At a glance, the sector’s biggest technology groups seem to have lots in common. For starters, all five of the Big Tech agencies (Amazon, Apple, Facebook, Microsoft, and Alphabet) have emerged as some of the most valuable publicly traded groups in the world, with founders such as Jeff Bezos or Bill Gates sitting atop the global billionaire list.
These tech giants also have a customer-dealing aspect to their enterprise. This is the front and center. With billions of human beings using their structures globally, those corporations leverage consumer facts to tighten their grip even more on marketplace proportion. At the same time, this fact is a double-edged sword, as those identical companies often discover themselves in the crosshairs for mishandling non-public statistics.
Finally, all of these groups have a similar foundation story: they were based or incubated on the fertile digital grounds of the West Coast. The agency with the weakest link to such origins would be Facebook, but even it has been primarily based in Silicon Valley since June 2004.
Sizing Up the Tech Giants 
For all of their commonalities, there is much less of a mold for how these tech giants emerge as generating cash flow. But before we get to how Big Tech makes its money, permits start by searching the financials at a better level. The following records come from the 2018 10-K reports in the ultimate year.
The Big Five tech giants combined for just over $800 billion in sales in 2018, which would make them one of the 20 largest international locations in terms of GDP. They might edge out Saudi Arabia ($684 billion GDP) in terms of length. Meanwhile, they generated $139 billion of net earnings for their shareholders for a 17.3% profit margin.
How Big Tech Makes Money
Let’s dig deeper and spot the differences in how these businesses generate sales.
You are the Customer
Three tech giants make cash equally in the broadest feel: you pay them money, and they give you a service or product.
Apple (Revenue in 2018: $265.6 billion)
Apple generates a fantastic sixty two.8% of its revenue from the iPhone
The iPad and Mac are suitable for 7.1% and nine.6% of sales, respectively
All other products and services – such as Apple TV, Apple Watch, Beats products, Apple Pay, AppleCare, etc. – combine to simply 20.6% of sales
Amazon (Revenue in 2018: $232.Nine billion)
Amazon receives the maximum from its online stores (52.Eight%) and 0.33-celebration seller services (18.4%). Amazon’s fastest-developing segment is offline income in bodily stores. Offline sales generated $17.2 billion in modern revenue, developing 197% yr-over-year. Amazon Web Services (AWS) is well-known for being Amazon’s most worthwhile section, and it counts for 11.Zero% of sales Amazon’s “Other” segment is also growing fast – it especially includes ad income Microsoft (Revenue in 2018: $110.4 billion)
Microsoft has the maximum different sales of any of the tech giants. This is a part of the cause. It presently has the most important market capitalization ($901 billion) of the Big Five. Microsoft has eight exclusive segments that generate ~5% or extra sales. The biggest 3 are “Office merchandise and cloud services” (25.7%), “Server merchandise and cloud offerings” (23.7%), and Windows (17.7%). The ultimate tech giants price you nothing as consumers, so how are they well worth so much?
You are the Product
Both Alphabet and Facebook generate billions of dollars of revenue, but they make this cash from advertising. Their systems permit advertisers to achieve a goal at scale with terrific precision, which is why they dominate the web advertising enterprise.
Here’s how their sales smash down:
Alphabet (Revenue in 2018: $136.8 billion). Despite having a much wider umbrella name, ad sales (via Google, YouTube, Google Maps, Google Ads, and many others.) still drive 85% of sales for the employer. Other Google products and services, like Google Play or the Google Pixel phone, generate 14.5% of total sales. Other Bets be counted to zero. Four of the sales are Alphabet’s moonshot, which tries to find the “next Google” for its shareholders. Facebook (Revenue in 2018: $fifty five.8 billion)
Facebook generates almost all revenue (ninety-eight. Five) from commercials. Meanwhile, 1.5% comes from bills and other prices. Despite Facebook being an unfastened carrier for users, the employer generated extra revenue in line with a person other than Netflix, which costs its service. In 2018 Q4, for example, Facebook made $35 per user. Netflix made $30. So, at the same time, as the tech giants may additionally have many similarities, how they generate their billions can vary considerably. Some are advertising products to you, while others are marketing to you because of the product.
