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Essay: The Winners and Losers in Online Advertising: Amazon, Apple, Facebook and Google

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Monday the 18th of September 2017

Christian Antunes

Maximilian Goettfert-Keichel

Alberto Mencarelli

Alicja Miler

Starlynn Simon

Sara Ortega Jimenez

MIB Cohort 1


1. Define the business model for Amazon, Apple, Facebook and Google.

Over the past twenty years the world has experienced changes that never before would have been envisaged. The power of an idea, the evolution of society, the unstoppable customers’ demands and the extremely rapid development of the market have by now made a significant mark. Four companies have specially led this impact, ruling four sectors of Internet Marketing and capitalizing nearly $1 trillion: Amazon, Apple, Facebook and Google.

  Amazon was founded in 1994 in Seattle and began operations in 1995 as an online bookstore. In general, the company engages in the retail sales of customer products and subscriptions in North America and internationally. Led by CEO and Founder Jeff Bezos, Amazon sells merchandise and content purchased for resale from vendors and third-party sellers, as well as manufactures and sells electronic devices such as, for example, Kindle e-readers. (Bloomberg, 2017)  

 Amazon’s mission statement promises an attractive e-commerce service to satisfy customer’s needs, seeking to be “Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online”.

  Amazon’s itself defines its lines of business in terms of product sales, service sales, AWS, fulfilment, publishing, digital content subscriptions, advertising and co-branded credit cards. To simplify, we could define the company’s line of business as online retail, Internet services and the Kindle ecosystem. The first one includes those products sold by Amazon as a traditional retailer, most commonly as a low-cost retailer; Internet services include Amazon Prime and are deeply intertwined with both retail business and the Kindle ecosystem. The last one focuses on manufacturing and distributing the Kindle tablets, which have become a fully functional tablet and media device.

  Google was first launched in 1998 as simply as search engine and has expanded to being one of Silicon Valley’s behemoth companies, building phones, developing autonomous cars, developing infertile mosquitos, and developing the internet’s most famous search algorithm, among its plethora of other projects. Google Inc. builds technology products and provides services to organize the information. The company includes Google Search that provides information online; Google Now that offers information to users; AdWords, an auction-based advertising program; AdSense, which allows Websites which are part of the Google network to deliver ads; DoubleClick Ad Exchange, for the trading display ad space and other advertising platform, such as AdExchange and AdMob. The giants known as YouTube, Android Software, the hardware Chrome OS devices, Nexus devices or Google Play belong to the Google Inc. family too.

While the company is known for its far-flinging array of R&D projects, advertising made up about 97% of Google’s $43 billion revenues in 2012. It is its advertising revenue which allows Google to develop new products and services.

  Apple Inc. is a brand that keeps us engaged. Its customers are faithful and loyal to the world’s most famous apple-shaped logo. The company was founded in 1976 in Cupertino, California. In 2016, the total gross income of Apple Inc. was $82.72 billion and its sales revenue rose up to $214.23 billion. The company focuses on designs, manufactures and markets mobile communication and media devices, personal computer and portable digital music players to consumers, small and mid-sized businesses as well as education, enterprises and government customers worldwide. Apple Inc. also sells software devices, accessories, networking solution and third-party digital content and applications. IPhone, IPad and Mac are the most famous range of products of the company but it also reaches other services such as iLife, iWork, Final Cut Pro, Logic Pro X and FileMaker Pro. They also developed Apple TV, which enables customers to access digital content directly from streaming high definition video, music, games and photos; Apple Watch, a personal electronic device and IPod, a portable media player. iCloud, AppleCare, Apple Pay, ITunes Store, iBooks Store or Apple Music are also work of Apple Inc.

  Apple Inc. CEO is Tim Cook. In general, Apple’s business strategy focuses on three fundamental keys: creating best user experience through vertically integrated models, building platforms for content and apps distribution on Apple devices and expanding the network of company-owned retail stores.

  Being able to differentiate in an every time more demanding market is what allows Apple to maintain this premium pricing. Its vertically integrated business model is formed by application software (iLife, iWork and others); services (Itunes Store, App Store, Apple Music, etc.); developer tools such as app building, testing or distribution tools; operating system (iOS, OS X, Watch OS, etc.) and devices and accessories like iPhone, iPad, iPod, MacBooks, Apple TV, amongst others.

  Facebook Inc. has been used since 2005, although it did not start growing until 2009. It was founded by Mr. Mark Zuckerberg and provides various products to connect and share through mobiles devices, personal computers and other surfaces worldwide. The company also owns Instagram, Messenger and WhatsApp, three of the most used mobile applications in the world. Facebook Inc. also offers Oculus virtual reality technology and content platform, which allow people to enter an immersive and interactive environment to play games and connect with others.

  Facebook Inc. earns money with every click, every like and every comment that each of us make in every connection. Brands pay huge amounts of money to this social media for being able to access the public and reach new clients. Facebook will then target users based on their age, location, relationship status or interests.

2.   Who might be the winners and losers in any contests between them and why?

In the advertising marketing, U.S. marketers spent about 380 billions annually and just 38 billions in online advertising that represent only the 9.7% of the total advertising market.

There is a 16 % difference between what companies are allocating toward their online advertising versus the amount of time Americans are online (26%).

Google is the winner in the media advertising market, taking control of almost all desktop and mobile searches. In addition, Google’s advertising accounts for the majority of their earnings. Conversely, Amazon is the loser because they focus more on customer preferences and products, whereas advertising falls below Google Inc.

3. Identify a firm that you know something about, for example a media company, a retailer, or manufacturing firm with some involvement in the online economy. How, if at all, does it either rely on or compete with one or more of Amazon, Apple, Facebook or Google?

Microsoft Corporations develops, licenses and supports software products, services and devices worldwide. The company offers Office 365 commercial products and services for businesses, what let it access to the online economy.

  Microsoft competes directly with Apple with the battle between their two softwares; Mac and PC. As the years go on we have included other giants like Amazon or Google to this confrontation. It´s a battle over equipment management, software, hardware, networks, artificial intelligence and more.

Microsoft also competes with Amazon and its Web Services (AWS). The growing collection of integrated cloud services created by Microsoft and named Azure is leading a battle with AWS. Both companies are the world leaders of cloud computing with a total amount of revenues of $18,000 millions in 2015. Google is now trying to enter the battle by producing and developing cloud services. This would make a great impact in Google’s revenues, given the fact that it comes almost entirely from advertisement.

Finally, Microsoft also competes with Facebook with their acquisition of LinkedIn in June 2016. After acquiring the world’s largest professional networking site, Microsoft is able to go head-to-head with Facebook.

4.   Think about the broad landscape of the digital economy. What skills will be under-supplied in the future that you envisage?

In a future laden with artificial intelligence and automation, interpersonal skills, those qualities which make for more pleasant, comfortable, and efficient human contact, will be greatly under-supplied, owing to successive generations of employees requiring less and less personal contact in their capacities as producers and consumers. Interpersonal skills will be, in a growingly human-less economy, specialized skills, yielding higher value as their scarcity increases. In order to continue to maximize the effectiveness of factors such as customer acquisition, public relations, marketing, and other interpersonally driven aspects of business management, firms will need employees specializing in personal skills.

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