Will today’s technology powerhouses maintain their stranglehold on world tech for the next ten years and still be the companies we are talking about in 2027?

With the emergence of the technology powerhouses they have been grouped by acronyms GAFA, Google, Apple, Facebook and Amazon, closely followed by NATU, Netflix, AirBnB, Tesla and Uber.  GAFA are very different companies to a number of years ago.  Google is part of the wide ranging technology company Alphabet; Apple offers a wide range of cloud based services and not just phone and iPads; Facebook is an advertising and media giant built around a social network; and Amazon has developed from an online book reseller across almost every vertical market imaginable. Such diversification has lead many to speculate whether GAFA have become too big to fail.

We took a look at the largest public companies in 2016 against those in 2006 to gain a feel for how many companies have managed to maintain their dominance over that decade.   Please see below a quick comparison using the Forbes 2000 list for both years.  You will see only two companies from the 2006 list are still in the Top10 for 2016, ExxonMobil and JP Morgan Chase.  This would suggest that 10 years is a long time in business and many of the major players in 2016 will not be so by 2026.

The main gainers over the period have been the Chinese Banks taking the Top 3 positions and making up 4 of the top 6 largest global companies in 2016.

The World’s Largest Public Companies 2006

The Forbes 2000 is not only a comprehensive list of the world’s largest, and most powerful, public companies. It is also unique in its way of measuring corporate size. Our logic for using sales, profits, assets and market value in a composite ranking: a list based on a single metric provides a lopsided view of which companies are most important to the world’s economy.

1. Citigroup
2. General Electric
3. Bank of America
4. American Intl Group
5. HSBC Group
6. ExxonMobil
7. Royal Dutch/Shell Group
8. BP
9. JP Morgan Chase
10. UBS

The World’s Largest Companies 2016

The incredible ascent of the Chinese economy may be slowing down, but its banks still have plenty of weight to throw around. Chinese banks held on to the top three spots in the FORBES Global 2000, a comprehensive annual ranking of the world’s largest public companies. The 2016 list features public companies from 63 countries that together account for $35 trillion in revenue, $2.4 trillion in profit, $162 trillion of assets, and have a combined market value of $44 trillion.

1. ICBC
2. China Construction Bank
3. Agricultural Bank China
4. Berkshire Hathaway
5. JP Morgan Chase
6. Bank of China
7. Wells Fargo
8. Apple
9. ExxonMobil
10. Toyota Motor

 

What is also noticeable is that only one of the much vaunted GAFA makes it into the Forbes 2000 Top 10, with Apple 8^th in the list.  The Forbes ranking is based on a composite score from equally-weighted measures of revenue, profits, assets and market value.

However, the most valuable companies for 2016 based purely on market capitalisation has Apple, Alphabet, Amazon and Facebook all in the top 6.

The six most valuable public companies in 2006 versus 2016

Much has changed in both technology and in the business world since 2006. A decade ago, the smartphone boom hadn’t started, Apple started its MacBook series of laptops (replacing the previous iBook and Powerbook lines), and social media was just taking off.

On the business side, the most valuable public companies in 2006 were mostly energy companies or banking. However, the next 10 years would see big changes for both sectors. The late 2000s brought a major banking crisis (whose perpetrators largely escaped meaningful punishment, unfortunately), while oil companies also got heavily criticized after the Gulf of Mexico BP oil spill. Meanwhile, the tech companies continued their rise leading to the results shown in the infographic below.

When you look at Forbes most valuable brands for 2016, Apple and Google top the list, with Facebook at number 5 and Amazon coming at number 12.

1. Apple – $154.1 billion
   2. Google – $82.5 billion
   3. Microsoft – $75.2 billion
   4. Coca-Cola – $58.5 billion
   5. Facebook – $52.6 billion
   6. Toyota – $42.1 billion
   7. IBM – $41.4 billion
   8. Disney – $39.5 billion
   9. McDonald’s – $39.1 billion
   10. General Electric – $36.7 billion
   11. Samsung – $36.1 billion
   12. Amazon – $35.2 billion

To GAFA and all major technology players, brand is key.  Apple has relied on its strong brand to sell their products.  Many argue that Apple are in need of a “home run” after poor sales of the iWatch and iPhone7.

Many have questioned whether Facebook can maintain their dominant position with millennials preferring other messaging services such as Twitter or Snapchat. To date the same millennials have maintained a presence on Facebook to stay connected with older generations but this does not suggest they will remain faithful to the brand over time.

Conclusion

So, in answer to the question of whether GAFA will maintain their stranglehold on world tech for the next ten years and still be the companies we are talking about in 2027, this all depends on them maintaining their brand value.  Another discussion is whether in ten years Alphabet will be known for driverless cars rather than as a search engine or Facebook for Artificial Intelligence rather than as a social network.

 

 

Important Note

The information in this website is provided by CSS Partners LLP. This website has been approved for the purposes of section 21 of the Financial Services and Markets Act by Charles Street Securities Europe LLP (CSSE), which is authorised and regulated by the Financial Conduct Authority. CSS Partners is an appointed representative of CSSE.

Any views or opinions expressed in this blog are those of the author alone, except where specifically stated that they are the views of CSS Partners LLP.