insights! episode #11: what is the DNA of GAFA companies?

It's about the topic, what makes the GAFAs so special?

What is the code, the DNA of the billion-dollar companies?

Each of these companies – Google, Amazon, Facebook and Apple – has a market capitalisation of more than one billion euros. And these particular features I'd like to outline for you today.

The first point is, the GAFAs all appeal to a certain instinct. In sales psychology it's totally clear, let's take the Swedish car manufacturer Volvo for example. Volvo clearly appeals to the head: safety, with Volvo I reach my destination safely. Sustainable, environmentally conscious, maximum 180 km/h. BMW is on a different side there. With "Sheer Driving Pleasure" they appeal to a different segment. The GAFAs know that exactly. The second point is, the GAFAs attract the best people. They not only pay them exceptionally well. People who have been there can, with this CV - I was at Google or Amazon in this or that position - very quickly get well paid jobs elsewhere. It's a distinction to have been there. If you consider how many applicants there are for a software engineer position at Google and how many applicants there are for a place to study at Harvard, it's harder to get into Google than into Harvard. An interesting point by the way, I find. The next point is, the hyperscalers, the GAFAs, they don't just grow fast, they also have a high margin. And these are combinations, that of course doesn't always work immediately, but ultimately it's something that gets realised. And that of course makes them much more powerful. Looking at how they achieve it is ultimately the next trick. All the GAFAs ultimately have two main revenue streams. There's recurring revenue, ongoing income that they don't have to keep chasing after the customer has decided in their favour. The second area is bundles. I already have a contract, I can bundle it with something and thereby keep expanding it further. And these so-called rundles lead precisely to accelerating growth and increasing margin. The next point is vertical integration. What is Apple? Apple is actually a luxury goods manufacturer. But what do they have in place? Apple doesn't just have the smartphone or the corresponding desktop and notebook devices. No, Apple has also vertically integrated upwards. The Apple Stores give the customer a very special experience, about which Steve Jobs once said, if I have stores, I want an NPS score to come out like the best hotels in the world. Why like there?
They have the best NPS scores. But vertical integration also further down the chain. They don't just have the smartphone, they have the operating system, they have the marketplace. By now they also determine privacy matters, by saying, no, the user must be allowed to decide for themselves whether, for example, a unique device identifier should be available to other apps. This vertical integration of course makes them very, very strong. The next point is the Benjamin Button point. When I have a product, it gets older, and the older it gets, the less exciting it becomes. Yet these companies manage to keep renewing these products so this Benjamin Button effect doesn't occur. Ultimately they can all tell brilliant visions, and their storytelling plays in the Champions League. Just think of the Tesla shows, with Elon Musk, or Steve Jobs. But Tim Cook also does this wonderfully on stage. These are real stories being told, why I'd want to have something like that.

And not just with the GAFAs, also with Gucci, the handbag made from special leather that's only produced that way at Gucci. That builds stories which people love to buy. These stories mean the margin can be increased again. Ultimately there's also the point of likeability, these brands are liked. And there we currently see the difference that Apple manages to remain liked despite having a very, very strong positioning. With Amazon it's already noticeably harder, because for more and more companies it's a market competitor, or even much more than that. When I think of Facebook and Mark Zuckerberg, and I'm sure many share this with me, I don't have an unreservedly good feeling. But what unites all the brands in the end is that the people behind them are somehow liked too. That's the DNA that unites all these companies.

 Thanks for listening, have a great day or evening!

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