The best way to understand the ways that Big Tech companies do and don't compete with one another is to use the old Watergate adage: Follow the money.
Why it matters: How Apple, Google, Facebook, Amazon and Microsoft make their revenue today shapes the battles they will fight tomorrow.
The big picture: For years, the largest tech companies each had their own fiefdom where they garnered the lion's share of revenue and profits.
- While tech companies competed at the edges, the market was big enough that each had plenty of green fields to expand into. They might step on each other's toes, but they took pains — and sometimes struck deals — to steer clear of the others' core businesses.
Yes, but: As they have each become enormous, their search for growth has begun leading them onto one another's turf.
- Amazon and Apple, for example, are getting more revenue than ever from advertising — the heart of Google's and Facebook's business.
- Google is investing heavily to catch Amazon and Microsoft in cloud computing.
- Microsoft, Google and Facebook each have their feet in different parts of the gaming market, with Apple and Amazon dabbling too.
- Amazon, Apple and Google each operate major subscription streaming services.
- All five are investing heavily in AR/VR hardware and systems.
- And all of them see AI as central to their future.
Be smart: Like wealthy families that have run a town for decades, these companies share a vast web of dependencies and grudges — as in the recent privacy war between Facebook and Apple, or Apple's slow and steady effort to wrest the mobile maps market out of Google's control.
Here's what you find when you "follow the money" for each of tech's Big 5:
Apple
Hardware — mostly phones and computers — still generates the bulk of Apple's sales and makes the company's other businesses possible. But the company has significantly diversified its revenue in recent years.
- By the numbers: Apple reported $365 billion in revenue during its past fiscal year, which ended in October. Of that, more than half ($191 billion) came from iPhone sales, while the Mac, iPad and Apple's accessories business each generated more than $30 billion in revenue. Services — which for Apple means everything from extended warranties to music and TV subscriptions — accounted for $68.4 billion, up 27% from the prior year.
- Core business: Hardware
- Emerging businesses: Advertising and services, including financial services (Apple Pay)
- Competitive concerns: Apple sets the terms for the iPhone and yet it is also a competitor in areas ranging from subscription music to consumer cloud storage. It also has some enormous deals with rivals, such as the agreement that makes Google the default search engine on iPhones and Macs — and generates billions for Apple.
Facebook (Meta)
For all its talk of the metaverse, the social networking giant still gets nearly all its revenue from ads on Facebook and Instagram. Those cash cows have proven vulnerable thanks to the constraints of the operating systems they run on — most importantly, when changes Apple made to tracking significantly dented Facebook's mobile revenue.
- By the numbers: Meta reported nearly $118 billion in revenue for the 12 months ending Dec. 31. Of that, almost $115 billion was ad revenue related to its core apps. It had about $700 million in non-advertising revenue for its family of apps and $2.2 billion in revenue from Reality Labs, which includes its Oculus VR unit.
- Core business: Digital advertising, social media
- Emerging businesses: VR hardware, digital goods
- Competitive concerns: With Facebook, Instagram and WhatsApp, Meta controls a huge chunk of the social networking market and, with it, a big slice of overall online advertising.
Google (Alphabet)
Google is rightly described as "the search giant," but its ambitions extend into the kinds of cloud computing offered by Amazon and Microsoft. And, while it doesn't charge directly for Android, it generates a significant amount of its ad revenue from mobile devices.
- By the numbers: Parent company Alphabet reported $161 billion in revenue for the year ended Dec. 31. Nearly all of that came from what the company lumps into Google Services — chiefly search and display advertising, as well as smaller revenue sources, such as hardware. Also within Google Services: YouTube, which generated $28.8 billion in ad revenue; Google Cloud, with about $8.9 billion revenue; "other bets," such as autonomous vehicle division Waymo, that bring in a few hundred million dollars..
- Core business: Advertising via search
- Emerging businesses: Enterprise software, cloud computing, consumer hardware
- Competitive concerns: Alphabet's hold on the search market lets it determine which services live and die through tweaks to its algorithm. How it treats its own content has been a point of concern for years, while it has also been criticized for the rules governing Android and the Play Store app marketplace.
Amazon
The online retail giant also has an omnivorous appetite for other kinds of businesses, including its massive web services arm as well as offline groceries (via Whole Foods), video and audio content, ebooks, prescription drugs and medical services. And any time Amazon enters a business, it brings the enormous power of its distribution network and access to hundreds of millions of Prime subscribers.
- By the numbers: Amazon reported more than $469 billion in revenue for the year ending Dec. 31. Most of that comes from the sale of physical goods, though it also includes digital goods and subscription revenue. About $62 billion came from its Amazon Web Services cloud computing business, a 37% increase from the prior year.
- Core businesses: Online retail, web services
- Emerging businesses: Advertising, physical retail, health care
- Competitive concerns: Amazon has been able to grow by constantly taking on new markets — but also, critics and now regulators charge, by privileging its own offerings on its larger platform marketplace. Today the company is so large that it sparks monopoly fears even when it enters a previously competitive market as a small player.
Microsoft
The dominant giant of the desktop era still casts a long shadow over the tech world, with massive revenue streams rooted both in its venerable Windows and Office products as well as a highly successful newer business line in cloud services.
- By the numbers: Microsoft reported just shy of $200 billion in revenue for the fiscal year ending June 30. While Office and Windows are still huge money makers, the company also gets significant revenue from Azure and other cloud offerings.
- Core businesses: Windows, Office and other business software; cloud services
- Emerging businesses: Surface and other devices, cloud gaming
- Competitive concerns: Microsoft is no longer a major target for antitrust enforcers, but Windows still controls a huge part of the PC market, and Microsoft's choice of which apps and services are installed by default is still enormously consequential. The company has faced new complaints this year over cloud computing. Just this week it agreed to make changes in how it licenses cloud products in Europe to address complaints there.
The bottom line
Competition among these companies is increasingly a global affair, as the search for growth draws them onto terrain outside the U.S. where they face big challenges based on culture, language and economics.
- At the same time, the rise of tensions between China and the U.S. gives all these U.S.-based companies a nationalist card to play when regulators threaten action to rein in their power: Hurt us, they argue, and you'll hurt America.
