Two decades ago, the Fortune Global 500 was dominated by big oil, car giants, Walmart and mighty Japanese zaibatsu. Today, the Mitsubishis and Itochus of this world have been replaced by immense Chinese state monopolies, but otherwise little has changed. Old, consolidated industries still rule.
Everyone knows this is not going to last. Technology companies have been the future since the late 70s, but now their time has come. Already the five biggest firms in the world by market cap are US tech giants – Apple, Alphabet, Microsoft, Amazon and Facebook. They still have a way to go in terms of revenues – Apple, for instance, takes in only half the amount Walmart does – but the trajectory is clear.
But how big will they actually get? Which up and coming tech firms will join the pantheon of greats? And who will be the biggest of them all? Tired of waiting for pesky old father time to get his skates on, I decided to make some predictions. (For a discussion of the utter folly of predicting the future, incidentally, read Philip Tetlock's Superforecasting).
Criteria: There are three relevant factors I looked at. The first is the revenue growth trajectory in recent years. The second is how much room the company has to expand, in its current market or in new ones. The third is what risks could upset the Apple cart (I mean, apple cart, ahem).
Revenues (2016): $136bn
Growth rate 2016: 27%
Compound Annual Growth Rate (CAGR) 2010-2016: 25.9%
Room to expand: Ecommerce is slowly eating the $25tn (£19tn) global retail sector, and Amazon is slowly eating ecommerce. The big question is at what point do those processes stop. Because of the sums involved, even conservative estimates would leave Amazon with a truly enormous market. Indeed, if it continues to grow at 27% a year, then by 2023 it will be over four times bigger than it is now.
It’s also diversifying successfully into entertainment, the developing world, fresh food, data applications (see below) and the cloud, something it effectively invented. Last year, Amazon’s AWS took in $12bn, up 54% from 2015, and founder Jeff Bezos predicts it will eventually be bigger than the rest of the company combined. Gulp.
Biggest risks: Failure in India and dividend-hungry investors forcing Bezos to spin off AWS, leaving Amazon.com strapped for free cash.
Revenues (2016): $90.3bn
Growth rate 2016: 20.4%
Room to expand: Strip away all the funky fireman’s poles, sleep pods and lofty ambitions for making the world a better place, and you’ll find Google is essentially an advertising firm. As digital ad spend rushes towards half the overall spend (it’s currently 38%), Google will be the biggest beneficiary: eMarketer predicts it will more or less hold onto its one-third market share over the next few years.
Google’s parent Alphabet is faintly obsessed with finding the Next Big Thing, but so far none of its ‘moonshots’ – driverless cars, the connected home, health-tech etc - have really hit the mark. On the other hand, so we are told, the future is all data and AI – and Google is by far the strongest in the world on both counts. Surely there’s some money in that somewhere...
Biggest risks: If Google’s future depends on harvesting our personal data, it could find itself on a potentially fatal collision course with regulators, from which even the smartest AI autopilot will be unable to save it.
Revenues (2016): $27.6bn
Growth rate 2016: 54.4%
CAGR 2010-2016: 55.1%
Room to expand: As a younger company, Facebook is still growing at over 50% a year. It’s the only serious rival to Google in digital ad spend, and the rivalry is even closer in the most promising area, mobile ads. It also has vast quantities of data on its 2 billion users and will be hungrily looking at ways of monetising it. Other than that, Facebook’s biggest opportunities are in VR, which could get it a slice of the entertainment market, or possibly as an alternative ecommerce platform.
Biggest risks: Facebook? Pah, that’s for old people. All the young kids use Snapchat, man. Fake news and live murders may draw regulatory ire too.
Revenues (2016): $15.7bn
Growth rate 2016: 32.8%
CAGR 2012-2016*: 49.9%
Room to expand: Chinese ecommerce sales are predicted to rise to $2.4tn by 2020, four times larger than America’s, as the country effectively skips the era of bricks-and-mortar chains. As the frenetic cheerleader of Chinese ecommerce, Alibaba has the most to gain. Founder Jack Ma also has a penchant for diversification, with the likes of AliPay, AliCloud, AliHealth and Alibaba Pictures, and has expanded internationally with stakes in India’s Snapdeal and southeast Asia’s Lazada.
Biggest risks: Two big ‘uns – either the Chinese government decides Alibaba is getting too big for its boots and pulls the plug/nationalises it, or the debt-financed, over-supplied Chinese economy goes into meltdown, bringing Alibaba (and everyone else) with it.
Revenues (2016): $215bn
Growth rate 2016: -7.3%
CAGR 2010-2016: 22.1%
Room to expand: The smart phone market has matured, and Apple has struggled to find another success story on quite the same scale as the iPhone (the smart watch certainly doesn’t seem to be living up to its name). The company is reportedly working on some form of automotive product (whatever could it be?), and may even use its $200bn cash pile to buy growth in the form of firms like Tesla or Netflix.
Biggest risks: The car industry is not exactly ripe for disruption: the enormous, deep-pocketed auto giants are themselves going all-in on driverless and electric technologies. This means new entrants (this also means you, Tesla) won't find it so easy to sweep all competition aside. Acquisitions may help in the short term, but that would hardly point to the sort of exponential growth the others might expect.
Microsoft - the web 1.0 beast still grows at 6% a year, despite a stagnant market for its core Windows and Office products, in a sign Satya Nadella’s cloud and mobile first strategy is working.
Uber - the global taxi/transportation market is huge, but regulators could seriously put the brakes on it.
Airbnb – the same goes for Airbnb, which also depends on a more widespread shift in attitudes around letting strangers stay in your home.
Tesla – for a company that makes such silent cars, Tesla sure makes a lot of noise. But so far the hype hasn’t been justified - sales (or rather deliveries) are still tiny compared to its traditional rivals. Whether Elon Musk can radically transform manufacturing (and energy storage, while he’s at it) to solve this problem remains to be seen.
Disclaimer: do not, for goodness’ sake, base any financial decisions on this article. Seriously.
Image credit: Karlis Dambrans/Flickr
*Data only since 2012