miércoles, 2 de marzo de 2016

Google, Apple and creative destruction

The figures show that digital industry is at its peak. In the latest ranking of the 50 top firms by market capitalisation, five out of the top ten companies are internet companies. As you can expect, you find in the two top posts of the ranking Apple and Google. Some decades ago this would mean that these two companies would lead the pack for some years. 

If we take a close look to the sources of revenue from both we will discover the basis of their strong market capitalisation. On one hand, Google obtains $16.7 billion out of $18.6 billion revenue from ads. On the other hand, appstore revenues for Apple grew 24% last year and are now the most significant part of the $5 billion services revenue for the company (10% of Apple revenues)

The digital age is characterised by the speed of the changes, changes that do not respect any actor. This truth is also applicable to both Internet giants. The sources of revenue of both companies look at risk at the beginning of 2016. Ad blockers have grown 41% last year and reached the peak of 181 million users. Smartphone users have become tired of downloading apps and most of them do not install any new app in a month. It is not difficult to foresee that a consolidation of both trends would endanger at the same time Google ad revenues and Apple appstore revenues.

Taking into consideration the above figures is easy to understand why both companies are looking for new sources of revenues (e.g smart home). Without new sources of revenues both companies risk to lost its leadership in market capitalisation in less than two years. The creative destruction paradigm takes speed in the digital age and nothing stays forever.

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