Big tech companies are under fire from many sides. Uproars over privacy fears, sluggish earnings, and regulation imminent, Silicon Valley is looking for a way forward. These tech companies have been trying to diversify their income streams in order to stay alive. The question is, can they succeed? So far it hasn’t gone well. Jason Dean reports for The Wall Street Journal:
Google, Facebook Inc. FB -0.79% and other tech giants have long tinkered with ways to grow outside the core businesses they dominate. Now those efforts are becoming urgent.
Facebook Chief Executive Mark Zuckerberg, beset by public anger over abuses on the social network, spent the company’s annual developer conference last week talking up his vision for a Facebook more focused on private messaging and small groups than on the advertising-driven social-media hub that gained it nearly 2.4 billion monthly users.
Messaging is one of several areas Facebook has been eyeing for new opportunities. Another got the spotlight last week when The Wall Street Journal reported that Facebook is recruiting financial firms and online merchants to help launch a cryptocurrency-based payments system.
Apple Inc., AAPL -1.70% meanwhile, said last week its sales-and-profit slump extended into a second straight quarter—the first time that has happened in more than two years—thanks to falling sales of the iPhone, the product that turned it into a colossus. Its response has been to try to morph itself into a services company fueled by app and entertainment sales as much as hardware.
Google parent Alphabet Inc. GOOGL -0.30% has been Big Tech’s most eclectic big-idea factory. It has worked on self-driving cars for a decade and has arms devoted to everything from balloon-tethered internet access to extending human life. But it has had little success turning those efforts into moneymaking businesses. Advertising is still 85% of its revenue, and operating losses at its “other bets” segment ballooned by 52% in the last quarter to $868 million, Alphabet said last week. The perils of its ad dependence were laid bare when an unexpected drop in quarterly sales sent Alphabet shares down 7.5% on Tuesday, their biggest one-day drop since 2012.
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Jeremy Jones, CFA
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