Are you examining where your income will come from in the future?

google, microsoft, apple, yahoo, amazon, facebook logosI have been telling clients that Business is like riding a bicycle - to keep your balance, you have to keep moving.  This infers that businesses are constantly examining and re-examining their income streams, profits, cash flows, etc.  As part of this process, a business has to take risks, regardless of their size.  Below are examples of the larger companies who are taking risks at the moment and why.

Google, Apple, Microsoft, Facebook, Amazon and Yahoo are just six of them.  Google has cash reserves of $56.5 Billion and it has recognised that its income streams are changing.  84% of its income comes from internet ads even after diversifying into hardware and other areas and their cash and equivalents jumped 24 per cent from a year earlier in the third quarter to $56.5 billion, while net revenue increased by 5.2 per cent to $11.9 billion.

Analysts estimate that their revenue will slow in 2014 due to the shift in people preferences from PCs to smartphones, tablets and other internet connected devices.  These devises have smaller screens, therefore room for less ads, so Google will suffer. In 2012, PCs accounted for 29% of connected devices. By 2017, PCs will account for 12-13 per cent, according to researcher IDC. Tablets will make up 17 per cent by 2017, and smartphones will account for 71 per cent.

Like any progressive company, Google is projecting forward.  In the past two years they have spent more than $17 billion to purchase hardware, software and advertising technology companies, according to data compiled by Bloomberg.

More recently, they have spent $3.2 Billion, in cash, for Nest Labs. 

Here is a list of Google acquisitions in the past two years:

  • $12.4 Billion on Motorola (and sold off a bit of it to Arris Group for $2 Billion).
  • $151 million on Zagat.
  • $114 million on DailyDeal.
  • $100 million on Meebo.
  • $25 million on Sparrow.
  • $450 million on Wildfire Interactive.
  • $45 million on Viewdle.
  • $17 million on BufferBox
  • $125 million on Channel Intelligence.
  • $30 million on Natural Language Processing.
  • $966 million on Waze.
  • $40 million on Flutter.
  • $23 million on FlexyCore.
  • $3.2 billion on Nest.

Your calculator will tell you that that amounts to $17.686 BILLION.  That is more than the total combined purchases of Apple, Microsoft, Facebook, Amazon and Yahoo, who have only spent $13 Billion.

While Google recognises that its core business lies in the internet and many of its acquisitions revolve around it – hardware, software, etc., they are also spending internally on products like Google Glass and driverless cars.  In addition, they are also looking at robotics. Nobody else is going down this road as seriously.  They bought Boston Dynamics for an undisclosed sum.  BD are famous for inventing the BigDog, a four legged machine invented for the military that can carry 150kg and has an uncanny sense of balance.  It’s the eighth robotics company they have bought in six months.

Another example of changes and moving forward is RyanAir.  They are collaborating with Google in finding the cheapest airline quotes.  Google bought BeatThatQuote for $37.7 million early in 2011.

Microsoft

MS has been the biggest buyer in the past two years after Google, spending about $9 billion. Most of that was on the pending $7.4 billion purchase of Nokia handset unit and the $1.2 billion acquisition of Yammer, the business-software provider.

Facebook

FB's biggest deal was mobile photo-sharing application Instagram for more than $700 million in 2012. The company was snubbed in its effort last year to purchase mobile app Snapchat for $3 billion because they decided not to sell.

Apple

Apple’s total purchases were just over $1 Billion.   Their largest acquisitions were $356 million for AuthenTec (finger print technology), $345 million for Primesense and $200 million for Topsy.  At the end of September 2013, Apple had cash reserves of $146.8 Billion.

Amazon

Amazon’s only notable deal in the past two years was for robotics company Kiva Systems Inc., which cost about $700 million.

Yahoo

Yahoo’s acquisition total about $1.23 billion, with $1.1 billion of that spent on blogging startup Tumblr last year.

The world is changing.  Business is changing.  Their core business is changing.  They are reinventing themselves.  Small business has to follow suit, albeit in a smaller way.

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