Reading the quarterly of the Big tech companies, one thing is evident above all: Half (Facebook) is worth nearly $ 700 billion less than a year ago, Microsoft sells in terms of Windows and YouTube licenses (of the group Alphabet) for the first time sees a contraction in advertising revenues, as opposed to Amazon that was not born to advertise.
The future seems difficult to interpret but, digging a little deeper, we realize that it has already begun and that the new business models have not yet borne fruit.
A look at the accounts and quarterly reports
Let’s start with Halfthe group to which Facebook, Instagram and WhatsApp belong among others: to give a good idea at first glance let’s say that $ 329.98 it was the price of a share a year ago and $ 96.96today’s price. The quarterly presented on October 26th speaks of a net profit down by 52% to 4.39 billion dollars and turnover down by 4% to 27.7 billion. The causes go beyond those cited by the media and can be proved by flipping through the budgets a bit.
The economic situation, the competition (not just that of TikTok) and the initiatives with which Apple guarantees the privacy of users and makes them less profitable (which has an impact on advertising margins) have a weight. To weigh more, even if it seems less evident, are the activities of Reality Labs, the company department dedicated to the development of virtual reality and the metaverse, which lost 3.7 billion dollars and grossed about 285 million. The attentions of the CEO Mark Zuckerberg they are all aimed at experimentation. And this allows us to draw the first conclusion: in Meta’s future there is above all the metaverse that does not yet exist, is not definitive, has no laws and makes no profit.
Alphabetthe holding company that also includes Google and YouTube – just to mention the most well-known companies – in the last 12 months it has lost 36.7% on the advertising front, leaving a revenue increase of 6% which corresponds to the slowest growth in the last 10 years. YouTube, for the first time in its history, it suffered a contraction in advertising revenues, which fell by 2% and settled at 7.1 billion dollars. Also in this case the surface reason is the competition from TikTok, but there is more: from 2018 to 2021 Google has progressively lost traffic, there are alternatives used mainly by young people and, if it is true that one is TikTok, the other is YouTube. If search engine and YouTube advertising revenues shrink, there is something that needs to be better regulated. It is no coincidence that the ancillary activities of Alphabet are subject to revisions: the laptop division of Google Hardware has been closed, half of the projects of the Area 120 research group have been eliminated and Google Stadia is about to be shut down. Too many business activities away from advertising lead to dispersion and inattention. Meta teaches: it is not enough to have the economic strength to devote oneself to something else, it is also necessary to know how to do it and keep the course.
Amazon’s data is particularly interesting: the online merchant is not the main activity of the Seattle giant, which owes a large part of its turnover to AWS (Amazon Web Services) a set of services via Cloud covering any business need, from relational databases to data analysis. Absurdly, revenues up to 127.1 billion dollars (+ 15%) betrayed the consensus that also revised down the expectations for the next three months. Cloud services are slowing down, but advertising revenue has grown by 25%. It must be said that advertising revenue was 9.55 billion and therefore we are a long way from Alphabet’s 54.48 billion but the trend is traced: where Alphabet grows little and with difficulty, Amazon grows double-digit. Another difference is that for Alphabet, advertising is a core business while for Amazon it is ancillary.
Cases of its own, Amazon and Microsoft
Amazon recorded revenues up to 90.15 billion dollars (+ 8.1%). A result above expectations but, to jarring, are the sales of the iPhone which, despite being up by 9.7% (to 42.63 billion dollars), make analysts turn up their noses who expected better results. The services of Cupertino, a source of income that includes the App Store, Apple TV +, Apple Music, Apple Fitness + and many others, grew by 5%, less than half compared to the + 12% recorded in the second quarter of 2022. CEO Tim Cook – like all the other CEOs of the big tech companies – pointed out that, without the devaluations on the foreign exchange markets, growth would have been much higher.
It’s a half-truth: TikTok and Amazon are growing beyond the turmoil in the currency markets, as is Microsoft. And it is right Microsoft to provide another proof of how the winds are changing: despite having increased revenues by 20% (20.33 billion) compared to the previous quarter, the Windows licensing market continued to lose, leaving 15% on the ground during the 12 months. The cause is to be found in the slowdown in the personal computer market, analysts say acting by analogy, considering that overall PC sales fell by 15.5% over the course of a year.
However, this does not explain why Apple, in the space of a year, has increased Mac sales by 7%. The only explanation is innovation: Cupertino innovates (proof of this are the M1 and M2 processors that have nothing to envy to the more performing chips of Intel and AMD) while the personal computer market is sitting on its own.
All of this suggests that Microsoft is focusing much more on Cloud services than its origins – operating systems. If on Azure (Microsoft’s Cloud computing platform) you can buy everything – servers and virtual computers included – what’s the point of staying anchored to the licensing market? The change, also in this case, is taking place.
More metaverse, more Cloud resources, more services and a new form of advertising, completely different and administered in a different way from how we are used to absorb it today. The quarterly numbers suggest that the big tech companies are changing their skin, not all of them have understood well how to move but it is a matter of time.
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The quarterly of the Big of tech design the future: this is what is happening
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