The 2018 of Amazon, Google and Facebook


The internet services market revolved around three major issues in 2018: fake news, privacy and monopolies. We look here at the developments at the three biggest players: Alphabet (Google), Facebook and Amazon.

There are differences in the three but the similarities are clear. Facebook is still trailing when it comes to diversification and will face continued challenges in 2019 in the form of lawsuits and regulatory sanctions. Amazon is the most innovative and is suffering the least for the three big issues.

The three companies have many similarities. Alphabet/Google has, in general, the broadest scope, while Facebook has a more narrow focus on its core services (Facebook, Instagram, WhatsApp, Messenger).

  • There is a broad basis (search, social networking, e-commerce) on which the companies continuously build.
  • AI is a driver for improving existing services and creating new ones. This also creates a new interface (Google Assistant, Facebook Aloha, Amazon Alexa). Facebook is behind in this area, too.
  • All three are focusing hard on the enterprise market. Google mainly with apps (Google for Work), Facebook with the Workplace version of its site and Amazon with Amazon Business, a marketplace with a run rate of USD 10 billion.
  • All three have their own hardware portfolio. Facebook is a latecomer on this market.
  • Video plays a big role, and again Facebook is lagging behind.
  • Connectivity is a side business where Alphabet (Google Fiber, Google Fi) and Facebook (Facebook Connectivity) are busy, and Amazon is doing little.
  • Amazon (AWS) and Google (GCP) are leading players on the cloud market, while Facebook is not active.
  • Amazon is leading in subscription services (Prime), reducing its reliance on e-commerce. Google is taking its first steps in this area (Google One, see below), but Facebook is still quiet.

Fake news, privacy and monopoly tendencies

Amazon showed the best share price performance in 2018, with a gain of 23 percent, compared to a decline of 26 percent for Facebook and a small drop of 2 percent for Alphabet. That compares to a 7 percent fall in the benchmark Dow Jones. The outlook for the three big internet companies is closely tied to three broad issues:

  • Fake news or disinformation (incl. terrorist content, fake views, fake reviews, etc).
  • Privacy (incl. cybersecurity). Tim Berners-Lee plans to launch a Magna Carta in May 2019 and develop his venture Inrupt into an open-source platform (Solid) for consumers to manage their own personal data.
  • Monopoly forming (antitrust cases, EU fines for Alphabet and ongoing investigations against Amazon). This may lead to platform regulation or even the forced break-up of companies, as proposed by Tim Wu and Tim Berners-Lee.
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There’s also the problem of tax avoidance, something the EU is trying to address with a new sales tax on digital services such as online advertising. Copyright is another difficult issue, with the EU working on a possible upload filter and a ‘link tax’ on aggregators of third-party news and information, and AI is generating talk of new regulation, with even Microsoft acknowledging the risks.

Below we look at the most important recent developments at the three companies.

Alphabet: fines and a wide-ranging business model

As noted above, Alphabet/Google is the company with the broadest portfolio. Facebook may have been the most under pressure in the headlines in 2018, but Alphabet is feeling it the most financially, with two major fines from the EU and possibly a third and fourth on the way. The line ‘EU fine’ is becoming a recurring feature of its profit and loss account.

  • Search & Shopping vs. other shopping services: USD 2.74 billion fine in Q2 2017.
  • Android & Search, Chrome vs. smartphone makers: USD 5.07 billion fine in Q2 2018.
  • AdSense vs. advertisers (Google allegedly is restricting cooperation with other ad platforms): 2019?
  • Search: competitors are being disadvantaged. No concrete investigation yet

Looking at Alphabet’s business model, the company has taken some interesting steps beyond advertising (86% of revenues in Q3 2018). Google Maps is a notable such service with likely limited revenues but a growing amount of functionality. The smart city project underway at Sidewalk Labs has not yet shown any concrete results. Google Health encompasses a range of activities and appears promising as well.

  • Subscription services: Google One (storage), Play Pass for the Play Store and Waymo One for self-driving taxis (in Phoenix). Google Play also is expanding with the Kiosk news service.
  • Transactional revenues: printing Google Photos, the Titan Key for secure internet access.
  • Revenue sharing. More focus on Google Shopping, and Wing plans to test drone deliveries.
  • YouTube is expanding its paid services: TV, Premium and Music Premium.
  • Google Cloud Platform (GCP) continues to grow its global network to serve more customers.
  • Verily (life sciences) earns money from licences and via R&D for partners in the pharma sector.

Google is also busy with AI, mainly through the Google Assistant. The units DeepMind and Google Brain at Alphabet handle the development work. The Google Lens app can already recognise around 1 billion objects.

  • The Google Assistant and Google Home smart speaker are open platforms. The Assistant is available on third-party hardware and operator platforms, such as Vodafone Spain (smart home) and LG Uplus (set-top box). Renault-Nissan-Mitsubishi is integrating the Google Assistant in its in-car entertainment.
  • Integration with Google News allows users to have a personal news feed read out to them. Integration with Transactions supports shopping with the Assistant.

Other developments are underway with hardware, access (connectivity), Android and Verily:

  • Hardware is being developed in various parts of the business. Nest moved from ‘Other Bets’ to ‘Google Other’ in Q1 2018. This revealed revenues at Nest in 2017, which grew from USD 112 million in Q1 to USD 278 million in Q4. The most important devices are the Pixel smartphones and tablets, Google Home smart speaker, Home Hub with the screen, Google Wi-Fi router and the Chromecast stick for ‘casting’ content to a TV or audio system.
  • Access. Loon is working on internet access via balloons. The Google Fi MVNO is also growing, with possible expansion to Europe.
  • Android. Available in many forms beyond phones. The Android TV platform is used already by over 100 operators.
  • Among Alphabet’s ‘Other Bets’, Google Fiber appears to be at a standstill, but Verily has a growing number of partners.

Facebook: focus on the core

Facebook’s rate of innovation has slowed in recent months. Ads still account for 98.6 percent of its revenues. The company is suffering from the negative publicity on disinformation and privacy. Any innovation involves improved functionality for its core services: Facebook, Instagram, WhatsApp and Messenger. Its hardware portfolio also has expanded (Oculus, Portal), and it’s reportedly working on a cryptocurrency. However, it seems likely that Facebook has yet to feel the worst of the backlash and more legal and regulatory troubles will come in 2019.

  • AI: the voice assistant Aloha (or M) is in development, using the AI system Rosetta.
  • Expanding core services. Facebook Watch has gone worldwide, with original content (short-form series of 10 episodes). This begs the question of whether Watch can develop into a standalone service. Instagram also added video under the name IGTV. In addition, Facebook Dating started testing in a few countries, and WhatsApp is working on P2P payments.
  • Hardware. The Portal and Portal+ are Facebook’s answer to the smart speaker market, adding a screen. A new version of the Oculus is also planned, as well as AR glasses.
  • Access. Facebook Connectivity is a business unit bringing together a number of activities, including, TIP (developing network equipment), Express WiFi for developing countries and Terregraph (mmWave technology for the 60 GHz band).
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Amazon: search for new growth engines

A number of measures in Q4 are expected to help overcome the weak growth in Q3 (10-20%) but this mainly involves promotions in the e-commerce business. Traditional e-commerce is Amazon’s slowest activity, and the company is trying to find new areas to maintain its high growth rate. For many years the group has grown at annual rates of 20-30 percent.

The company is facing an EU investigation over how it treats third-party sellers on its platform. However, its innovation is our main focus here:

  • First, the ‘back end’. The growth is unrelenting – more warehouses and fulfillment centres, offices (such as the new HQs in the US as well as Toronto and San Diego). Its leased fleet is growing to 50 planes, while it also employs drones and small businesses (Delivery Service Partners) to help grow the footprint.
  • The ‘front end’ is just as busy. Expansion includes new products (such as its own brand AmazonBasics) and services, both in e-commerce (cooperation with PillPack for serving chronically ill patients) and web services (new AWS regions). A new web storefront was opened for Turkey, and the company is adding more physical shops, some of which are completely automated.
  • AI. Amazon’s development is similar to Google, focusing on the assistant (Alexa) and devices (Echo). The Amazon Comprehend Medical software helps analyse patient data for scientific research.
  • Advertising is a relatively new and quickly growing activity. It is likely the biggest part of Amazon’s ‘other’ revenues, which reached USD 2.5 billion in Q3, up 123 percent from a year earlier.
  • Hardware. In September new devices were unveiled at the Echo/Alexa Event. More can be expected in 2019.
  • Prime. Amazon passed 100 million Prime subscribers in April and since reported growth in the tens of millions. The video component (Prime Video) is tracking Netflix with investment in original productions and a growing number of distribution deals with pay-TV providers. Amazon’s production budget was USD 6 billion in 2018.
  • According to a recent report, Amazon Channels is expected to generate revenues of USD 1.7 billion in 2018. US consumers can subscribe to 156 competing OTT services via Amazon, for which Amazon shares a portion of the revenues.


This article is an opinion of Telecompaper.

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