance would be to look at profitability. According to Apple Insider, Apple earned two-thirds of the entire smartphone market’s profits in 2019, with the nearest competitor being Samsung on just 17%. And this is from a relatively small market share of “only 12%.”
- Though what Cook said may not be entirely true as they seem to dominate the tablet market with some 44% market share according to Phone Arena and iMore (not sure if 44% is considered “dominant?” What do you think?).
- Facebook accounted for 74% of all social media traffic in June 2020 per Statista. It is estimated they have over 2.6 billion monthly active users. With the current world population of 7.8 billion that means 1 in 3 people on planet Earth are on Facebook!
- In addition to social networking, Facebook also dominates the functions of online image sharing (Instagram) and online messaging (WhatsApp).
- Along with Alphabet and Amazon, Facebook has been referred to as the “Big Three” of digital advertising.
- They own all four of the most downloaded apps of the decade, Facebook, Facebook Messenger, WhatsApp and Instagram. That’s a clean sweep.
- Google search commands a staggering 92.62% of market share as of June 2019, handling more than 5.4 billion searches a day. Talk about scale.
- Android has 72% of the mobile operating system pie. Though as noted above Apple is significantly more profitable in this space.
- Google and YouTube are the first and second most visited sites in the world according to Alexa rankings (as of Apr 2020)
- It has nine products that have passed the one billion user mark. Can you believe that? The list includes Android, Chrome, Gmail, Google Drive, Google Maps, Google Search, Google Play Store, YouTube and Google Photos.
Revenue/Number of employees
I googled most of the data below and did my own calculations but also cross checked it with Statista and they seem quite sound.
A revenue of 70.7 billion dollars generated by 48,268 employees.
If you do the math, that is some $1.46 million dollars in revenue per employee.
In fact Facebook makes more profit per employee than other Fortune 500 tech companies. Which is how it can pay its typical employee a median salary of $228k per year.
With wages like that it makes it hard for other companies to compete for talent.
A revenue of 280.5 billion dollars generated by 840,400 employees (other than Walmart Amazon is the largest private employer in the US).
That’s $334k in revenue per employee.
A revenue of 260.2 billion dollars generated by 137,000 employees.
Which works out to some $1.9 million revenue per employee. This is the highest revenue per employee out of “The Four” – note that Facebook had a higher profit per employee.
A revenue of $162 billion generated by 123,048 employees.
That is some $1.3 million in revenue per employee.
Anyway that’s as far as I got. I am sure there are some other metrics to give a better perspective as to just how big BigTech are. Feel free to discuss these in the comments.
Thanks to Eugene Wei’s tweet I came across this resource. It is a link to all the supporting documents from the tech antitrust hearings. Enjoy sifting through it to find some gems if that is your cup of tea. 😀
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