What is the Business Model of Facebook, Amazon, Apple, Google and Microsoft?

What is the Business Model of Facebook, Amazon, Apple, Google and Microsoft?

Revenues are an important success indicator

Revenues are an important success indicator. Photo: Pixabay.com

A startup usually looks up to the big technology companies and their business model to innovate and disrupt the market. A classical startup tale. Amid the recent discussions around the way Facebook operates, I was wondering how they generate their revenues. Moreover, what are its close technology company competitors do to earn money? 

FAAMG dominating S&P500 and NASDAQ

Last year, in the middle of 2017, the financial services operator Goldman Sachs, introduced the acronym FAAMG. FAAMG stands for the initials of Facebook, Apple, Amazon, Microsoft, and Google (Alphabet). The reasoning of Goldman & Sachs for the coining of the term is the market power of the five players. Because they dominate the S&P500 as well as NASDAQ.

FAAMG Market Capitalization between the GDP of Germany and France

Market Capitalization of FAAMG, in the middle of 2017, was between the value produced in Germany and France, in 2017 (Statistica, 3.65 trillion US$ for Germany and 2.57 trillion US$ for France). That means Facebook, Apple, Amazon, Microsoft, and Alphabet (Google) represent an unimaginable 2,9 trillion US$ in combined market capitalization. The visualcapitalist.com website tells us more about the revenue streams of the top tech companies:

Revenue Streams of Facebook, Apple, Amazon, Microsoft, and Alphabet (Google)

Revenue Streams of Facebook, Apple, Amazon, Microsoft, and Alphabet (Google)

FAAMG Sources of income

Here it becomes exciting! Most companies have diversified their sources of income. But most operate in distinct categories for their principal revenues:

  • – Apple is a hardware company with 84% of their income arriving from product sales
  • – Alphabet is generating 88% of its revenues through advertising
  • – Facebook is also relying on advertising for their income which counts for 97%
  • – Amazon: For Amazon product sales amount to 72% of its income
  • – Microsoft is the company with income balanced in the hardware, software and services categories

More details are in the above mentioned, vast infographic prepared by the visualcapitalist.com

Facebook and Google (Alphabet) count on advertising

Knowing where the revenue streams stem from helps us to understand the positioning of these two companies and the need to use the data collected from their users to maintain their leading positions. The better Facebook and Google know their users the better advertising works. This principle is age-old and well illustrated by the specialized press, for example, which displays advertising for particular audiences.

Business Models

So, I am not taking a position on how good or bad the practices of Facebook and Google are because I do not know in detail what they are doing. The key is their operating mode fits their business model and companies -large and small- keep adapting their business model to market conditions, needs and requirements.

What is your Business Model?

My main interest was to determine the business model of the tech giants. If you are interested in evaluating your business model because you are a technology startup or any other business already operating, contact us!

Successful Startups: Common Startup Mistakes to Avoid

Successful Startups: Common Startup Mistakes to Avoid

 

 

 

 

The business plan is ready, the marketing strategy is set and yet many more issues to consider for a startup

 

 

 

The small business and startup magazine Inc. just published an article on common mistakes startups are observing. When building up, looking out for potential early pitfalls is key to sustainable growth. Thus, when writing your business plan, actively reducing potential issues is a critical success factor for startups. 

 

 

 

 

 

 

 

No matter how brilliant your startup idea is, there are mistakes to avoid:

 

 

 

* Aiming for the mass market and avoid to target a niche market
* Showing the business model is working, and you can generate revenue through recurring sales from early on
* Keeping your expenses low, when the income is growing
* Your first business model might not be your last one! Be open-minded and see what works and what does not.

 

 

 

 

 

 

 

For startups: Business plan review with a business strategist

 

 

 

Need advice on your business model and marketing strategy? GrowthDriver.biz can help! It’s only a small investment to startup faster and more efficient. We are ready to review your strategy. Or, if you prefer we create your business plan for you.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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