HOW DO BIG TECH COMPANIES GENERATE REVENUE?: These Big Four tech companies (Amazon, Apple, Facebook and Alphabet) are some of the world’s most valuable publicly traded companies, with founders like Jeff Bezos and Mark Zuckerberg topping the list of global billionaires.
Amazon, Apple, Facebook, Alphabet
These tech giants also have a consumer-centric aspect that takes centre stage in their business. With billions of people worldwide using the platform, the company leverages user data to reduce its market share. At the same time, this data is a double-edged sword. This is because the same company is often subject to mishandling of personal information.
Ultimately, all of these companies have a similar origin story: they were founded or incubated in the fertile digital grounds of the West Coast. The company with the slightest pretence of having such origins would be Facebook, but even Facebook has been based in Silicon Valley since June 2004.
We break down the revenue streams of the biggest tech companies:
- Amazon makes the most of its online stores (52.8%) and the services of third-party sellers (18.4%).
- Amazon’s fastest-growing segment in physical store sales. Offline sales generate $17.2 billion in current revenue, growing 197% annually.
- Amazon Web Services (AWS) is Amazon’s most profitable segment, accounting for 11.0% of revenue.
- Apple generates a staggering 62.8% of its revenue from the iPhone.
- The iPad and the Mac account for 8.2% and 9.9% of revenue, respectively.
- All other products and services – including Apple TV, Apple Watch, Beats products, Apple Pay, AppleCare, etc. – combined with only 20.6% of revenue.
Alphabet and Facebook generate billions of dollars in revenue, but they make this money from advertising. However, their platform allows advertisers to target at scale with incredible accuracy. That’s why they dominate the online advertising industry.
Facebook generates almost all of its revenue (98.5%) from ads. Even though Facebook is a free service for users, the company generated more revenue per user than Netflix, which charges for its service. For example, in the fourth quarter of 2018, Facebook earned $35 per user. Netflix made $30.
Despite having a broader name, advertising revenue (via Google, YouTube, Google Maps, Google Ads, etc.) generates 85% of the company’s revenue.