Microsoft, Apple, and Google: where does the money come from?
zdnet.com
zdnet.com
Microsoft is surprisingly diversified. It's nice to see their entertainment division has been successful--that's my favorite part of Microsoft (outside Microsoft Research, of course). I wonder if we'll see a separate, significant mobile category in the future.
Apple makes a larger amount of money off iOS and less off OS X than I expected. I guess I just see a disproportionate amount of Apple computers around (mostly owned by college students).
Google wasn't surprising at all. Of course, this says more about me than Google: I follow Google much more closely than Microsoft or Apple (I actually use Google's products, unlike the other two).
It would have been nice to see Amazon here as well. They've been trying some new things; I wonder how it's been working. (But not enough to go look myself :p.)
It'll be interesting to see Facebook in the future too.
And the thing with MS that really blows my mind is that they lost 8 billion dollars on the entertainment division before it became profitable. Imagine if that had been it's own startup -- it would have never made it as far as it has, because they would have run out of money long before ever being profitable. So in hindsight, we have to give credit to MS for sticking with it for so long.
Perhaps we should wait to see whether it ever pays back that 8 billion dollars before giving them any credit?
That was my immediate takeaway, but I wonder how meaningful this portrayed diversification is in the face of their present competition.
I think a better comparison would show MS being %97 "licensed software", Apple being %97 "hardware" and Google being %97 advertising. "Licensed software" is arguably the most vulnerable of the three models.
Why is that? A big chunk of that seems to be from Server & Tools which doesn't seem to be under immediate threat.
According to their SEC filing, Amazon's sales were 87.5% from products and 12.5% from services.
Link: http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?F...
Doubtful in the short of medium term. Microsoft has more or less abandoned the concept of mobile as a discreet ecosystem when it went from Windows Phone to WP7.
Now mobile is just another end user facing part of the Windows franchise. The same thing has happened to Hotmail and other parts of Windows Live. This past year they were moved out of Online Services Division.
We have no idea of the net income for those divisions, as the expenses are missing.
I'd have thought, the cost of advertising would be far less than producing say a hardware unit like an iPhone.
I'd expect the wedges to be different if we saw the charts listing profits, and that would be more interesting. Or am I missing something?
We know that it costs Apple about $300 to make a $500 iPad 2 and the cost of making an iPhone is known, too, and that cost is a lower fraction of the price they get (from the carrier or retailer) than it is for Macs. Of course, Apple had to spend many billions to make the first iPad 2, and the $300 does not include support costs (which I think are fairly minimal).
Point is that it is known that most of Apple's current profits come from iOS device sales. Also it is a pretty safe bet that the profit on music and video entertainment sales is fairly low as the owners of the music and video entertainment are very good at negotiating. Finally, Apple has stated that profit from app sales is much less than profit from even the least profitable hardware lines (currently iPod and Mac).
It is interesting to note that even Apple and Microsoft do not know the net income of the various divisions: since the success of the iPod brought new interest and new credibility to the Mac line, thereby increasing Mac sales significantly, and since it is impossible to know exactly how much Mac sales were increased by this "halo effect', it is impossible to know how much of the cost of developing the iPod should be assigned to the calculation of the net income of the Mac division.
Similarly, Microsoft and everyone else knows that the immense market share of Windows in the 1990s among consumers helped Microsoft's products to compete against offerings by IBM, Lotus, Sun, etc, in the enterprise market where Microsoft currently makes most of its money, but it is impossible to calculate exactly how much of the cost of acquiring those consumers as customers should be allocated to the Business division and the Server and Tools division.
Finally, for part of its life, Visual Studio was given away to qualified developers because the availability of more apps for Windows was seen as protecting and assisting that business, so a calculating of the "true cost structure" of, e.g., the Windows and Windows Live division and the Server and Tools division would have to take that into account.
Apple has a much clearer picture - they are an iOS company that sells iOS devices and their accessories, such as the Macs that connect to them. It seems they have successfully invented the product that was to take "Apple Computer" out of business - and are selling vast numbers of them.
For Google, it's even clearer. They have one product - user attention. Still, that's a dangerous place to be in - they must invent the company that will wipe Google out before someone else does it.
That's a great turn of phrase. Nicely done!
Unless they answer "Software."
Microsoft has long had a clear coherent vision, "A computer on every desk and in every home." The strategy, well, "Developers! Developers! Developers!" comes to mind - they even get to eat their own dogfood.
But software pretty much covers all four of the major categories to which your previous comment alludes, IMO, YMMV, etc.
Telling them "you are a software company" won't give a coherent strategy that encompasses both OEMs for Windows Home and enterprises for multi-license packs of Windows, Office, Windows Server, SQL, Exchange, Dinamics, Sharepoint and so on. And would not help the very promising ecosystem around the Xbox.
I think they'd be better off had the DoJ ordered the company to be broken into smaller pieces.
This could also show how the absolute amount of revenue has changed. I suspect that in MS's case it would be roughly similar, whereas for Apple the iPhone has come from nothing and total revenue has exploded.
58->62->69 ... that is their trailing three years i revenue in billions. They grew two Facebooks last year.They have more than doubled in size and profit over this last decade when Google supposedly killed them off. They've actually grown more than the entire size of Google to put it in some perspetive.
Also I've noticed that there's no segment in Apple's chart for App Store commissions, nor from iTunes. Is this classified under "other music", or are those divisions so small they don't fit in the chart?
Xbox related revenue, including Live and Downloads are part of the Entertainment and Devices division.
[1] http://www.microsoft.com/investor/EarningsAndFinancials/Earn...
However, presenting the data with pie charts isn't really acceptable. 3d pie charts, even less acceptable. And 3d pie charts with gradient shading is worse still. If you want readers to take data-driven articles seriously, please learn even the basics of data visualization and how to best demonstrate the differences in data, and how to further compare the data contained. A side-by-side stacked bar chart would allow viewers to easily compare values relative to each other within the bar chart, and also to visually compare across the 3 companies.
http://en.wikipedia.org/wiki/Pie_chart#Use.2C_effectiveness_...
Really? Advertising, search ... semantics. Everyone knows that AdSense/Adwords is Googles money making machine
Advertising, on the other hand, is what happens when you weight certain search results higher than others because they pay you more money, or when you, as Google does, separate out potentially interesting advertisements for you to click on.
You can run a search engine without being a business, without making money, and without having advertisements or search results weighted by how much money they gave you.
That said, how does Duck Duck Go make money?
They also reported paying 51% (AdSense for Search) and 68% (AdSense for Content) of the fees (which they defined as the revenue) to the "Google Network Member".
Doing the math out, that would indicate that the advertising profit from their own websites accounts for 85-90% of their total profit from advertising.
In essence, the fact that they "run the largest display advertising network in the world" is actually in any way "where they make the money".
(Of course, the money they get from that isn't "chump change", and I'd even make the argument that if they didn't run that off-Google advertising network their core advertising business would have less content available.).