TECH ON TOP
Digital giants like Google, Amazon and Facebook stay miles ahead of the competition,
SAN FRANCISCO— Amazon.com Inc. and Alphabet Inc. posted results last week that extended their dominance of how we shop and search online. Apple Inc. and Facebook Inc. will in the coming days add evidence that tech behemoths command an everwidening share of consumer time and spending.
Amazon’s revenue soared as shoppers favoured it over brick-and-mortar stores, while Google parent Alphabet reported surging quarterly profit that highlighted the ubiquity of its search advertising business — especially on smartphones.
“For Google, no one can catch them on search because of the technology and intellectual property,” Macquarie analyst Ben Schachter said. “For Amazon, scale is their friend and no one can compete on selection, price and fulfilment capabilities.”
The companies have vast networks of complementary products that feed off one another to generate more sales, making it ever harder for competitors to keep up.
“Given the strength of Google and Amazon, we think Facebook is likely to look similar,” Schachter said.
On Wednesday, Facebook is expected to report first-quarter profit of $2.57 billion (U.S.), up 70 per cent from a year earlier, while revenue climbs 45 per cent to $7.82 billion, according to analysts’ estimates compiled by Bloomberg.
When Apple reports fiscal secondquarter earnings on Tuesday, sales are expected to climb 5 per cent to $53 billion.
“The general theme that the big are getting bigger” applies to Apple’s self-feeding ecosystem, Schachter said.
Every time Apple sells an iPhone, the customer buys apps and other services, feeding data such as photos and contacts into the device, making it harder to swap for a competitor’s device. Higher margin service revenue then feeds back into Apple’s development budget, helping it build more advanced products to sell to the same consumer.
Google’s advertising business is very different, but has similar selffeeding qualities. The company got 97 per cent of mobile paid search clicks in the U.S. in the first quarter of 2017, according to client data from digital marketing firm Merkle Inc.
With more searches, Google gets more ad dollars to reinvest to keep its search engine ahead of the competition — mostly represented by Microsoft Corp.’s Bing. Google also gets more data on what results people click on, which can be used to improve its software even more and keep people coming back to find information.
“There are clear benefits to that scale,” Mark Ballard, senior director of research at Merkle, said. “There’s that feedback loop.”
For advertisers, Google’s large online audience makes it one of the first places to go to run online marketing campaigns. The other is Facebook.
Facebook and Google captured 77 per cent of U.S. digital ad spending last year, according to an analysis from the Interactive Advertising Bureau by Pivotal Research Group.
Marketers have long griped about the “duopoly” atop digital advertising. But they keep giving Google and Facebook money. That’s largely because few other places offer wide reach, channels for targeting consumers and better returns. Those advantages only multiply as the tech companies expand.