How Tech Giants Like Amazon and Facebook Became Wall Street Juggernauts in the Last Decade

The 6 most valuable companies are all tech firms as the 2020s kick off

The 2010s will be remembered as the decade tech companies became remarkably powerful — and valuable.

Just take a look at where we were 10 years ago. In 2009, only one of the 10 most valuable companies in the world  — Microsoft — was a tech company. Now, as we enter a new decade, six of the 10 most valuable companies are tech giants: Apple, Microsoft, Alphabet (the parent company of Google), Amazon, Facebook and Alibaba. What’s more, those six companies, in order, are the first through sixth most valuable companies on earth, with Apple and Microsoft both worth more than $1.2 trillion dollars.

How’d it get to this point? A decade ago, oil juggernauts like Exxon Mobile and Royal Dutch Shell easily lapped some of these now-dominant tech firms. Tech has clearly crashed the party and now appears to hold a stranglehold on the market.

Three key factors appear to have spurred the rise of tech, according to several experts who spoke to TheWrap: ubiquity, innovation and adaptability.

On ubiquity, all of these companies have not only been adopted by more people in the last decade but are also being used more frequently.

“Most consumers use Amazon, Apple, Google, Netflix and Facebook on a daily basis and view it along with water and food as a necessity,” Wedbush analyst Dan Ives said.  “Tech stalwarts such as FAANG  (Facebook-Apple-Amazon-Netflix-Google) have become internet staples and have crossed the line in which these monetization engines have become a major part of the next-generation economy.”

Take Facebook as an example. With more than 400 million users at the start of 2010, it was big enough to topple MySpace as the go-to social media site while also inspiring a hit movie in “The Social Network.” It’s only continued to grow since then, becoming a monolith with 2.4 billion global users. It added WhatsApp and Instagram into its family of apps in the meantime, only increasing the amount of time people interact with one of its core products. More people spending more time on its platforms has lead to an influx of digital ad revenue each year, as advertisers continue to flee static legacy media outlets in favor of Facebook and Google.

This growth has been especially attractive to Wall Street, which is typically more interested in where a company is headed than where it is right now.

“In a world in which growth is hard to find, tech stocks remain front and center for investors,” Ives added. “The valuations have risen over the last decade and are major fuel in this parabolic tech move seen over the last few years. Transformational tech trends such as cloud, streaming and smartphones have changed the world and consumer behavior, and the stocks reflect this dynamic.”

The next two factors innovation and adaptability, are closely linked. Many of these companies were able to survey the landscape, see the steady rise of smartphones and the internet, and position their companies to succeed while their competitors took years to catch up. As hockey legend Wayne Gretzky once put it, skate to where the puck is going to be, not where it is. Amazon comes to mind here. Twenty years ago, it was known as a scrappy, unprofitable online book retailer. Ten years ago, it was establishing itself as the go-to destination for online shopping — but people were still catching on. Now, e-commerce sales are set to hit $3.46 trillion in 2019, or double where the industry was only five years ago. Amazon, led by chief executive Jeff Bezos, anticipated this trend.

Film producer and current NYU business professor Peter Newman added that “adaptability,” or the ability to quickly adjust to market dynamics, often plays a critical role.

“Look at Netflix,” Newman said, “it went from sending out envelopes with DVDs to having a clear [streaming] path for 7 years where companies weren’t competing with them.”

Netflix isn’t one of the 10 most valuable companies on the planet, but it’s doing fine as the ’20s kick off: its worth about $142 billion and has been the top-performing company in the S&P 500 since 2010.

This was helped along by changes outside of Netflix’s control, like the increasing adoption of high-speed internet. Still, Netflix noticed this and shifted its focus from being a DVD rental service to a company that offered and produced content that could be streamed online. This was a move more established competitors could have made as well, but didn’t. That failure to adjust — often boiling down to an “if it isn’t broke, why fix it?” mentality — allowed Netflix to race to nearly 160 million global subscribers on the strength of its original shows and content it had licensed from Hollywood blue bloods. It would be years before heavy hitters like Disney belatedly entered the streaming battle.

“If Warner Bros. had gotten into the streaming business at the same time [as Netflix], we might not have a Netflix now,” Newman added, “because shows like ‘Friends’ and ‘The Office’ wouldn’t have been available.”

There are some valid reasons to be skeptical these tech companies will continue to be the most valuable companies a decade from now. Change happens quickly and new competitors emerge — not to mention politics. Sen. Elizabeth Warren, for example, has warned she’ll break up Facebook and Amazon if she’s elected president.

But Gene Munster, founder and chief analyst at Loup Ventures, said these companies are well-positioned to succeed because they’re continuing to branch out into new sectors and take market share from new rivals.

“The reason why tech has had a run that will likely continue into the next decade is the sector is stealing market cap from other industries,” Munster said. “For example, Apple took market cap from Nokia, Sony, Canon and any industry that was disrupted by the iPhone. Over the next decade, tech will steal market cap from healthcare and automotive from massive markets that have been largely untouched by tech.”

Sean Burch

Sean Burch

Tech reporter • • @seanb44 


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