What? Me worry?
That was the mood from the leading modern monopolies this week as they all announced first quarter earnings. Amazon, Google and Facebook have become political targets over the last year, but you wouldn’t know it by looking at the numbers.
At Amazon, continued political crossfire from President Trump couldn’t slow the company down. A triumphant Jeff Bezos announced that Amazon had surpassed 100 million Prime subscribers. While Amazon has long been coy about the number of Prime users, 100 million represents a significant milestone for the e-commerce giant. That’s especially true since Amazon today announced a 20% price increase in Prime subscriptions that will roll out over the next couple of months for new and existing subscribers.
As for the rest of Amazon’s business, it’s growing at a record clip. Amazon reported $51 billion in revenue for the quarter, up a whopping 43% year-over-year. And net income more than doubled to $1.6 billion, a level of growth that surprised even the most optimistic analysts. What’s more, Amazon provided guidance that its net income will stay at a similar level for the next quarter, which could mark a renewed focus on profits for the company.
Search giant Google (Alphabet) also showed strong growth despite constant regulatory pressure in the EU and growing concerns over privacy at home.
Alphabet’s revenue grew to $31 billion for the quarter, with advertising accounting for the vast majority at $26.64 billion. This segment also generated most of the company’s profits, which came in at $7 billion in operating income, up from $6.6 billion a year ago.
Finally, there’s Mark Zuckerberg and Facebook. Many were concerned that the Cambridge Analytica scandal and the so-called “#deletefacebook” movement would hurt Facebook, but apparently advertisers weren’t among them.
Facebook added 70 million users in the first quarter, with the platform now boasting 1.45 billion daily users and 2.2 billion monthly. Impressions, a key metric for ad sales, grew by 8%, and ad prices grew by 39%. “Despite facing important challenges, our community and business are off to a strong start in 2018,” Zuckerberg said.
With strong numbers across the board, these modern monopolies defied the doubters. But the political pressure will only increase in the months ahead. Facebook appears the most vulnerable, but Google would be similarly effected by tightening privacy regulations.
Efforts to get ahead of potential regulation could also have an impact. Facebook has announced it plans to add 20,000 workers who will focus on user security and privacy. That’s a significant increase from a current total that’s just above 27,000.
Amazon seems to be the least vulnerable. The company showed strong growth across the board, and it isn’t entirely dependent on advertising, although its advertising revenue did grow to $2 billion. Amazon will likely take third place behind Facebook and Google in the advertising market over the next few years. The company has strong growth areas in AWS and Amazon Business, the latter of which it didn’t even report numbers for.
Judging by its past growth, Amazon Business could be at a $10 billion run rate for 2018. That would mean that Amazon Business is already one of the largest B2B distributors in the U.S. But as Ian Heller at MDM notes, even a $10 billion business segment would only be 4% of sales for Amazon.
With the market size of B2B being several times the size of consumer retail, it might not be long before Amazon dwarfs the size of any traditional B2B distributor, and Amazon Business becomes a significant driver of revenue growth.
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