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How Big Tech Makes Their Billions

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How Big Tech Makes Their Billions in 2020

How Big Tech Makes Their Billions

The world’s largest companies are all in technology, and four out of five of those “Big Tech” companies have grown to trillion-dollar market capitalizations.

Despite their similarities, each of the five technology companies (Amazon, Apple, Facebook, Microsoft, and Alphabet) have very different cashflow breakdowns and growth trajectories. Some have a diversified mix of applications and cloud services, products, and data accumulation, while others have a more singular focus.

But through growth in almost all segments, Big Tech has eclipsed Big Oil and other major industry groups to comprise the most valuable publicly-traded companies in the world. By continuing to grow, these companies have strengthened the financial position of their billionaire founders and led the tech-heavy NASDAQ to new record highs.

Unfortunately, with growth comes difficulty. Data-use, diversity, and treatment of workers have all become hot-button issues on a global scale, putting Big Tech on the defensive with advertisers and governments alike.

Still, even this hasn’t stopped the tech giants from (almost) all posting massive revenue growth.

Revenues for Big Tech Keep Increasing

Across the board, greater technological adoption is the biggest driver of increased revenues.

Amazon earned the most in total revenue compared with last year’s figures, with leaps in almost all of the company’s operations. Revenue from online sales and third-party seller services increased by almost $30 billion, while Amazon Web Services and Amazon Prime saw increased revenues of $15 billion combined.

The only chunk of the Amazon pie that didn’t increase were physical store sales, which have stagnated after previously being the fastest growing segment.

Big Tech Revenues (2019 vs. 2018)

CompanyRevenue (2018)Revenue (2019)Growth (YoY)
Apple$265.6 billion$260.2 billion-2.03%
Amazon$232.9 billion$280.5 billion20.44%
Alphabet$136.8 billion$161.9 billion18.35%
Microsoft$110.4 billion$125.8 billion13.95%
Facebook$55.8 billion$70.8 billion26.88%
Combined$801.5 billion$899.2 billion12.19%

Services and ads drove increased revenues for the rest of Big Tech as well. Alphabet’s ad revenue from Google properties and networks increased by $20 billion. Meanwhile, Google Cloud has seen continued adoption and grown into its own $8.9 billion segment.

For Microsoft, growth in cloud computing and services led to stronger revenue in almost all segments. Most interestingly, growth for Azure services outpaced that of Office and Windows to become the company’s largest share of revenue.

And greater adoption of services and ad integration were a big boost for ad-driven Facebook. Largely due to continued increases in average revenue per user, Facebook generated an additional $20 billion in revenue.

Comparing the Tech Giants

The one company that didn’t post massive revenue increases was Apple, though it did see gains in some revenue segments.

iPhone revenue, still the cornerstone of the business, dropped by almost $25 billion. That offset an almost $10 billion increase in revenue from services and about $3 billion from iPad sales.

However, with net income of $55.2 billion, Apple leads Big Tech in both net income and market capitalization.

Big Tech: The Full Picture

CompanyRevenue (2019)Net Income (2019)Market Cap (July 2020)
Apple$260.2 billion$55.2 billion$1.58 trillion
Amazon$280.5 billion$11.6 billion$1.44 trillion
Alphabet$161.9 billion$34.3 billion$1.02 trillion
Microsoft$125.8 billion$39.2 billion$1.56 trillion
Facebook$70.8 billion$18.5 billion$665.04 billion
Combined$899.2 billion$158.8 billion$6.24 trillion

Bigger Than Countries

They might have different revenue streams and margins, but together the tech giants have grown from Silicon Valley upstarts to global forces.

The tech giants combined for almost $900 billion in revenues in 2019, greater than the GDP of four of the G20 nations. By comparison, Big Tech’s earnings would make it the #18 largest country by GDP, ahead of Saudi Arabia and just behind the Netherlands.

Big Tech earns billions by capitalizing on their platforms and growing user databases. Through increased growth and adoption of software, cloud computing, and ad proliferation, those billions should continue to increase.

As technology use has increased in 2020, and is only forecast to continue growing, how much more will Big Tech be able to earn in the future?

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How Big Tech Revenue and Profit Breaks Down, by Company

How do the big tech giants make their money? This series of graphics shows a breakdown of big tech revenue, using Q2 2022 income statements.

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In the media and public discourse, companies like Alphabet, Apple, and Microsoft are often lumped together into the same “Big Tech” category. After all, they constitute the world’s largest companies by market capitalization.

And because of this, it’s easy to assume they’re in direct competition with each other, fiercely battling for a bigger piece of the “Big Tech” pie. But while there is certainly competition between the world’s tech giants, it’s a lot less drastic than you might imagine.

This is apparent when you look into their various revenue streams, and this series of graphics by Truman Du provides a revenue breakdown of Alphabet, Amazon, Apple, and Microsoft.

How Big Tech Companies Generate Revenue

So how does each big tech firm make money? Let’s explore using data from each company’s June 2022 quarterly income statements.

Alphabet

breakdown of Alphabet's revenue streams and profit

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In Q2 2022, about 72% of Alphabet’s revenue came from search advertising. This makes sense considering Google and YouTube get a lot of eyeballs. Google dominates the search market—about 90% of all internet searches are done on Google platforms.

Amazon

breakdown of amazon's revenue streams and profit

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Perhaps unsurprisingly, Amazon’s biggest revenue driver is e-commerce. However, as the graphic above shows, the costs of e-commerce are so steep, that it actually reported a net loss in Q2 2022.

As it often is, Amazon Web Services (AWS) was the company’s main profit-earner this quarter.

Apple

breakdown of Apple's revenue streams and profit

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Apple’s biggest revenue driver is consumer electronics sales, particularly from the iPhone which accounts for nearly half of overall revenue. iPhones are particularly popular in the U.S., where they make up around 50% of smartphone sales across the country.

Besides devices, services like Apple Music, Apple Pay, and Apple TV+ also generate revenue for the company. But in Q2 2022, Apple’s services branch accounted for only 24% of the company’s overall revenue.

Microsoft

breakdown of Microsoft's revenue streams and profit

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Microsoft has a fairly even split between its various revenue sources, but similarly to Amazon its biggest revenue driver is its cloud services platform, Azure.

After AWS, Azure is the second largest cloud server in the world, capturing 21% of the global cloud infrastructure market.

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Animation: The Most Popular Websites by Web Traffic (1993-2022)

This video shows the evolution of the internet, highlighting the most popular websites from 1993 until 2022.

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ranking websites by page views 1993-2022

The Most Popular Websites Since 1993

Over the last three decades, the internet has grown at a mind-bending pace.

In 1993, there were fewer than 200 websites available on the World Wide Web. Fast forward to 2022, and that figure has grown to 2 billion.

This animated graphic by James Eagle provides a historical look at the evolution of the internet, showing the most popular websites over the years from 1993 to 2022.

The 90s to Early 2000s: Dial-Up Internet

It was possible to go on the proto-internet as early as the 1970s, but the more user-centric and widely accessible version we think of today didn’t really materialize until the early 1990s using dial-up modems.

Dial-up gave users access to the web through a modem that was connected to an active telephone line. There were several different portals in the 1990s for internet use, such as Prodigy and CompuServe, but AOL quickly became the most popular.

AOL held its top spot as the most visited website for nearly a decade. By June 2000, the online portal was getting over 400 million monthly visits. For context, there were about 413 million internet users around the world at that time.

RankWebsiteMonthly Visits (May 2000)
1AOL400,891,812
2Yahoo387,573,587
3MSN354,239,803
4eBay116,101,785
5Lycos116,064,930

But when broadband internet hit the market and made dial-up obsolete, AOL lost its footing, and a new website took the top spot—Yahoo.

The Mid 2000s: Yahoo vs. Google

Founded in 1994, Yahoo started off as a web directory that was originally called “Jerry and David’s Guide to the World Wide Web.”

When the company started to pick up steam, its name changed to Yahoo, which became a backronym that stands for “Yet Another Hierarchical Officious Oracle.”

Yahoo grew fast and by the early 2000s, it became the most popular website on the internet. It held its top spot for several years—by April 2004, Yahoo was receiving 5.6 billion monthly visits.

RankWebsiteMonthly Visits (April 2004)
1Yahoo5,658,032,268
2MSN1,838,700,057
3Google1,318,276,780
4AOL905,009,947
5eBay805,474,705

But Google was close on its heels. Founded in 1998, Google started out as a simpler and more efficient search engine, and the website quickly gained traction.

Funny enough, Google was actually Yahoo’s default search engine in the early 2000s until Yahoo dropped Google so it could use its own search engine technology in 2004.

For the next few years, Google and Yahoo competed fiercely, and both names took turns at the top of the most popular websites list. Then, in the 2010s, Yahoo’s trajectory started to head south after a series of missed opportunities and unsuccessful moves.

This cemented Google’s place at the top, and the website is still the most popular website as of January 2022.

The Late 2000s, Early 2010s: Social Media Enters the Chat

While Google has held its spot at the top for nearly two decades, it’s worth highlighting the emergence of social media platforms like YouTube and Facebook.

YouTube and Facebook certainly weren’t the first social media platforms to gain traction. MySpace had a successful run back in 2007—at one point, it was the third most popular website on the World Wide Web.

RankWebsiteMonthly Visits (Jan 2007)
1Google7,349,521,929
2Yahoo5,169,762,311
3MySpace1,276,515,128
4MSN1,259,467,102
5eBay957,928,554

But YouTube and Facebook marked a new era for social media platforms, partly because of their ​​impeccable timing. Both platforms entered the scene around the same time that smartphone innovations were turning the mobile phone industry on its head. The iPhone’s design, and the introduction of the App store in 2008, made it easier than ever to access the internet via your mobile device.

As of January 2022, YouTube and Facebook are still the second and third most visited websites on the internet.

The 2020s: Google is Now Synonymous With the Internet

Google is the leading search engine by far, making up about 90% of all web, mobile, and in-app searches.

What will the most popular websites be in a few years? Will Google continue to hold the top spot? There are no signs of the internet giant slowing down anytime soon, but if history has taught us anything, it’s that things change. And no one should get too comfortable at the top.

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