The Powers That Be Internet Edition Google Apple Facebook Amazon and Microsoft

 

  1. Focus on the Frightful Five (Google, Apple, Facebook, Amazon, and Microsoft):
    • Discuss the business models of the Frightful Five as of today. You should discuss each company’s sources of revenue and the percentage from each source if such information is available.
    • Do you see any similarity of the business model evolvement of the Frightful Five?
    • What are the recent tech trends that investors and businesses should pay attention to based on what the Frightful Five are doing?

Start your answer here:

  • The vast majority of Google revenue comes from advertising via its search engine and its AdSense program, which places ads on millions of websites. Google’s revenue is largely made up of advertising revenue, which amounted to 134.81 billion US dollars in 2019. (Statista)

In 2019, the revenue of Facebook reached at a level of $70.7 billion from $55.8 billion in the preceding year. Its major source of income is digital advertising. (Statista).

The business model of Apple’s on the other hand is not only cantered around consumer consumer-centric devices but also provision of relevant services. The company can maintain its base because of easy-to-use designs and data migration to new product lines.

Microsoft’s success is built on the licensing of its own developed software like Windows and Office Suite. They also offer numerous other software as well. They also have a slight shift to their business model as they are also releasing their own devices in direct competition to that of Apple.

The business model of Amazon is a subscription-based business model that centered around not only its Amazon Prime service, but it also charges commissions on the sales made at its platform. It also has a small electronics product line. Under a Prime account, customers pay an annual fee to secure free two-day or same-day shipping on eligible items.:

  • There is a business model similarity as most of them are subscription-based and earn revenue from advertising. And they are more than companies and acting like governments than corporations because they’re doing things that the government usually do in terms of innovation.
  • Many businesses are now investing in artificial intelligence, as AI will have a breakout moment in manufacturing. Artificial intelligence is now part of everyday life, driven by the emergence of a device ecosystem. Furthermore, there is a great scope of IoT (internet of things) that IoT has many mainstream applications today as some predicted.
  1. Focus on the Frightful Five (Google, Apple, Facebook, Amazon, and Microsoft):
    • Discuss Exhibit 4 & Exhibit 10, link the numbers to business models and market conditions (e.g., financial market, consumer market, and tech market).
    • Look at Exhibit 2 & Exhibit 5, and discuss the stock trend of the Frightful Five. Link the trend to the business models and the market conditions.

Start your answer here:

  • Exhibit 4

Market capitalization refers to the total dollar market value of a company’s outstanding shares of stock.The market capitalization of Apple Inc. is high which shows that the size of Apple Inc is bigger than the other four.

Revenue is also high than others but gross profit is low comparatively which shows that there is a cost of sales which is higher than others, it may be because Apple products are better and high tech than others. The EBITDA margin is better also for Apple Inc than others, the operating expenses would below. Apple is a high tech company that’s why the cost of sales is high.

  • Exhibit 10

According to the report of Net display add revenue, Facebook earned the highest revenues than the other advertisement based companies. This shows that Facebook is widely used and people are ready to pay more money to advertise on Facebook.

  • Exhibit 2

Market Capitalization analysis from 2008 to 2018 shows that Apple Inc is on at the top. But on the other hand, if consider the growth rate then Microsoft is going well over the past years. The growth rate of Ali baba is also good. According to the market, it can be seen that Alibaba is becoming more and more popular day by day.

  •  Exhibit 5

It can be seen in exhibit 5 that amazon is overtaking the others and the share price is increasing speedily. It can be considered that Amazon is having a high market share. Nowadays Amazon is widely used.

  1. Focus on the BAT (Baidu, Alibaba, and Tencent)
  • Discuss how BAT develops as a result of the Chinese Firewall.
  • Is the Chinese Firewall good for the growth and profitability of Chinese companies in the short term? How about in the long term? What about for consumers and the overall society?
  • To what degree are BATs path similar to and different from the Frightful Five?

Start your answer here:

  • Chinese firewall is the combination of legislative actions and technologies enforced by the People’s Republic of China to regulate the Internet Its role in Internet censorship in China is to block access to selected foreign websites and to slow down cross-border internet traffic. Chinese firewall blocked sites that did not comply with censoring keeping google, Facebook, Twitter, and youtube along with Bloomberg and the New York times out of the market. They promoting their digital ecosystem without any competitive threat. When other ecosystems were banned in china the people (domestic and foreign) were forced to use BAT.
  • The effect includes limiting access to foreign information sources, blocking foreign internet tools (e.g. Google search, Facebook, Twitter, and others) and mobile apps, and requiring foreign companies to adapt to domestic regulations. Chinese firewall was a good idea to promote the domestic ecosystem. It is wrathful in short term as per the long term. Several people in china are using BAT. BAT is designed for the best interest of people. It is more useful for users and the BAT itself.
  • BATs path is almost similar to the frightful five as they are providing internet servicing, chat apps, translators, maps, online shopping, and any other services given by frightful five.
  1. GDPR
  • Use your own words to discuss the GDPR (General Data Protection Regulation). (NOTE: you cannot just copy & paste the answers. But consider you were to describe GDPR to your CEO, how would you explain GDPR in no more than three (3) sentences)
  • From a CFO’s perspective, how would GDPR impact a company? How would you cope with it?
  • From a investors’ perspective, how would GDPR impact your investment/analysis/valuation of the tech sector? How would you cope with it?

Start your answer here:

  • GDPR is a regulation in EU law on data protection and privacy. The aim is to give control to individuals over their data and to simplify the regulatory environment for international business by unifying the regulation. And there are high fines in the case of violation.
  • GDPR is sensitive information that should be secure. It’s a kind of contract of the company with the user but in the case of a breach, there would be heavy fines. The company can cope with it by increasing its security levels. The CFO will particularly be concerned regarding the financial data of the customers like regarding credit cards and the transactions with the company that would also have their personal information. So any breach have severe consequences for the company.

It means, the company like us that collects data needs to comply with the GDPR regulation which is actually a whole new standard for the protection of consumer rights, particularly regarding their privacy and data security.

The companies are required to take care of all kind of data that can reveal consumer’s identification that includes even IP address as well.

It asks for reasonable level of protection but does not define particular what would constitute a reasonable level of protection and thus any company that collects and uses consumer data needs to take as much care regarding data as it can as otherwise it may result in severe fines and penalties.

The consumers also have right to access to their data. They have right to get their data forgotten or deleted by the organization. The consumers can also require transfer of data among service providers. The consumers also have right to get informed about the data collected and that only correct data is collected and stored. They can also restrict the processing of that data. Moreover, in case of information breach, the company is required to inform the individuals within 72 hours.

  • Data privacy risk measures the likelihood of misuse or unauthorized access of personal data. Data protection impact assessments help organizations identify and quantify risks for remediation and disclosure to customers. There may be a data privacy risk to the investors. It is a contract to which the company is bound and the violation results in heavy fines. The investors would be cautious to invest in the companies that have more chance to breaching the requirements or that have such history. This is because any breach would not only impact fines in the short run but it would also bring bad press as well that can harm the company’s business both in the short and long run.

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