So far, Elon Musk’s work on Twitter can be described in just one word: disaster. It turns out that too much power in the hands of one person always means a high level of risk. That’s also the case with Meta, where Mark Zuckerberg has invested billions in the Metaverse. So far, the CEO has spent 20 times what Apple put in the first iPhone – without having much to show for it.
In boom times this would perhaps be less noticeable. But the growth of Amazon, Apple, Google, Meta and Microsoft is flattening out. The network effects are weakening, advertising revenues are subject to economic fluctuations, unlike in the past – and stock prices are falling. Overall, the five tech stocks lost nearly $3 trillion in market cap over the past year.
The corporations become victims of their own success. Amazon earns almost 500 billion, Apple around 400 billion and Google almost 300 billion dollars – enormous sums with high growth rates hardly imaginable.
A hiring orgy since 2020
Years ago, companies spoiled by success feared this moment. In order to postpone it for as long as possible, they tried to develop new growth areas. Amazon, Microsoft and Google invested in the cloud. Zuckerberg bought Instagram photo app a decade ago and WhatsApp messaging service in 2014. All brilliant moves overall.
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However, the strategy has its limits. With many acquisitions and investments, a certain “conglomeritis” set in in Big Tech, it is becoming increasingly confusing. Last March, their combined spending surpassed the trillion dollar mark for the first time. The digital and supposedly “asset light” business models are in fact heavy, as evidenced by the $600 billion their data centers and other physical assets are collectively worth.
There was also a hiring spree, especially at Meta. Zuckerberg hired about 39,000 people since 2020, nearly doubling the workforce. Now he has to fire 11,000 and apologize.
Tech stocks are also increasingly at odds with one another in their quest for growth, as illustrated by Apple, Microsoft and Amazon’s foray into selling online advertising — the core business of Google and Meta.
As a result, Big Tech’s return on investment has fallen from 60 percent to 26 percent over the past five years.
Overpowering influence of bosses
Amazon or Google aren’t now one-man shows like Musk is on Twitter. But Zuckerberg controls the majority of votes with a two-tier stock system. The founders also have 51 percent of the votes on Google. At Amazon, founder Jeff Bezos has resigned as CEO, but as executive chairman and a 15 percent stake, he has great influence – and can push through expensive adventures such as Project Kuiper, where Amazon is building a $10 billion global satellite internet.
Interestingly, one company is doing best without an all-powerful boss: Apple. CEO Tim Cook is undisputed, but not because of his stake. He only owns a tiny fraction of the company. Perhaps one of the reasons why the iPhone group is more cautious. For a long time, Apple toyed with getting into car production. But the group spared itself the costly adventure, the shareholders reward it with the highest and comparatively most stable market capitalization of 2.4 trillion dollars.
Big Tech will continue to be powerful, but the days of big growth are over. Managing this new phase of the market requires CEOs who are humbler and less adventurous. Bosses too, who listen more to the shareholders. A management principle that is still unfamiliar to Big Tech.
More: Black Week for Big Tech – Alphabet, Amazon, Meta, Apple and Microsoft’s stock market values fall by $700 billion in three days