The big-5 tech companies are growing rapidly.
We live in a marketplace. There are so many alternatives to goods and services that in many instances it is almost impossible to distinguish between them. Those that do stand out, do so in such stark contrast and relief that they capture the attention of the customer in a way that is anomalous in its intensity and its reward. Amazon, Apple, Facebook, Google and Microsoft represent these for American companies. Compare their stock to the S&P:
The big-5 tech companies are creating platforms that collect troves of data on their customers, B2B and B2C.
The mega platforms of today (Amazon, Apple, Google, Facebook, Microsoft, Alibaba and Tencent) are brilliant examples of how to leverage customer data to build a sustainable competitive advantage through customer data. Amazon, Google, Facebook, Apple, Microsoft, Tencent, Alibaba are building consolidated data paradigms that intend to extend their data capture into every part of their user’s lives. Each one of these companies collects and centralizes data from their diverse product portfolio:
Note: Apple is an exception to the data sharing rule, making a point to not centralize data between products.
Their non-advertising based business model allows them to do this.
This data provides them with a derisked approach to innovation.
These company’s strategies involve subsidies for experiences so that you are inclined to maintain your engagement (e.g. Google and Facebook are free to the consumer and Amazon heavily subsidizes the cost of shipping and COGS to ensure consumer loyalty). Others build barriers that increase the switching costs (e.g. Apple’s ecosystem is magnificently complicated / impossible to migrate from).
Acquisition is an important tool that they use to grow.
When data informs these companies about a product or service based on consumer needs, they use acquisition to quickly enter new markets.
All forecast a large percentage of their current and future growth overseas.
The Big 5 tech companies make emerging markets a core part of their strategy. Why? Because emerging markets like China and India are forecast to control a massive amount of worldwide consumer spending within the next 15 years.
Middle Class Consumption, Top 10 Countries (PPP, trillion $, global share)
These companies’ US core products are experiencing slowed growth compounded by a weakening middle class.
While the US economy has experiencing a 9.5 year long bull market, experts have been forecasting a recession in the near future. For more, see thoughts published by John Hussman, Citi Research, Zillow, and JPMorgan.
% Of Adults in Each Income Tier
Meanwhile, the international middle class is rapidly growing.
The biggest population centers in the world are industrializing and adopting new technology. Population and economic growth are working side-by-side in markets like China and India to quickly build markets of great size.
This forces these companies to focus on the few industries experiencing explosive growth.
Which is why the Big-5 are looking to alternative sectors to grow in America to compliment the expansion of their core offering overseas. Consequently, emerging and growth opportunities in North America are being cornered by a small number of technology companies.
They enter new sectors so with incentives to the customer and P&L subsidies from the core P&L.
This allows them to offer new services at very low costs while simultaneously growing the user base and data collected by Big Tech’s platforms, giving them unprecedented abilities to target customers and influence their choice.
Explore each company’s product history and adoption.
Amazon is the ultimate representation of the new breed of companies. This company, that started off selling books, has been able to consistently expand into new markets and optimize customer relationships.Factsheet
Apple has led the hardware market for years. Their product design and proprietary ecosystem has secured them margins seen only luxury markets with the reach of a consumer product brand.Factsheet
Facebook, with 2.2 billion monthly active users, is the largest social media site of all time. This young company, founded in 2004, leverages their network to sell advertising and has cemented its role as Google’s counterpart in the digital advertising “duopoly.”Factsheet
Google has developed an amazing business while becoming the infrastructure for the web. The company pulls in ~$110 billion in revenue without selling a physical product.Factsheet
Microsoft has been a market leader for 40 years. Although once more dominant, Microsoft is still a keystone in the digital and internet economy.Factsheet