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Opinion | The Rise of Big Tech May Just Be Starting

Consider, for instance, Apple’s “services” business — a division that includes, among other things, its App Store, Apple Pay, iCloud and its music and TV subscription plans. Traditionally Apple has made a huge amount of money from selling hardware. But iPhone sales have gone up and down over the past half decade, which makes sense; eventually everyone who wants an iPhone will have an iPhone, and with each new iPhone only slightly better than the last, people will have fewer reasons to upgrade. Indeed, iPhone sales in Apple’s holiday quarter in 2021 grew by 9 percent over 2020 — solid, but nothing like the growth Apple once saw with the iPhone.

And so Apple has increasingly turned to subscriptions and other online services for growth — essentially a way to grow not just by selling more iPhones, but by getting more money from each iPhone user. The plan is working spectacularly well. Apple reported that during 2020 its App Store billing and sales revenue grew by 24 percent over the previous year. Luca Maestri, Apple’s finance chief, told investors last month that the company now has 785 million paying subscribers to its various offerings — a number that grew by 165 million in the past year. For some perspective: Netflix has about 222 million subscribers in total.

You see a similar trend across the industry — Big Tech’s not just getting more customers for its traditional businesses, but is expanding its ancillary businesses in ways that seem impossible. Amazon, for example, is not just an indomitable retailer and the largest cloud services provider (its Amazon Web Services cloud business now has a $71 billion annual revenue run rate). The company also disclosed that its advertising business generated $31 billion in revenue in 2021, while Microsoft said its ad revenue exceeded $10 billion. Remember that ads are, in the scheme of things, a small part of the business for both companies — Amazon’s $31 billion ad business is not even 10 percent of its annual revenue. And yet it dwarfs companies whose entire business is mainly ads — Snap, for example, which had $4 billion in revenue in 2021, or Pinterest, which sold less than $2.6 billion in ads.

Dan Ives and John Katsingris, analysts at the investment firm Wedbush Securities, wrote in a recent report that what we are seeing now is only the beginning of a long-term explosion in tech earnings. They estimated that companies would spend a trillion dollars on cloud services over the coming years, meaning that there is a lot more room for tech companies to keep growing and growing and growing. Apple’s services business alone could be worth $1.5 trillion, Ives has estimated. He and other pundits have called the coming investment boom in tech the “Fourth Industrial Revolution.”

That sounds grandiose. And yet it’s hard to see what stands in Big Tech’s way. Lawmakers and regulators have expressed alarm over tech behemoths’ market power, but with the midterm election looming and Republicans and Democrats still at odds over what exactly to do to curb tech giants’ power, the window for new antimonopoly policy might be shrinking.

I wonder if a few years from now we’ll say that when it came to anticipating the future for Big Tech, we weren’t thinking big enough.

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