GAFA

Google

2
2
Google’s revenues have almost grown 3 times between 2016 and 2021.

GOOGLE REVENUE GROWTH

Source: https://www.statista.com/statistics/266206/googles-annual-global-revenue/
Around 82% of Google’s revenues come from advertising down from 97% in 2009.

Advertising Revenues in $ bn
Non-Advertising Revenues in $ bn
250
50 47,25
209,49 45
200 40
34,8
35
146,92
150 134,81 30
25,9
116,46 25
95,58 19,9
100 20
79,38 14,9
15
10,6
50 10

0
0

2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021

Source:
https://www.statista.com/statistics/266249/advertising-revenue-of-google/
https://statstic.com/googles-non-advertising-revenue-is-growing-fast/
4
Google is the global market leader in Digital advertising closely followed by Facebook.

DIGITAL ADVERTISING MARKET SHARE

Source: https://www.emarketer.com/content/duopoly-still-rules-global-digital-ad-market-alibaba-amazon-on-prowl

5
5
 Google Advertisements

Google Search Ads Display Ads (AdSense)

Youtube Ads
(AdWords)

71% of Google’s 14% of Google’s 15% of Google’s

Ad Revenues Ad Revenues Ad Revenues
($149bn) ($28.8 bn) ($31.7bn)

Source:
https://www.moneycontrol.com/news/business/at-31-billion-amazon-beats-youtube-in-advertising-revenue-8037041.html
6
6
GOOGLE SEARCH ADS

• Search Ads includes revenue generated on

Google’s search properties, along with ads

on other Google-owned properties like

Gmail and Maps

7
7
GOOGLE MAPS

Google Maps makes money through two

primary revenue sources:
• Local Ads: Using Google Maps, advertisers
can buy ads for local business listings and
“pins.”
• Google offers Maps API for a fee for other app
developers and businesses (Ex: Uber, Ola, Lyft
etc)
• It is estimated it could be worth $11 billion by
the year 20231.

Note:
https://www.cnbc.com/2021/05/18/how-does-google-make-money-advertising-business-breakdown-.html
https://www.kamilfranek.com/how-google-maps-makes-money/
8
8
YOUTUBE

• YouTube is growing faster than the company’s other major ad sources.

• Youtube advertisement brought in $28.8 bn revenues in 2021

• To be eligible to monetize videos, a channel needs 4,000 public watch hours within the past

12 months, 1,000 subscribers, and must adhere to other prescribed policies of Youtube.

• Youtubers make 68% of advertisement revenue

Note: https://www.cnbc.com/2021/05/18/how-does-google-make-money-advertising-business-breakdown-.html
9
9
ADSENSE

• Launched in mid2003 by Google.

• Over 10 million websites are using Adsense.

• Website can create an adsense account

• Google will display targeted ads on the webpage that are either relevant to the content of the

website or to users’ previous searches, based on its proprietary algorithms.

• Website visitors will start clicking those ads and - the website will be paid for it.

• Publishers (websites) typically get 50% - 68% of the click amount

10
10
Cost per click varies widely across industries.

COST PER CLICK DYNAMICS

• Search or Display ads

• Industry Niche

• Location

• Key Words

• Bidding Rate

11
11
 COST PER CLICK BY INDUSTRY

Source: https://instapage.com/blog/google-ads-industry-benchmarks 12
12
AVERAGE CPC BY COUNTRY

Source: https://instapage.com/blog/google-ads-industry-benchmarks 13
13
CTR – CLICK THROUGH RATE

Source: https://instapage.com/blog/google-ads-industry-benchmarks 14
14
AVERAGE CONVERSION

Source: https://instapage.com/blog/google-ads-industry-benchmarks 15
15
 GOOGLE’S NON-ADVERTISING
REVENUES

16
16
 Google’s Non-advertising
Revenues

Google Other Other Bets

Android, Cloud Computing and Newer technologies such as

Hardware like Google Home. quantum computing and
autonomous driving.

17
17
Google’s non-advertising revenues form 18% of the company’s revenues in FY 2021 up
from just 3.2% in FY 2009.

Year Non – Non-

Advertising Advertising
Revenues in US Revenue as % of
$bn Total Revenues
2009 0.8 3.2%
2015 7.6 10.1%
2021 47.25 18%

Source: Company Documents 18

18
Google Play

• Google Play is a distribution channel for Android apps that Google operates.

• It charges them 30% of the amount consumers pay for the apps or as an in-app payment.

• For regular subscription-based payments, it charges 30% for the first-year subscription consumer

pays and 15% from all subsequent years.

19
19
 Google Play generated revenue of $48 bn in 2021 from it’s Playstore though ios is the
leader with $85 bn

GOOGLE PLAY APP IOSAPP REVENUES

60
REVENUES 90 85,1
80
50 47,9 72,3
70

38,6 60
58,4
40

30,6 50 46,6
30
24,8 40
38,5
21,2 28,6
20 30
15
20
10
10

0 0

2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021

Source: https://www.businessofapps.com/data/app-revenues/
Games remain the primary form of revenue generation for both iOS and Android, accounting for 67% of all
app revenue. Subscription and non-gaming apps forms the rest of the revenues.

Source: https://www.businessofapps.com/data/app-revenues/
Android reduces the customer acquisition costs and give higher bargaining power
to Google
STRATEGIC ADVANTAGE DUE TO ANDROID
• Due to Android, Google Apps are loaded in all Android run smart phones

• Without Android, Google would have had to spend big to get it’s search engine, and other apps

like Maps, Youtube, Music, Pay etc on smart phones.

• Higher Bargaining power w.r.t smart phone manufacturers.

22
Google’s Revenue from the distribution of Movies, Music, Video, and Books.

• Apart from the app store, Google get revenues from Play Movies & TV, Play Book, Youtube
subscription without ads.
• For example, Google has more than 42 million subscribers for its music-streaming service.
• These apps are part of “must-have” apps that phone manufacturers have to include on every
Android phone if they want to install Google Play on it.

Source: https://www.theverge.com/2022/1/20/22892939/music-streaming-services-market-
share-q2-2021-spotify-apple-amazon-tencent-youtube
23
23
Amazon is the leading player in the global smart speaker market, with 26%
percent share while Google follows with 20 % share
GLOBAL SMART SPEAKER MARKET SHARE

Globally, the Smart speaker

market was $9.04 bn in 2021

and is growing at 21%

CAGR to reach $34 bn in

2028

Source:
https://www.statista.com/statistics/792604/worldwide-smart-speaker-market-share/
https://www.globenewswire.com/news-release/2022/02/09/2381477/0/en/Smart-Speaker-Market-to-Rise-to-USD-34-24-Billion-by-2028-Rising-
Smart-Home-Trend-to-Propel-Growth-Fortune-Business-Insights.html
Google is the 3rd largest player in the cloud market.
GOOGLE CLOUD

Source: https://www.statista.com/chart/18819/worldwide-market-share-of-leading-cloud-infrastructure-service-providers/
GOOGLE – MOTOROLA STORY
• Acquired Motorola Mobility for $12.5 billion in 2012.
• Most analysts believed Google simply wanted Motorola’s 17,000 technology patents.
• But they also wanted to sell smartphones, which Google had been trying to do on its own with
its Nexus line of smartphones, but with limited success.
• Following Apple’s lead in owning both the hardware and software sounded great but the
realities of the market made it nearly impossible.
• Google couldn’t play favorites with Motorola for fear of alienating other handset manufacturers
that also use Android.
• Ultimately, Google sold Motorola to Lenovo group for $2.9 bn in 2014.
• Retaining of majority of patents was the only benefit to Google.

26
26
 Amazon

27
27
Amazon has grown 3.5 times between 2016 and 2021.

AMAZON 10 YEAR GROWTH

Amazon’s YOY
Revenues growth
in $bn
2021 $470 22%
2020 $386 38%
2019 $280.5 21%
2018 $232 36%
2017 $170 25%
2016 $136 27%
2015 $107 20%
2014 $89 19%
2013 $74.5 22%
2012 $61 27%

Source: Company Reports

Amazon is more than an online
Amazon retailer
has multiple and
very gets
fast roughly
growing gets 47% of it’s revenues from
segments.
non e-commerce sales.
AMAZON: KEY REVENUE BY SEGMENT (US $BN)
Online Stores Physical Retail third Subscription Amazon Web
Stores party seller services Services
services

2014 68.51 11.75 2.75 4.64

2015 76.86 16.09 4.47 7.88
2016 91.43 22.99 6.39 12.22
2017 108.35 5.8 31.88 9.72 17.46
2018 122.99 7.22 42.75 14.17 25.66
2019 141.25 17.19 53.76 19.21 35.03
2020 197.35 16.23 80.46 25.21 45.37
2021 222.08 17.08 103.37 31.77 62.2

Source: https://www.statista.com/statistics/672747/amazons-consolidated-net-revenue-by-segment/
 All segments registered healthy growth in 2021

250 13%
222,08 AMAZON SEGMENTWISE GROWTH
197,35
200
2020 2021

150
28%
103,37 36%
100
80,46 26%
62,2
5% 45,37
50
25,2131,77
16,23 17,08
0
Online Stores Physical Stores Retail Third party Subscription AWS
Seller Services Services

Source: https://www.statista.com/statistics/672747/amazons-consolidated-net-revenue-by-segment/
In Q4 2021, though AWS constitute only 13% of revenues, they contributed to close to
100% of Amazon’s operating income as other two divisions made loss in that quarter.
AMAZON: REVENUES AND PROFITS

Source:
https://www.investopedia.com/how-amazon-makes-money-4587523
 AMAZON: ONLINE ECO-SYSTEM
• Online-store revenue remains the foundation of Amazon's business and also grew at 13% in
2021.
• Geographically US is the biggest market for Amazon.
• Aside from its online sales, Amazon also made $103 billion on third-party registering 28%
growth in 2021.
• These include commissions, shipping fees, and other seller services tangentially related to the
corporation's online shopping empire.
Amazon has been focusing on physical stores both in US and in other geographies

AMAZON: PHYSICAL STORES

• Acquired Whole Foods in 2017 for $13.7 bn
• Online ordering from Whole Foods in many cities and selling Amazon
Grocery Stores
devices in the store

• Offering ultra-convenience, the store sells grocery items and prepared

Amazon Go foods.
• The first-of-its kind physical store without cashiers or checkout lines.
• https://www.youtube.com/watch?v=NrmMk1Myrxc

• Tapping into the FOMO (fear of missing out) concept, the popular
Treasure Truck has expanded to 30 cities, according to Amazon’s
Roaming Treasure Truck website.
• Each truck contains new, trending and local hand-picked items, stirring
up excitement and anticipation as it cruises through cities.
• https://www.youtube.com/watch?v=beRphtBRyD8
Amazon has been investing in some of the existing physical stores in India

AMAZON: PHYSICAL STORES

• In 2017, Amazon bought 5% of ownership in department store chain

Shoppers Stop for Rs179.25 crore.
Investments in Indian • In 2018, Amazon invested in Aditya Birla Group’s food and grocery
Stores retail chain More
• In January 2020, acquired 49% stake in Future Coupons the deal gave
Amazon around a 3.6% share in Future Retail Limited
Cloud
 • Defined simply, cloud computing is the delivery of computing

Global Cloud Market Size services—including servers, storage, databases, networking,

in US $bn
1000 947 software, analytics, and intelligence—from proprietary data
900
16.3%
800
centres over the internet (“the cloud”)
700
600
• Why faster adoption of Cloud?
500 445
400
• Lower the cost
300

• Flexibility
200
100

• Fast scale-up
0

2021 2026
• Access to latest technologies

• Companies to focus on their core business

Source: https://www.marketsandmarkets.com/Market-Reports/cloud-computing-market-234.html
 Asia Pacific is going to be the next biggest growth driver for Cloud market

REGIONAL DYNAMICS

• North America and Europe account for more than 70% of cloud market.
• Going forward Asia pacific will be the growth driver with > 30% CAGR in the next 5 years.
• Top players are building ore data centers in Asia Pacific region

Source: Mordor Intelligence

AWS, the early winner, dominated market share since the birth of the industry

COMPETITIVE LANDSCAPE

• Cloud computing took off with the

creation of AWS and the introduction
of its Elastic Compute Cloud (EC2) in
2006.
• Microsoft launched Microsoft Azure
in 2010.
• Google Cloud Platform (GCP) was
released in 2013.
AWS investment in Cloud is more than that of the next 3 players combined.

Global Cloud Infrastructure Spending and Growth by Company

Cloud Service Investment in Market Share Annual Growth

Provider 2019 in US $bn in 2019
Amazon Web 35 33% 36%
Services
Microsoft Azure 18 16% 64%
Google Cloud 6 8% 88%
Alibaba Cloud 5 5% 64%
Others 43 40% 23%

Source: Canalys
 AWS
• Global leader with first mover advantage.

• Has the most complete and technically advanced system, it expanded aggressively.

• It boast over 165 fully featured services and claims over 40 of which were not available

anywhere else.

• Having their own Ecommerce.

• AWS boast an impressive list of customers including Netflix, LinkedIn, Facebook, Expedia,

Cars.com and even NASA, which streamed images received from its space rover Curiosity,

through the AWS cloud

• Though AWS contributed to only 13% of Amazon’s revenues in Q4 2021, it contribute 100%

of it’s operating profits.

 Microsoft Azure

• Launched more than four years after AWS

• Microsoft’s has huge installed base and cross-sold it’s cloud services to the companies that

used MS technologies.

• Targeted retailers who wanted to avoid AWS due to competitive threat such as eBay,

Walgreens, ASOS and Bemol (a Brazilian retail powerhouse).

• Companies like Dell, British Heart Foundation, Heineken, Samsung, SMRT (Singapore’s main

transport provider) and DBS Bank are also among Microsoft Azure’s customers.
GOOGLE CLOUD PLATFORM
• Late entrant having neither Amazon’s retail muscle nor Microsoft’s enterprise sales pedigree.
• GCP gained traction among banks and financial services firms
• A partnership with SAP help GCP to expand among SAP’s clients.
• GCP offers lower pricing and higher speed of 10tbs
• With Spotify, Apple, Lush Cosmetics and Evernote part of its impressive clientele, GCP
emerged as a strong competitor.
• Revenue increased from just $4 bn in 2017 to $19 bn billion in 2020.

Source: https://www.statista.com/statistics/478176/google-public-cloud-revenue/
ALIBABA CLOUD

• Alibaba Cloud, Aliyun was established as a subsidiary of the Alibaba Group in 2009.
• On Singles Day in 2020 (11.11), handled more than $74 billion in transactions which is a world
record.
• Face challenges for expansion outside China.
• Since 2015, increased focus on global expansion.
• Key global clients include MNCs like K’archer and Ford, Cathy Pacific, Air Asia, IHG.
 Amazon Ads

44
44
 Amazon’s advertising revenues has growth 2.5 times between 2019 and 2021.

Source:
https://www.statista.com/statistics/259814/amazons-worldwide-advertising-revenue-development/
45
Amazon is more preferred by Consumer Packaged Goods companies
AMAZON’S GROWTH

A poll of more than 2000 U.S.

consumers confirmed this
preference, with 66 percent of
participants saying that Amazon is
their first stop when looking for a
new product, not Google.

Source: https://www.webfx.com/blog/marketing/amazon-vs-google/
46
46
AMAZON ADVANTAGES

• Sellers are advertisers - Over 600 million products available on Amazon in the US
alone. Neither Google nor Facebook is into retailing
• All advertisements are internal generating revenues for sellers and Amazon
• User intent:
 Google and Facebook uses many signals to understand the user intent
 However, user intent is clear when it comes to Amazon searches: the
searcher is there to buy a specific product.
• Amazon Video Platforms
 OTT platforms like IMDB, Twitch contributes 11% of ad revenue

47
47
 AMAZON PRIME

• Amazon prime bring direct revenues based on

subscription

• It also brings indirect revenues as Prime

members buy double the amount of products

compared non-prime members on Amazon.

• Increased its pricing in Mar. 2022 from $119 per

year to $139 per year in US

 Global OTT market size will grow at a CAGR of 14% to reach $156.9 bn in 2024.

https://www.marketsandmarkets.com/Market-Reports/over-the-top-ott-market
Amazon is the second largest player in the OTT market after Netflix.

Source: https://www.businessofapps.com/data/netflix-statistics/
In India, Disney is the market leader with more than 40% share while Amazon comes distant 3rd
after Eros Now.

Source: https://www.exchange4media.com/digital-news/disney-hotstar-has-41-share-of-indian-online-
video-subscription-market-omdia-112817.html
Fire Phone
 AMAZON FIRE PHONE

• Launched: 25th July 2014.

• Estimated sales of only 35,000 in first 20 days and a few lacs through it’s lifetime
• In October 2014, during the announcement of 3rd quarter financial results, Amazon stated they
took a $170 million hit due to costs associated with the Fire Phone and had over $83 million worth
of Fire Phones in inventory
• Discontinued: 27th August 2015
 WHY FIRE PHONE FAILED?

PRICE
 Amazon has a history of undercutting competitors on everything.
 But the Fire Phone launched at a very high price of $199, essentially the same price as the iPhone
and high-end Samsung Galaxy.

SMALL APP STORE

 Amazon’s app store had about 2,40,000 aps compared to more than 1 million in the Google Play
store.
 WHY FIRE PHONE FAILED?
DON’T BE DIFFERENT (UNLESS YOU ARE APPLE)
 Had separate operating system called Fire OS.
 But in this market, if you're not using ios or Android, customers don't care.
 In the first quarter of 2015, Apple's worldwide smartphone market share was 18 percent, while
Android's was 78 percent, remaining 4 percent for the likes of Microsoft and BlackBerry.

LATE TO MARKET

 When Fire Phone was launched, Apple was on its eighth generation of iPhones, and Android
devices have been around nearly as long.
 Smartphones accounted for 72 percent of the overall mobile market in the U.S.
ALEXA
Amazon is the leading player in the global smart speaker market, with 26%
percent share while Google follows with 20 % share
GLOBAL SMART SPEAKER MARKET SHARE

Globally, the Smart speaker

market was $9.04 bn in 2021

and is growing at 21%

CAGR to reach $34 bn in

2028

Source:
https://www.statista.com/statistics/792604/worldwide-smart-speaker-market-share/
https://www.globenewswire.com/news-release/2022/02/09/2381477/0/en/Smart-Speaker-Market-to-Rise-to-USD-34-24-Billion-by-2028-Rising-
Smart-Home-Trend-to-Propel-Growth-Fortune-Business-Insights.html
 ALEXA
• Amazon rectified the errors it made in Fire Phone:
• First Mover
 Amazon Echo launched in June 23, 2015
 Google Home launched Google Home in November 4, 2016
 Apple Homepod launched in February 9, 2018
• Price (May 2019)
 Amazon Echo - $99 , Google Home – $130, Apple Homepod- $349
 Entry level Price
 Amazon Echo Dot (3rd Generation)- $50, Google Nest Mini (2nd Generation) - $50
• Features
• Amazon Echo is the most compatible with both Android and ios, while Google Home is most
suitable for Android users and Apple Homepod is most suitable for customers in the Apple
Ecosystem with an iPhone, Apple TV, and HomeKit
Facebook
Facebook ’s revenues and profits have grown more than 4 times between 2016 and 2021.

FACEBOOK REVENUE GROWTH

Source: https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/
KEY TAKE AWAYS FROM FACEBOOK NUMBERS

• Biggest and most powerful social network.

• From only 20 million monthly active users in 2007 to more than 2.9 billion in 2021

• 1.9 billion daily active users in 2021.

Source: https://backlinko.com/facebook-users
Time spent by people in social media has been increasing continuously.

• In the US, 45% of adults report that

they get some or all of their

Apologies by Zuckerberg/Facebook
news from Facebook (and this

percentage is even higher for

younger and less educated adults).

Source: https://www.oberlo.in/blog/social-media-marketing-
statistics#:~:text=The%20latest%20social%20media%20statistics%20show%20that%20there%20are%203.78,of%20the%20current%20world
%20population.
Of all the GAFA companies, Facebook is least diversified in terms of revenues.
FACEBOOK: REVENUE BREAK-UP

3%

98%

Family of Apps Reality Labs

Source: https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp
Business Model
 No one knows more about consumers than Facebook.

The core of Facebook’s business model is charging advertisers for access to precisely

targeted segments of their massive consumer database.

Biggest competitor of Facebook is “Data Privacy laws”

 WHETHER FACEBOOK SELL DATA?
"There's a very common misperception about Facebook - that we sell data to advertisers. we do
not sell data to advertisers. We don't sell data to anyone..”

- Mark Zuckerberg

Source:
https://www.businessinsider.in/how-facebook-makes-money-from-your-data-in-mark-zuckerbergs-
words/articleshow/63717594.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
• Mark Zuckerberg had to go through US Congressional testimony in April 2018 and was grilled
for about 10 hours.

https://www.youtube.com/watch?v=ncbb5B85sd0
Anna Eshoo (D-CA): Are you willing to change your business model in the interest of protecting individual
privacy?
Zuckerberg: Congresswoman, we are — have made and are continuing to make changes to reduce the amount
of ...

Anna Eshoo: No, are you willing to change your business model in the interest of protecting individual
privacy?
Zuckerberg: Congresswoman, I’m not sure what that means.

Frank Pallone (D-NJ): I'd like you to answer yes or no, if you could. Will you make the commitment
to changing all the user default settings to minimize, to the greatest extent possible, the collection and use of
users' data?
Zuckerberg: Congressman, this is a complex issue that I think deserves more than a one-word answer.
• By most accounts, Mark Zuckerberg’s Congressional testimony was a resounding
success.
• From beginning to end of the Congressional hearing, Facebook’s market cap increased
by $34 billion.
1. Why Facebook will always have problems with Data Privacy more than Google or

Amazon?

2. Why Facebook will not charge user fees?

3. Why Facebook will not focus on spreading

Apologies balanced or nuanced views?
by Zuckerberg/Facebook
4. How facebook can influence how you act?

5. Why users are still in facebook despite knowing their privacy is invaded?
 Why Facebook will
Apologies by Zuckerberg/Facebook
always have problems
with Data Privacy?
FACEBOOK VS PRIVACY

• Facebook faces an inescapable tradeoff between protecting the privacy of its users and increasing its growth

and profitability.

• The more restrictive Facebook becomes related to user information, the lower the “rent” Facebook can

charge for from advertisers for targeted ad placements.

• For example, if an advertiser wants to promote a woman’s beauty product, it would be willing to pay a

relatively high price per thousand impressions (CPM) if it knows its ads will only be seen by customers

with the highest purchase potential (e.g., defined by gender, income, location, purchase history, interest

and willingness to pay for premium cosmetics, etc.).

• Since Facebook knows more about more consumers than anyone, they provide advertisers with uncanny

precision in reaching precisely the right audiences..

 Why Facebook
Apologies will not
by Zuckerberg/Facebook
charge user fees?
 Why Facebook will not charge users?

• Facebook’s average revenue per user (ARPU) in 2021 was $401.

• It is estimated that more than 90% will leave Facebook if it charge users

• Hence, to replace this revenue in an ad-free service, Facebook would have to charge each remaining user

more than $400 per annum

• That’s why on the logic for charging user fees, Zuckerberg commented “that sounds ridiculous to

me!”

Source:
https://www.statista.com/statistics/234056/facebooks-average-advertising-revenue-per-user/
 Why Facebook will not
focus
Apologies byon spreading
Zuckerberg/Facebook
balanced or nuanced
views?
Facebook’s tryst with serious content
• Facebook had made some efforts to recruit reputable news organizations to publish
content directly on its platform, with the promise to share advertising revenues.
• The New York Times, Washington Post, The Atlantic and others signed up for the “Instant
Articles” initiative, but user engagement and financial returns proved disappointing, and
Apologies
most publishers quit within a year andby Zuckerberg/Facebook
hence Facebook abandoned this plan.
• Zuckerberg’s statement on abandoning serious journalism:
“We've gotten feedback from our community that public content – posts from businesses,
brands and media – is crowding out the personal moments that lead us to connect more with
each other. Based on this…I'm changing the goal I give our product teams from focusing on
helping you find relevant content to helping you have more meaningful social interactions.”
 Facebook Newsfeed Algorithm

• The algorithms that control what you see or don’t on your News Feed – are designed to maximize shares

and likes.

• Facebook’s News Feed algorithms now generally rank news stories lower than opinion pieces, and

complicated, nuanced topics lower than simple ones even more so than in the past.

• Ditto for posts from friends that reaffirm your political beliefs compared to more nuanced non-partisan

public policy viewpoints that attract fewer Likes.

We are a Technology Company not a Media Company
• Zuckerberg’s version is:

“We’re a technology company; we’re not a media company. When you think about a media

company, you have people who are producing content, who are editing content, that’s not us.

Apologies
We’re a technology company. by Zuckerberg/Facebook
We build tools. We do not produce any of the content.“
Apologies by can
“How facebook Zuckerberg/Facebook
influence how you act”
 Facebook Election Day Experiment

• Facebook has also performed experiments with numerous academic researchers to measure its impact on how

you act.

• For example, consider the decision on whether or not to vote in Congressional elections

• Facebook collaborated with researchers at the University of California, San Diego to test the effectiveness of

alternative messages posted by Apologies by Zuckerberg/Facebook

Facebook on Election Day, 2010.

• The experiment assigned all US Facebook users over 18 who accessed the website on November 2, 2010 to one of

three groups.
 Group 1
• For 1% of the users, Facebook sent the following message:

Group 2
Apologies by Zuckerberg/Facebook
• For 98% of the users, Facebook sent the following message

Group 3
• For the remaining 1% of users, Facebook did not send any message
 RESULT

Researchers compared publicly available voting records with the data on Facebook user

behavior to determine that the more effective social message prompted an estimated 3,40,000

to vote who otherwise wouldn’t have.

 Why users are still in facebook despite
Apologies by Zuckerberg/Facebook
knowing their privacy is invaded?
 Percentage of Facebook users who agree or strongly agree with the statement "Facebook is
committed to protecting the privacy of my personal information"

Apologies by Zuckerberg/Facebook

Source: Ponemon Institute, “Facebook’s Privacy Trust: Impact of the Recent Privacy Mega Breach,”
 Why many users are not unduly worried about privacy breach?

• Habituated or even addicted

• Facebook has become integral part of daily lives
• FOMO
• No other alternative
Apologies by Zuckerberg/Facebook
• Most folks simply don’t make a connection between their individual activity and the breach
of privacy
 Typical customer response to privacy breach

“I’ve heard that my Facebook data is being spread around for all kinds of reasons, but that doesn’t bother me. I never

bother to look at the Facebook ads in my News Feed and there’s nothing in my boring posts that would be of any

interest to anyone other than my friends. Sure it bugs me when I hear all these stories about fake news and election
Apologies by Zuckerberg/Facebook
meddling, but really, what does that have to do with me? I’m just sharing personal tidbits with my friends. And let’s

be honest, there really isn’t an alternative to Facebook."

Why people are still in Facebook?

“…the price advertisers are willing to pay Facebook to invade users’ privacy is vastly greater
than the price most consumers would be willing to pay Facebook to protect their privacy.”

Len Sherman, Executive in Residence and Adjunct Professor at Columbia

Business School.
 Apple

https://www.youtube.com/watch?v=JlptP2bpWD8
Apple has been struggled for growth from 2015 to 2020 but it’s share price increased from $27.33
on 2nd January 2015 to $154 on 6th September 2021.
APPLE PROFITS
APPLE REVENUES

Source:
Company Reports
 APPLE : INITIAL YEARS
• Steve Jobs and Steve Wozniak, a pair of 20-something college dropouts, founded Apple
Computer on April Fool’s Day, 1976.
• Launched Apple II in April 1978.
• Quickly became the industry leader and also revolutionized the personal computer (PC)
industry.
• IBM entered the PC market with MS DOS and Intel microprocessor and became No. 1 in the PC
industry in a couple of years.
• Apple responded by introducing the Macintosh in 1984.
• Mac’s slow processor speed and lack of compatible software limited sales.
• Apple’s net income fell by 62% between 1981 and 1984, sending the company into a crisis.
• Steve Jobs, was forced out in 1985 and the boardroom coup left John Sculley, the executive
whom Jobs had recruited from Pepsi-Cola, alone at the helm.
 The Sculley Years, 1985–1993

• Sculley pushed the Mac into new markets, most notably in desktop publishing and education.

Apple’s worldwide market share recovered and stabilized at around 9% .

• Macintosh’s loyal customers allowed Apple to sell its products at a premium price.

• By 1990, Apple was the most profitable PC company in the world with gross profit of around

50%

• Apple devoted 9% of sales to research and development (R&D), compared with 5% at Compaq

and only 1% at many other IBM-clone manufacturers.

• Under the leadership of Sculley, Apple's sales multiplied from $982 million in 1983 to $7.9

billion in 1993 and the company had $ 2 bn in cash and $200 mn in debt.
 The Spindler and Amelio Years, 1993–1997

• Tried to slash costs and pushed for international growth, but Apple lost momentum.

• A 1995 Computerworld survey found that none of the Windows users would consider buying a

Mac, while more than half the Apple users expected to buy an Intel-based PC.

• Following a $69 million loss in Apple’s first fiscal quarter of 1996, the company appointed

another new CEO, Gilbert Amelio

• Apple lost $1.6 billion under Amelio. At one point, insiders believed that Apple was within 90

days of bankruptcy

• To save the company, Jobs became the company’s interim CEO in September 1997
 RETURN OF STEVE JOBS AND QUICK TURN AROUND

• Apple posted $1 bn loss in 1997 and was within 90 days of bankruptcy

• To save the company, Jobs became the company’s CEO in September 1997.
• Jobs believed in focus. He immediately cut the number of product lines from 15 to 4 and said
that Apple will have the one of the narrowest product lines of any company of comparable size.
• Tim Cook, hired by Jobs in 1998 after a career in operations at Compaq and IBM, was credited
with streamlining Apple’s supply chain.
• Launched iMac at $1299 in August 1998.
• This marked the first real coup of Steve Jobs after return.
• Apple posted a $309 million profit in its 1998 fiscal year.
 Services and wearables contribute to around 30% of Apple’s revenues

Revenue Share by Product Category in 2012 Revenue Share by Product Category in 2021

[CATEG
[CATEG [CATEG [CATEG ORY
[CATEG
ORY ORY ORY NAME],
ORY
NAME], NAME], NAME], 10%
NAME],
8% 3% 19%
4%
[CATEG
ORY [CATEG [CATEG
NAME], ORY ORY
15% NAME] - NAME], [CATEG
51% 9% ORY
[CATEG NAME],
[CATEG
ORY 54%
ORY
NAME],
NAME],
20%
8%

Source: Company Reports

Mac sales was stagnant between 2016 and 2019 but though increased in 2020 and 2021 due
to pandemic.

Mac Sales

https://www.businessofapps.com/data/apple-statistics/
ipod
• Jobs’s shift toward a digital hub strategy was initiated by the
debut of the iPod in 2001, followed by the iPhone in 2007, then
the iPad in 2010.
• The iPod could initially sync only with a Mac. Jobs reportedly
declared at one point that Windows users would get iPods
“over my dead body”
• Apple’s executive team pushed Jobs to change his mind, and he
ultimately relented.
• Opening the iPod provided access to the vast market of
Windows users.
• Apple has sold more than 400 million iPods since its launch.
• Currently, iPod contribution to Apple’s revenues is negligible.
 THE iPhone

• At the January 2007 Macworld, Jobs introduced the

iPhone, saying, “Every once in a while a revolutionary

product comes along that changes everything. Today,

we’re introducing three revolutionary products of this

class. The first one is a widescreen iPod with touch

controls. The second is a revolutionary mobile phone. And

the third is a breakthrough Internet communications

device. . . . These are not three separate devices, this is one

device, and we are calling it iPhone.”

 THE iPhone

• Entry into mobile phones might have been a risky move for Apple. At the time, the industry was
dominated by Nokia, Motorola, and Samsung, with a roughly 60% market share.
• More than 2 bn iphones sold since it’s launch
• Though iphone’s share in the global shipment was just 13% of the Smart phone market, it’s share
in revenue was 40% and share in profits was 75% of the handset industry’s profits in 2021
• Apple hugely succeeded in its premium pricing - the price of the base version iPhone 11, for
instance, was more than triple the ASP of Android smartphones ($699 vs. $214).
• It reduced costs relentlessly – the material costs of a typical iphone was just 45% of its price.

Source:
• https://www.counterpointresearch.com/global-handset-market-operating-profit-q2-2021/
• “Global average selling price of smartphones from 2010 to 2019,” https://www.statista.com/statistics/484583/globalaverage-selling-price-
smartphones/, accessed January 15, 2020.
• Ed Hardy, “iPhone 11 Pro Max Production cost is shockingly low,” Cult of Mac, October 12, 2019, https://www.cultofmac.com/658650/iphone-
11-pro-max-production-cost-bill-materials-bom/, accessed January 15, 2020.
iphone sales which was stagnant after the peak of 2015 picked up in 2020 and 2021.
iphone Sales by Region in millions

229.2 210.6 217.1 218.8 187.8 201.4 242

Total

https://www.businessofapps.com/data/apple-statistics/
 Moving beyond iphones - ipad

“Some people say, Give the customers what they want. But that’s not my approach. Our
job is to figure out what they’re going to want before they do.”

- Steve Jobs in 2010 during the ipad launch

 Moving beyond iphones - ipad
• Apple’s release of the iPad on March 2, 2010 – Last
major product launch by Steve Jobs before his
demise.
• Before the iPad, tablet sales were trivial.
• When the iPad launched, market demand was
uncertain at best.
• More than 450,000 iPads were sold during its first
week on the market.
• Though at-least 20 manufacturers launched tablets
in the next few years Apple has maintained its
leadership with 31.7% share in 2021 with Samsung
at the second place with 20% share

Source: https://9to5mac.com/2021/05/01/idc-apple-tablet-market-ipad/
Apple saw an impressive 57 percent increase in iPad sales in 2020, primarily due to the
coronavirus pandemic but sales dropped in 2021.

ipad Sales

https://www.businessofapps.com/data/apple-statistics/
New Growth Engines: Wearables,
HomePod, and Services
• Apple under Steve Jobs had revolutionized four industries: PCs, music, cellphones, and
tablets.
• It became obvious to Tim Cook and his team that Apple would need to diversify its
revenue stream beyond smartphones.
• Apple attacked three big markets: wearables, voice-based devices, and new services.
• The contribution of Wearables, Homepods and Services increased to over 29% of
Apple’s revenues in 2021 compared to just 11% in 2012
Apple Watch

• Launched in September 2014

• The parts and manufacturing costs for the $349 base
version of the Apple Watch totaled around $84,
giving it a cost/price ratio of 24%.
 Apple Watch sales increased almost 570% in 5 years since it’s launch in 2015.

Apple Watch : Sales Volume

https://www.businessofapps.com/data/apple-statistics/
 Apple is the market leader in smart watch segment with the next player Samsung far behind.

Apple Watch Market Share

Source: https://www.counterpointresearch.com/global-smartwatch-shipments-market-share/
Apple Airpods

“…representative of the trademark Apple arrogance,

indicative of a company culture in which doing what’s

logical and consumer-friendly is often conflated with

doing what Apple executives think is best…standards be

damned.”
-Verge, September 7, 2016,

Source: https://www.theverge.com/2016/9/7/12838024/apple-iphone-7-plus-headphone-jack-removal-courage,
What were panned by many as pricey accessories have become mainstream, with almost
every phone manufacturer offering their own ‘hearable’ to compete with Apple.

Apple Airpods
• Apple quickly sold out its entire stock of the new $159
earbuds after releasing them in December 2016.
• Apple’s AirPods lineup had also expanded to include a
$200 pair with a wireless charging Case and the $249
AirPods Pro, which were noise canceling and water
resistant.
• Apple’s Q3 2021 market share fall from 37.6%, to 24.6%.
However, that still left Apple with more than twice the
share of its nearest rival, Samsung, at 12%.
• Fall in Sales can be partly attributed to the customers
postponing Apple Airpod purchase waiting for 3rd Source: https://www.businessofapps.com/data/apple-statistics/
generation model

Source: https://www.counterpointresearch.com/global-true-wireless-hearables-
market-reaches-27-million-units-q2-2019/,
Though Apple sits far behind Amazon and Google in market share, it almost doubled its
market share in 2021 with the launch of Homepod mini.

Apple Homepod

• Apple entered the smart speaker market with the

HomePod in early 2018.
• This segment is dominated by Amazon Echo and
Google Home.
• By launching Homepod mini, Apple Managed to
almost double the market share from 5.9% in 2020 to
10.2% in 2021
Source: https://www.businessofapps.com/data/apple-
statistics/
 Services

Subscription services
App store
Though iphone has a market share of just 13% compared to 71% of Android phones, ios app revenues is much
higher than that of google play store.

GOOGLE PLAY APP IOSAPP REVENUES

60
REVENUES 90 85,1
80
50 47,9 72,3
70

38,6 60
58,4
40

30,6 50 46,6
30
24,8 40
38,5
21,2 28,6
20 30
15
20
10
10

0 0

2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021

Source: https://www.businessofapps.com/data/app-revenues/
Apple saw the number of subscribers to its services increase dramatically over the
past six years.
Subscription Services

Includes subscriptions to
iCloud, Apple Music, Apple
TV+, Apple Arcade, Apple
News+, Apple Fitness+.

Source: https://www.businessofapps.com/data/apple-statistics/
 Subscription Services
Apple music
• Music Streaming Service
• As of 2020, Apple Music had more than 60 million subscribers.
• Apple overtook Spotify to become the most popular music streaming service in the United
States in April 2019.
Applecare
• A collection of extended warranties, protection plans, and other forms of coverage for Apple
products, for which customers could pay a single upfront fee or a monthly subscription, which
varied depending on the product.
• AppleCare generated $6.5 billion of revenue in 2019

Source:
https://www.theverge.com/2019/6/27/18761603/apple-music-60-million-subscribers-eddy-cue-spotify
https://www.wsj.com/articles/apple-music-overtakes-spotify-in-u-s-subscribers-11554475924
 Subscription Services
Apple Arcade
• Game subscription service
• Charging $4.99 per month for access to 100 games exclusive to Apple, users could play games
on multiple Apple devices including the iPhone, the iPad, and Apple TV.
• At the time, players in the video game subscription space were numerous and diverse: prices
ranged from $5 to $15 per month, catalogs ranged from 100 to more than 800 titles.
• EA access, had 5 million subscribers, and PlayStation had 1 million subscribers.
• But still Apple Arcade has acquired 12 million subscribers by the end of 2020

Source: https://9to5mac.com/2021/04/06/poll-has-your-opinion-of-apple-arcade-improved-with-the-arrival-of-
classic-ios-games/#:~:text=Apple%20has%20never%20discussed%20Apple,by%20the%20end%20of%202020.
 APPLE IN FUTURE
• Would Apple be a hardware-first or a services-first?
• How might a services-first mentality change Apple’s strategy?
• Apple had also long relied on its ability to differentiate its products. If services were key, how
would Apple differentiate those services?
• And finally, what type of skills did Tim Cook want in the next CEO?
• Cook became 60 years old in 2020.