Gennaro Cuofano's Blog, page 254

August 31, 2018

How Does YouTube Make Money? YouTube Business Model In A Nutshell

Founded in 2005 by former PayPal co-workers (Chad Hurley, Eric Skaggs, Jawed Karim, Martin Pauer, and Steve Chen) YouTube was acquired for almost $1.7 billion in 2006 by Google. We don't know how much revenues it makes, although it might be a $15 billion per year, based on advertising and paid membership. YouTube is the most popular website on the planet, after Google.

YouTube origin story

Going back and look at the YouTube story might be a good exercise to understand the wild success it experienced in a short period and how YouTube business model might look like in the future.

YouTube start: It all began at the San Diego Zoo

April 23rd, 2005, Jawed Karim a German-born boy, moved to Minnesota with his family in 1992, uploaded a video entitled "Me at the zoo:"

This was the first inaugural video taken at the San Diego Zoo, for YouTube, the video-sharing platform which would become the most popular website - after Google - in a decade.

As reported by AdAge, back in July 2006, "The popularity of YouTube is growing at an astronomical rate, as web traffic to the video-sharing site grew 75% just in the week ending July 16, from 7.3 million to 12.8 million unique visitors, according to Nielsen/NetRatings. Traffic to the site has grown nearly threefold -- 297% -- since January, making it the fastest-growing site online."

YouTube copyright issues and how it dealt with them

As growth picked up right away, problems for copyrighted content loomed ahead. YouTube founders sat down with media executives to convince them of the value, in terms of business for them to be featured on YouTube.

The same AdAge reports - in regards to the YouTube business model - "Still in the process of building its advertising model and sales team, YouTube is experimenting with a number of sponsor partnerships. Last month, NBC struck a deal with YouTube to promote its fall TV lineup just months after ordering the site to take down the copyrighted video. Under the terms of the agreement, NBC is creating an official NBC Channel on YouTube to house its fall preview with exclusive clips to promote shows such as "The Office." And earlier this month, Walt Disney tapped YouTube to promote "Pirates of the Caribbean: Dead Man's Chest," with rich-media banner ads."

Google acquisition of YouTube for $1.7 billion in less than two years

YouTube founders managed to survive and thrive until in 2006 the big hit arrived. Google purchased YouTube for almost $1.7 billion. As reported by NBC news back in 2006 "Internet search leader Google is snapping up YouTube for $1.65 billion, brushing aside copyright concerns to seize a starring role in the online video revolution."

And it goes on "The price makes YouTube Inc., a still-unprofitable startup, by far the most expensive purchase made by Google during its eight-year history. Last year, Google spent $130.5 million buying a total of 15 small companies."

The deal was announced with such excitement that Sergey Brin also said “It’s hard to imagine a better fit with another company,” during a conference call after the purchase. “This really reminds me of Google just a few short years ago.”

Explosive growth: how YouTube got to over two billion views by 2010
By 2010 YouTube recorded over two billion visits per day. Just five years before, the YouTube's founders, former PayPal co-workers were sitting the whole night to go through the test and preparation of the video-sharing platform that would be acquired by Google, just 19 months after that night!

At that point, YouTube had already over 2 billion views per day, way more than combined US networks. By 2012 YouTube would double that number. In 2012 YouTube kept consolidating its massive international expansion.

YouTube today [image error]
YouTube is the most popular website in the world, after Google. With over 24 billion visits per month, according to Similar Web estimates, the video-sharing platform is extremely sticky.
With 22 minutes of time spent on site on average, almost ten pages viewed per session and a bounce rate of 27.50%, YouTube might well be one of the most engaging sites on the planet. No wonder YouTube might also be a money machine

How much money does YouTube make?

As part of Goole's (now Alphabet) financials, we don't know the revenues for the video-sharing platform. Back in 2006 Google announced YouTube revenues as "not material" (in short, they are not required to shot them on the books). However

Since its acquisition from Google, YouTube revenues numbers were not disclosed, but according to Business Insider YouTube might be a $15 billion business in 2018.

Is advertising the right business model for YouTube?

As explained on Google annual report "As interactions between users and advertisers change and as online user behavior evolves, we continue to expand and evolve our product offerings to serve their changing needs.

Over time, we expect our monetization trends to fluctuate. For example, we have seen an increase in YouTube engagement ads, which monetize at a lower rate than traditional desktop search ads. Additionally, we continue to see a shift to programmatic buying which presents opportunities for advertisers to connect with the right user, in the right moment, in the right context. Programmatic buying has a different monetization profile than traditional advertising buying on Google properties.

The number of paid clicks through our advertising programs on Google properties increased from 2016 to 2017 due to growth in YouTube engagement ads. The decrease in cost-per-click was primarily driven by continued growth in YouTube engagement ads where cost-per-click remains lower than on our other advertising platforms."

[image error]

The advertising business model for media is not new, and it represents the primary driver for Google's revenues today, and we can well hypothesize that it will be the primary drivers for both Google and YouTube in the next years. As explained in Google's annual report "We also experienced growth in YouTube revenue driven primarily by video advertising across TrueView with a growing contribution from ad buying on DoubleClick Bid Manager, as well as improvements in ad formats and delivery."

The advertising business model is not the only possible. As Netflix has been able to grow into a multi-billion dollar company with its subscription business model, also YouTube is experimenting with that.

YouTube subscription-based business model

[image error]

Formerly known as YouTube Red, YouTube Premium includes features across YouTube and the new YouTube Music app as well as access to all YouTube Originals series and movies.

[image error]

What does YouTube premium comprise?

Ad-free videos: Watch millions of videos without ads
Download videos to watch offline: Save videos and playlists on mobile devices and play them offline
Play in the background: Keep videos playing when using other apps or when your screen is off

What does YouTube Music comprise?

Easily explore the world of music with the new and improved YouTube Music app
Ad-free music: Listen to millions of songs without ads
Download music to listen offline: Save music and playlists in the YouTube Music app and listen offline
Play in the background: Keep music playing when using other apps or when your screen is off

What does YouTube Originals comprise?

It comprises YouTube’s original series, and movies range from dramas featuring award-winning actors to comedies with top YouTube creators and documentaries covering multi-platinum artists. With YouTube Premium, you have access to all YouTube Originals, available to watch on all devices. You can find the list of movies and series on the YouTube Originals channel.

What does YouTube Kids comprise?

Ad-free and offline play in the YouTube Kids app

What does YouTube Gaming comprise?

[image error]

Ad-free, offline, and background play in the YouTube Gaming app

YouTube Gaming filters videos from YouTube to give you the best experience for watching gaming videos. You’ll find everything that’s in YouTube Gaming on the main YouTube app/site, but only gaming content on YouTube Gaming.

We cannot know how many YouTube paying members there are. However, YouTube is pushing on its paid memberships.

With an ad-free and offline library, YouTube music premium and the YouTube originals, the video-sharing platform might well be able to compete with Netflix, Spotify and others media companies running on top of the subscription-based business model.

YouTube mission: "Our mission is to give everyone a voice and show them the world"

As explained on the YouTube website "We believe that everyone deserves to have a voice and that the world is a better place when we listen, share and build community through our stories."

Summary and conclusion

Founded in 2005 by a group of former PayPal employees, YouTube grew so fast that by 2006, in about 19 months after it got acquired by Google for almost $1.7 billion.
Ever since YouTube has kept its pace and it has become the most popular site on the planet after Google itself. Since YouTube is part of Google's financials we don't know yet its revenues.
Yet as pointed out on Business Insider that might be a business of $15 billion per year. This scenario might change soon if the SEC will ask Google to report YouTube revenues.
Advertising is the primary revenue source for Google and presumably for YouTube as well. However, YouTube is also experimenting with the subscription business model.

Other hand-picked articles:

How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained
How Does PayPal Make Money? The PayPal Mafia Business Model Explained
How Does WhatsApp Make Money? WhatsApp Business Model Explained

The Power of Google Business Model in a Nutshell

The post How Does YouTube Make Money? YouTube Business Model In A Nutshell appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 31, 2018 12:42

August 29, 2018

Who Owns Coca-Cola? Coca-Cola Business Strategy In A Nutshell

Coca-Cola institutional investors with more than 5% of its stock include Berkshire Hathaway (an investment company owned by Warren Buffet) with 9.38% of shares, The Vanguard Group, holding 6.67% of shares and BlackRock owning over 5.67% of shares of the company. Other individual investors like Herbert A. Allen, director of The Coca-Cola Company since 1982, Barry Diller, Chairman of the Coca-Cola board since 2002. And former CEO Chairman of the Board: Muhtar Kent", "tablet":"Chairman of the Board: Muhtar Kent", "mobile":"Chairman of the Board: Muhtar Kent"}" class="titles_updated" style="outline: 0px; quotes: '“' '”';">Muhtar Kent.

[image error]

Above the three most prominent institutional investors that own more than five percent of the company:

[image error]

Above and below the directors and executives officers that own shares of the company:

[image error]

Who is Herbert A. Allen?
Director of The Coca-ColaCompany since 1982. Mr. Allen is President, Chief Executive Officer and a Director of Allen & Company Incorporated, a privately held investment firm.
Who is Barry Diller?

Director of The Coca-Cola Company since 2002, he is also Chairman of the Board and Senior Executive of Expedia Group, Inc. Barry Diller has also served as Special Advisor to TripAdvisor, Inc.

Chairman of the Board: Muhtar Kent", "tablet":"Chairman of the Board: Muhtar Kent", "mobile":"Chairman of the Board: Muhtar Kent"}" class="titles_updated" style="outline: 0px; quotes: '“' '”';">Who is Muhtar Kent?

Muhtar Kent is Chairman of the Board of Directors of The Coca-Cola Company. From 2009-2017 he served as CEO of the company. He joined Coca-Cola back in 1978 holding several marketing and operations leadership positions over the course of his career.

What is Coca-Cola incentive formula?

As of 2017 Coca-Cola, incentive formula comprises a base salary multiplied by a target percentage, times the company performance factor. To which the individual performance amount is added.

[image error]

For instance, Mr. Kent with a 200% target got an annual target incentive of $2 million, two times the amount of its base salary.

[image error]

Before we move forward, I’d like to show you why I think Coca-Cola has been so successful over the years and it has nothing to do with its secret formula.

Coca-Cola in the desert

Although a few people wonder about Coca-Cola business model (they might give it for granted just like I did not long ago), my curiosity was sparked in the middle of nowhere. As I was traveling toward the Grand Canyon in Arizona, I passed through a town called Dolan Springs.

Situated in the middle of nowhere, at 3,400 feet of elevation, with less than four thousand people living there (according to Wikipedia estimate in 2010) I saw one thing that got my attention. In front of a local shop, there was a Coca-Cola automatic distributor. I couldn’t see a single person around, but I could get a fresh Coke!

I understand that Coca-Cola is a company born at the end of the 1800s. Thus it had quite some time to get people accustomed to its brand, and taste, as to become a habit (or a vice) for millions if not billions of people (unfortunately I’m one of them). Yet, it doesn’t matter in which country on earth you are Coca-Cola will be there.

What’s the secret of this company besides its formula? I bet that is about its business model and its distribution strategy. That’s why I looked into its financials to dissect its operations.

Coca-Cola operating segments

Coca-Cola can be divided into a few operating segments across Europe, Middle East, and Africa:

• Latin America

• North America

• Asia Pacific

• Bottling Investments

• Corporate

Coca-Cola products line

Beverage concentrates, referred to as “beverage bases,” and syrups, including fountain syrups
Finished sparkling soft drinks and other nonalcoholic beverages referred to as “finished product business” or “finished product operations.”

Finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.

How does the Coca-Cola manufacturing process work? unfinished vs. finished products

As explained in the annual report:

In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to authorized bottling operations (to which we usually refer to as our “bottlers” or our “bottling partners”). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers — such as cans and refillable and nonrefillable glass and plastic bottles — bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.

In our finished product operations, we typically generate net operating revenues by selling sparkling soft drinks and a variety of other nonalcoholic beverages, including water, enhanced water, and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. These finished product operations consist primarily of our Company-owned or -controlled bottling, sales and distribution operations which are included in our Bottling Investments operating segment. Also, in the United States, we manufacture fountain syrups and sell them to fountain retailers, such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. We authorize these wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States. Our finished product business also includes juice and other still beverage production operations in North America. Our fountain syrup sales in the United States and the juice and other still beverage production operations in North America are included in our North America operating segment.

How does Coca-Cola distribution system work?

Coca-Cola drinks are available to consumers in more than 200 countries through a network of Company-owned or -controlled bottling and distribution operations, independent bottling partners, distributors, wholesalers, and retailers. This is a massive beverage distribution system able to serve 1.9 billion beverages each day.

What brands does Coca-Cola own?

The Coca-Cola Company owns a portfolio of brands, beyond the Coca-Cola drink, which comprise:

Georgia a coffee brand sold mainly in Japan.
Dasani
Ice Dew a water brand sold in China
Diet Coke/Coca-Cola Light
Powerade
Simply a juice and juice drink brand sold in North America
I LOHAS a water brand sold primarily in Japan
Coca-Cola Zero Sugar
Del Valle a juice and juice drink brand sold in Latin America
Glacéau Vitaminwater
Ayataka a green tea brand sold primarily in Japan
Fanta
Schweppes owned by the Company in certain countries other than the United States
Gold Peak a juice and juice drink brand sold in North America
Sprite
Aquarius
FUZE TEA
Minute Maid a juice drink brand sold primarily in the Asia Pacific
Minute Maid Pulpy
Glacéau Smartwater a vapor-distilled water with added electrolytes which is sold mainly in North America and Great Britain

The secret isn’t in the secret formula but in the bottling partners

The Coca-Cola Company has five large independent bottling partners based on unit case volume that in 2017 were:

Coca-Cola FEMSA, S.A.B. de C.V. (“Coca-Cola FEMSA”), which has bottling and distribution operations in Mexico, Guatemala, Panama, Colombia, Venezuela, Brazil), Argentina and the Philippines;
Coca-Cola European Partners plc (“CCEP”) Andorra, Belgium, France, Germany, Great Britain, Iceland, Luxembourg, Monaco, the Netherlands, Norway, Portugal, Spain, and Sweden
Coca-Cola HBC AG (“Coca-Cola Hellenic”) Armenia, Austria, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the Former Yugoslav Republic of Macedonia, Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern Ireland, Poland, Republic of Ireland, Romania, the Russian Federation, Serbia, Slovakia, Slovenia, Switzerland and Ukraine;
Arca Continental, S.A.B. de C.V. northern and western Mexico, northern Argentina, Ecuador, Peru and the state of Texas and parts of the states of New Mexico, Oklahoma, and Arkansas in the United States
Swire Beverages Swire Beverages Hong Kong, Taiwan, 11 provinces and the Shanghai Municipality in the eastern and southern areas of mainland China, and territories in 13 states in the western United States.

This distribution system represented in 2017 the 41% of the total unit case volume.

Coca-Cola distribution plants

[image error]

With distribution plants all over the world Coca-Cola is able to make its products available everywhere:

[image error]

As of 2017, the concentrated operations represented 51% of the production compared to the 49% for the finished product operations.

[image error]

Source: The Coca-Cola Company Annual Report

Net operating revenues were over $35 billion in 2017, compared to over $41 billion in 2016.

A quick glance at the Coca-Cola ecosystem

[image error]

With a massive portfolio of soft drinks with more than four thousand products worldwide; 250 bottling partners, 900 plants, and 27 million retail customers The Coca-Cola system is probably the most extensive distribution ecosystem on earth.

Do you want to know who owns Google and who owns Apple?

Handpicked related articles:

What Is the Receivables Turnover Ratio? How Amazon Receivables Management Helps Its Explosive Growth
Amazon Case Study: Why from Product to Subscription You Need to “Swallow the Fish”
What Is Cash Conversion Cycle? Amazon Cash Machine Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
The Power of Google Business Model in a Nutshell
Starbucks Business Model In A Nutshell

The post Who Owns Coca-Cola? Coca-Cola Business Strategy In A Nutshell appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 29, 2018 05:13

What Is Berkshire Hathaway? Warren Buffett’s Company In A Nutshell

Berkshire Hathaway is the investment firm from billionaire Warren Buffett. It was once a textile company founded back in 1839. In 1962 Warren Buffett started to acquire shares of the company until he had ownership of it. However, as Warren Buffett would later notice, Berkshire Hathaway represented the worst investment he’s ever made. Although he kept the company, which over the years would start investing in many other businesses (Coca-Cola, Heinz, Geico and many others) and became the investment holding for Warren Buffett‘s investments over the years.

Berkshire Hathaway origin story

There was a time when Berkshire Hathaway was a manufacturing company, from Rhode Island. The company, founded in 1839, was born as the merging of several manufacturing companies over the years by the 1950s Berkshire Hathaway was a successful manufacturing company, which suffered from the decline of the textile industry. During the 1960s, young Warren Buffet set to make money out of Berkshire Hathaway stocks. However, he never made money from those operations. In fact, from a CNBC interview Warren Buffett clarified that Berkshire Hathaway was the worst deal he ever made. Claiming to have lost $200 billion.

In his words, in the CNBC interview, Warren Buffet noted “It was early in— 1962, and I was running a small partnership, about seven million. They’d call it a hedge fund now.“

As the story goes, Warren Buffett was ready for a tender offer which he agreed with the management. Yet that agreement was not respected, which made Warren Buffet angry until taken aback from the anger he acquired the control of the company and fired the man – Mr. Stanton – to whom he had agreed on the tender offer for Berkshire Hathaway.

Since he had committed most the investing money in Berkshire Hathaway, Mr. Buffett kept holding at it. In the meanwhile, he also entered the insurance business, within the next twenty years. In short, Berkshire Hathaway became a burden that would never scroll from Warren Buffett‘s shoulder, not just from a philosophical standpoint. But instead from a financial perspective.

As reported by Warren Buffett had he entered directly the insurance business, rather than the textile, based on compounding earnings Warren Buffett would have earned $200 billion more. Of course, talking at conditional is not a good investment strategy.

The paradox is that Berkshire Hathaway, Warren Buffett‘s first and worst investment also stuck as the name of the investment company that later in the years would acquire brands like Coca-Cola, Geico, Goldman Sachs, Apple and many others.

Who owns Berkshire Hathaway?

[image error]

Source: Berkshire Hathaway Proxy 2018

Berkshire Hathaway is owned by Warren Buffett, Charlie Munger, Bill Gates (founder of Microsoft), David Gottesman (founder of First Manhattan Co.) and others.

While as individual shareholders Warren Buffett is the one who owns more than 5% of Berkshire Hathaway class A stocks. At the institutional level, Blackrock owns 7.7% of the company and The Vanguard Group has 9.2% of the company, both in class B stocks and State Street Corporation owns about 6.3%. Those ownership percentages are as of March 2018.

Like Alphabet ownership structure (known as Google), also for Berkshire Hathaway, we have to make a distinction between ownership and control. Berkshire Hathaway stocks are divided into two classes: A and B.

If you look at the shareholders for Berkshire Hathaway, you might notice how Warren Buffett, between Class A and Class B stocks, might have voting power for more than 50%. However, as reported on the Proxy statement, “Mr. Buffett has entered into a voting agreement with Berkshire providing that, should the combined voting power of Berkshire shares as to which Mr. Buffett has or shares voting, and investment power exceed 49.9% of Berkshire’s total voting power, he will vote those shares in excess of that percentage proportionately with votes of the other Berkshire shareholders.

Berkshire Hathaway stocks: Class A vs. Class B

When a company decides to issue equity in the form of common shares, it can do so in several types depending on the limitations that the owners of the company want to give to voting powers and also in terms of ownership. In short, a Class B stock might be worth more Class A stocks.

As of the close of business on March 2018, Berkshire Hathaway has issued 748,347 shares of Class A Common Stock and 1,344,969,701 shares of Class B Common Stock.

Berkshire Hathaway Class A Stocks

Each share of Class A Stock is entitled to one vote per share. Each share of Class A Stock is convertible into 1,500 shares of Class B Stock at the option of the shareholder.

Berkshire Hathaway Class B Stocks

Class B Stock is entitled to one-ten-thousandth (1/10,000) of one vote per share on all matters submitted to a vote of shareholders of the Corporation.

What salary do Warren Buffett and Charlie Munger get?

[image error]

Warren Buffett and Charlie Munger get a salary of $100,000 per year. This is a base salary, as they don’t take bonuses or any other form of compensation.

Top 15 Berkshire Hathaway stocks

[image error]

Source: Berkshire Hathaway Annual Report 2017

From the table, you can see how today Berkshire Hathaway is a well-diversified business that owns companies like American Express, Apple, Bank of America, Coca-Cola, Goldman Sachs, Moody’s, Heinz (not reported here) and many other brands. Among the most successful investments, there is Coca-Cola, which Warren Buffett started to buy back in 1988, until in 2017 that amounted to 9.4% shares of the company.

If you follow Warren Buffett, you know how his aversions for tech companies. Yet starting 2016 he started acquiring Apple Inc. stocks.

Warren Buffett investment in Apple stocks

One of the most important principles that drive Warren Buffett investing is about his circle of competence. Indeed, that implies to invest in companies he can understand. Thus, technology firms have not been in Warren Buffett‘s radar for that simple reason. However, it seems that back in 2016 and still in 2018 Warren Buffett has been racking up stocks of Apple. In an interview for CNBC, he said: “Apple strikes me as having quite a sticky product and an enormously useful product to people that use it, not that I do.”

Does Warren Buffett manage the whole portfolio?

As specified by Warren Buffett in the 2017 annual report “Some of the stocks in the table are the responsibility of either Todd Combs or Ted Weschler, who work with me in managing Berkshire’s investments. Each, independently of me, manages more than $12 billion; I usually learn about decisions they have made by looking at monthly portfolio summaries. Included in the $25 billion that the two manage is more than $8 billion of pension trust assets of certain Berkshire subsidiaries. As noted, pension investments are not included in the preceding tabulation of Berkshire holdings.”

Does Warren Buffett look at market fluctuations?

One of the essential principles of value investing, which is Warren Buffett methodology to stock investing is to ignore Mr. Market. The value investor looks at the company fundamental and ignores market fluctuations and the noise made by media. As specified by Warren Buffett in Berkshire Hathaway 2017 annual report “Charlie [referring to his life-long partner Charlie Munger] and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their “chart” patterns, the “target” prices of analysts or the opinions of media pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be), our investments will be successful as well. Sometimes the payoffs to us will be modest; occasionally the cash register will ring loudly. And sometimes I will make expensive mistakes. Overall – and over time – we should get decent results. In America, equity investors have the wind at their back.”

Has Berkshire Hathaway always been successful?

As a company that made its success with stock investing. Also for Berkshire Hathaway, there are dips. Some of those lowered the value of the company for more than half:

[image error]

As pointed out by Warren Buffer “the table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.”

Warren Buffett case against advisors commissions and why passive investors outperform active investors (in most cases)

As pointed out by Warren Buffett “American investors pay staggering sums annually to advisors, often incurring several layers of consequential costs. In the aggregate, do these investors get their money’s worth? Indeed, again in the aggregate, do investors get anything for their outlays?”

In fact, back in 2007, Warren Buffer set an experiment. On one side an advisory firm, called Protégé selected five “funds-of-funds.” In short, it selected five investment experts, who in turn selected other hundreds of investment experts, each managing a hedge fund. In short, what we would call an “elite crew” of financiers. While Warren Buffett would invest in an index fund.

In short, that is a fund that replicates other existing indexes. In this particular case, Warren Buffett “bet” on an index fund replicating the S&P. The main feature of the index fund is the passive management style those have. In fact, an index fund starts from the assumption that you can outperform other managed funds, by simply replicating existing funds.

There are several reasons why a passive fund might have, in most cases, a better return than an actively managed fund according to Warren Buffett. To list a few:

No management fees and low overall fees: what makes actively managed funds not a good investment are the fees managers get. Those fees are usually owed both when the fund wins and loses. With the consequence that over time the return is eroded
No cost of divesting and investing in new stocks: when changing the composition of the portfolio those managers will have it incur costs, that often make the overall fund not profitable
Tax-efficient funds: when buying and selling stocks within an actively managed portfolio that creates taxation due to capital gain. Usually, when it comes to index funds, it doesn’t happen as the turnover of stock in the portfolio is minimized

As Warren Buffett specified in 2016 when the bet was coming to an end, in relation to the manager ability to bit the market, “the search for the rare high-fee manager who is worth his or her pay is the fact that some investment professionals, just as some amateurs, will be lucky over short periods. If 1,000 managers make a market prediction at the beginning of a year, it’s very likely that the calls of at least one will be correct for nine consecutive years. Of course, 1,000 monkeys would be just as likely to produce a seemingly all-wise prophet. But there would remain a difference: The lucky monkey would not find people standing in line to invest with him.”

How did it go?

[image error]

From the table above after the first year, the index fund pretty much outperformed the actively managed funds-of-funds.

As he further pointed out back in 2016 by Warren Buffett, “The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”

Integrity: when Warren Buffett said no to more partners

As noted by Warren Buffett in the 2017 annual report “In January 1966, when I was managing $44 million, I wrote my limited partners: “I feel the substantially greater size is more likely to harm future results than to help them. This might not be true for my own personal results, but it is likely to be true for your results. Therefore, I intend to admit no additional partners to BPL. I have notified Susie that if we have any more children, it is up to her to find some other partnership for them.”

Warren Buffet Manifesto: the 13 principles that drove Berkshire Hathaway since 1983

[image error]

Intrinsic value as main metric for Berkshire Hathaway

Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. While this definition provided in the annual report is straightforward. In reality, assessing the intrinsic value for an organization is very hard and can be done by looking at it from several perspectives. Warren Buffett has his own way to look at intrinsic value, that while at the beginning of his career was way closer to his mentor, Ben Graham, it changed over the years. For instance, while Ben Graham as value investor pushes to acquire companies when they are cheap. Warren Buffett usually ignored the stock price.

Berkshire Hathaway investing process

As reported in the annual report for 2017

We are eager to hear from principals or their representatives about businesses that meet all of the following criteria:

(1) Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing units),

(2) Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround” situations),

(3) Businesses earning good returns on equity while employing little or no debt,

(4) Management in place (we can’t supply it),

(5) Simple businesses (if there’s lots of technology, we won’t understand it),

(6) An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).

Berkshire Hathaway business operations

Berkshire has about 377,000 employees, only 26 of these are at headquarters. Some of the investment segments:

Insurance and Reinsurance Businesses
Berkshire Hathaway Reinsurance Group
Railroad Business—Burlington Northern Santa Fe
Utilities and Energy Businesses—Berkshire Hathaway Energy
Manufacturing Businesses: which comprise three categories: (1) industrial products, (2) building products and (3) consumer products. Berkshire’s industrial products businesses manufacture specialty chemicals, metal cutting tools, components for aerospace and power generation applications and a variety of other products primarily for industrial use
Service and Retailing Businesses
Finance and Financial Products

[image error]

Disclaimer: the information provided in this article is for educational purpose only. The financial information is useful to understand a company’s business operations but has nothing to do with stock movements. For investment decisions consult a professional.

Do you want to know who owns Google and who owns Apple?

Handpicked related articles:

The post What Is Berkshire Hathaway? Warren Buffett’s Company In A Nutshell appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 29, 2018 01:22

August 27, 2018

Who Owns Disney? Six Myths About Steve Jobs At Pixar

Disney is owned by people like Robert A. Iger, chairman and chief executive officer (CEO) of The Walt Disney Company, since 2005. Others like Jack Dorsey, Twitter co-founder, and Sheryl Sandberg, COO of Facebook won’t probably seek re-election as board members, as companies like Twitter and Facebook have become way more media companies than they used to be. When it comes to institutional investors with more than 5% of the company, Blackrock Inc. with 5.5% and The Vanguard Group with 6.1% respectively owned Disney stocks in 2017.

As The Walt Disney Company was founded in 1923 it had also a long history in terms of stock ownership. It is interesting to revisit the story of how Steve Jobs owned almost 8% of the company got for a few years.

Why did Steve Jobs own Disney stocks?

Until 2016, Laurene Powell Jobs Trust owned 7.8% of Disney:

[image error]

This number is shown in the Disney Proxy Statement for 2016. However, as of 2018, those stocks were sold

Everyone knows Steve Jobs’ story. For those who don’t recall it. In 1985 Steve Jobs was ousted from Apple. That was mainly due to the lack of success of his last product and the fact the company needed to take action to avoid consequences on the bottom line. When Jobs was ousted he didn’t take it “sportingly,” and he sold all of his stocks of Apple back then. I covered in “Who Owns Apple,” how Jobs used those stocks to purchase Pixar. And with his genius, Steve Jobs managed to make Pixar become among the most innovative companies in the world until Disney acquired it.

That is the conventional story that praises the genius of Jobs. I’d like though to report the story told by Alvy Ray Smith on his blog. This is his perspective on those years as founder of Lucasfilm, the company that would presumably sell Pixar to Steve Jobs. In reality, Alvy Ray Smith seems to tell us another story, which doesn’t picture Steve Jobs as the visionary we all know.

Pixar History revisited by Alvy Ray Smith

It is important to remark this is another side of the story that can be hardly confirmed or refuted. However, I invite you to read it yourself on Alvy Ray Smith blog. He has there documents that seem to be genuine. Here I’m noting a few critical points.

As noted Alvy Ray Smith on his blog, the computer scientist and businessman that co-founded Pixar “A new spinout corporation from Lucasfilm, called Pixar, was capitalized with $10 million from Steve Jobs. Pixar paid $5 million of this to Lucasfilm for exclusive rights to the technology developed by the team while at Lucasfilm (exclusive except that Lucasfilm could continue to use it too). That was not a “buy” for Pixar. It was a “buy” of technology rights, and it was a “buy” by Pixar, not Steve. The other $5 million was used to actually run the new company. Steve Jobs was the investor, pure and simple.“

In short, he is arguing that Steve Jobs is an “investor,” not the “buyer” thus the one who runs the company. In fact, in the same article, Alvy Ray Smith continues “Ed Catmull, and Alvy Ray Smith were the management of Pixar. Steve owned 70% of the new company, the management and employees the other 30%. Ed, Alvy, and Steve were the board of the corporation. Again, this was not a “buy” by any stretch of the definition. The implication of “buy” is to “own and run.” The implication of “invest” is to own an interest in and let managers (ultimately responsible to the board) run. Pixar was of the second type. Use of the term “buy” is a marketing ploy to make it seem that Steve was the single inspired genius who had all the ideas of Pixar and made it work. That’s not how it worked. Not even close.
He also makes another strong point when it comes to Jobs saving Pixar because he had a grand vision for its future:

No, it didn’t. Jobs did not come along and pour money into a dying company and save it, as is sometimes depicted. Pixar was failing despite his money which was the only money the company had. That is, the company built from scratch with Jobs’s investment was the company that was in trouble, DESPITE Job’s financial involvement. It was failing as a hardware company. What saved Pixar was Disney’s asking it to make a movie. That wasn’t Jobs’s idea at all. In fact, the idea all along (Ed and Alvy’s idea) was to keep the company alive with hardware manufacturing as long as necessary to reach the next stage in Moore’s Law, when computing a movie would become feasible, then make movies. Jobs invested in that initial hardware company. He ran another hardware company, Next, at this time. Hardware was what he knew, not animation.

The company ran out of money several times in the initial hardware days. Jobs poured more money in to cover the losses each time. It’s sometimes construed that he did this because he saw the long-term potential of the movie business and held on to “his vision” with further investments. This wasn’t the case at all, however. Jobs kept pouring money into the company so that he wouldn’t have to sustain the embarrassment that his first company – after being booted from Apple – was a failure. The result is the same: His money kept the company afloat, but the idea that it was his grand vision is not right. In fact, he would have sold the company to ANYBODY for $50 million (to cover his total investment) during that pre-movie period. The company (Ed and Alvy, in particular) wrote several business plans during those years for just that purpose. They all failed to attract a buyer. Jobs would have bolted if he could have without embarrassment.

What Jobs WAS good at was seeing the grand opportunity when it appeared, and moving fast to take advantage of it. That opportunity wasn’t Disney’s approach in 1991 to the company to make the movie. It was when the completed movie, over three years later (late 1994), was taken to New York City and the critics went wild, saying it was going to be a smash. THEN Jobs quickly stepped forward, pushed Ed Catmull aside as apparent head of the company, and took brilliant advantage of the opportunity to take the company public, cover his investment finally, and make it appear that it had been his idea all along to do it this way. He was a marketing genius, including self-marketing.

It was Disney’s money that saved Pixar. They paid for the production of Toy Story, which went on to great success for the company. Animated movies were Pixar’s vision, from its earliest days at NYIT on Long Island, not Jobs’s vision.

You can read all six months below:

Myth 1. Steve Jobs bought Pixar from Lucasfilm
Myth 2. Steve Jobs co-founded Pixar
Myth 3. The movies were Steve Jobs’s vision
Myth 4. Steve Jobs named Pixar
Myth 5. Steve Jobs ran Pixar
Myth 6. Steve Jobs’s investment saved Pixar

Who owns Disney now?

[image error]

Why Twitter had Jack Dorsey as a board member?

In December 2013 Jack Dorsey announced his participation in the Disney with a quote:

“I only hope we don't lose sight of one thing—that it was all started by a mouse.”—Walt Disney pic.twitter.com/MgY9byVIkz

— jack (@jack) December 23, 2013

As reported by The Verge back then, “Jack Dorsey is a talented entrepreneur who has helped create groundbreaking new businesses in the social media and commerce spaces,” said Bob Iger, Disney’s chief executive. “The perspective he brings to Disney and its Board is extremely valuable, given our strategic priorities, which include utilizing the latest technologies and platforms to reach more people and to enhance the relationship we have with our customers.“

However, as Twitter has become over the years a media company, Jack Dorse won’t probably be re-elected as a board member as conflicts of interests loom ahead.

Why Twitter had Sheryl Sandberg as a Disney, board member?

Sheryl Sandberg was appointed as a Disney board member back in 2010. Just like Jack Dorsey, she might be not for re-election as Facebook, now considered a media company, make her position in a conflict of interest with the company. As announced back in 2010 on The Walt Disney Company Blog “Sheryl is an outstanding executive who can add incredible value to what is already a diverse and highly experienced group of directors,” said John E. Pepper Jr., Disney’s chairman. “She brings great expertise in the online world, considerable international experience and a deep understanding of consumer behavior.”

Do you want to know who owns Google and who owns Apple? Read on:

Who Owns Google? Under The Hood Of The Tech Giant That Conquered The Web

Who Owns Apple? How The Trillion Dollar Apple Inc. Has Changed Hands

The post Who Owns Disney? Six Myths About Steve Jobs At Pixar appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 27, 2018 11:23

What is Growth Hacking? Grow Your Business with Growth Hacking

Growth hacking is a process of rapid experimentation, which in a way has to be “scientific” by keeping in mind that is used by startups to grow, quickly. Thus, the “scientific” here is not meant in the academic sense. Growth hacking is expected to unlock growth, quickly and with an often limited budget.

Growth hacking could be readily applied to anything. However, it finds its playground in digital marketing, as it is quite inexpensive and easy to track and analyze a massive amount of data. Also, in digital marketing, it is possible to experiment fast and with low costs and reversible failures.

For instance, if you put up a landing page, which has already a substantial amount of traffic, you want to A/B test it. Thus, you create two versions of that page and send traffic to both and see what converts best. However, it is important to remind that things like A/B testing are tools that the growth hacker uses.

In short, growth hacking is about the process and mindset that process requires. The tools, tactics, and strategies come later. Just like the scientific process, it has to be testable and repeatable. Unlike the scientific process, it has to be fast!

What happens when you use Growth Hacking?

January 2015 Sean and his team at GrowthHackers.com were experiencing a stagnating growth. Although they grew at about 90,000 unique monthly visitors in a year, they were mainly growing on the back of Twitter. Time to change strategy. They decided to implement a High Tempo Testing Program. That is how growth picked up and accelerated,

[image error]

Source: GrowthHachers.com

Growth Hacking is one of the most exciting subjects today. Not only in the marketing arena but in any other conceivable area. I'm not trying to emphasize when I tell you that growth hacking can make you become the next President of France. If you don't believe me probably you didn't notice that hacking growth has become the secret weapon of one of the screwiest politician alive, the new elected France's President Macron, which used Growth Hacking to win the election (Growth Hacker Raffaele Gaito passed me this news).

What is Growth Hacking and what is not

As the story went in 2007, Brian Chesky and Joe Gebbia couldn’t afford the rent on their San Francisco apartment that is why they decided to transform their loft in a lodging space. Yet instead of relying on Craiglist, they built their site, which they called Airbed & Breakfast and hacked Craigslist to drive users back to their website,

[image error]

Source: GrowthHachers.com

Long story short that is how they grew from a loft to a company worth $30billion, which we all know by the name of Airbnb. Yet that is only part of the story. In fact, Airbnb didn't grow in a multi-billion business from a day to the next with a single magic trick. Instead, they had to undertake several experiments before seeing their listings grow.

In fact, experimentation is the critical ingredient of growth hacking. For it to work, you have to experiment through a rigorous process that mixes rapid and cross-functional testing. That is what Sean Ellis called growth hacking.

In short, growth hacking overturned the traditional founders' myth. In which, one brilliant individual has a genial idea that makes the company go from a garage to a palace. Therefore, it isn't anymore about a person but the team. It isn't anymore about one genial idea but a process generating ideas. There's no such thing as a growth hacker, but only a growth hacking team driven by the same mindset.

The Growth Hacking Mindset

The first step in hacking growth is to acquire the growth mindset. In fact, there is no tool, skill or strategy you can use, master or implement if you don't develop the right mindset first. That mindset starts with the way you learn.

From Personal to Incremental: Two Approaches to Learning

The key to pursuing excellence is to embrace an organic, long-term learning process, and not to live in a shell of static, safe mediocrity.

By Josh Waitzkin from The Art of Learning

In a world that becomes increasingly competitive the most essential skill to master is "The Art of Learning." In his homonymous book, chess player, martial arts competitor and author Josh Waitzkin explain the two modes of learning: entity vs. incremental theories of learning.

The entity theory treats intelligence as fixed and stable. The incremental theory of intelligence instead thinks of it as something malleable, fluid and changeable. In other words, if you believe in the former you will identify yourself with the activity/experiment you're undertaking. Therefore each failure will be unbearable and a demonstration of your lack of intelligence and skills. Instead, with the latter approach, you will stop identifying with the learning process and start to see each failure as an opportunity to learn something new.

In short, to develop a successful growth hacking mindset, you must remove your ego from the learning process and use an incremental learning approach. That is how you develop a growth mindset.

The Power of Yet: The Growth Mindset

Mindset change is not about picking up a few pointers here and there. It's about seeing things in a new way. When people...change to a growth mindset, they change from a judge-and-be-judged framework to a learn-and-help-learn framework. Their commitment is to growth, and growth take plenty of time, effort, and mutual support.

by Carol S. Dweck from Mindset: The New Psychology of Success

If the growth mindset is not about you; it is about the process. How can you make sure to change the way you learn, while also making sure your team is on the same page? Use the power of yet:

praise the process and make sure your team knows the process is what matters
reward effort, strategy, and process not individual intelligence
learn and teach to push outside the comfort-zone so that failure becomes a normal aspect of the growth process

Once acquired the incremental learning method and the growth mindset, there's a third non-trivial aspect of growth hacking, the scientific mindset.

It Got to Be Data-Driven: The Feynman Approach

It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it disagrees with experiment, it's wrong.

by Richard Feynman

If you want to build a growth hacking team, you got to have a scientific mindset. The method to follow is pretty simple. Identify a problem, do some research, form a hypothesis, do an experiment, analyze your data, and draw conclusions.

It doesn't matter how beautiful your theory is if it doesn't match the data then it is wrong! In short, every decision has to be data-driven and based on the actions of the users rather than on the beliefs of the founders.

The Method

Sean Ellis in Hacking Growth shows the how as it follows,

[image error]

The process is simple yet powerful. From data analysis to testing and back to that analysis, the loop of growth must be followed consistently.

The Skills: Multidisciplinarity is the rule of thumb

As Davis Jones, author of the Udemy Bestselling course Growth Hacking Masterclass in Digital Marketing multidisciplinarity is the norm. SEO, email marketing, social media, copywriting and online advertising are the necessary skills to acquire to thrive in the digital marketing world.

Growth Hacking is about the whole funnel

Growth hacking isn't anymore about MRR or acquisition, but it involves the entire funnel. From awareness to purchase the funnel accelerates at the speed of light,

[image error]

Source: tomtunguz.com

In this scenario, there are a plethora of tools out there yet quite a few able to help you achieve success. Let's see some of them.

The Top 20 Tools

Now that you got the right mindset it is time to start using some tools. GrowHack.com drafted an incredible spreadsheet about all the tools used by the greatest growth hackers for each funnel stage, which you can get from here.

Below I analyzed the data and extracted a list of the top 20 software used by top growth hackers independently from the funnel stage,

[image error]

You can find a more comprehensive analysis done by GrowHack.com on the SaaS marketing stack per funnel stage.

August 25, 2018

That Single Deal That Made Apple’s iPhone The Most Successful Product Of Our Time

It was the fall of 2006 when Apple had been working on the launch of a product that would revolutionize the smartphone market. Steve Jobs had remarked several times there was nothing “smart” to that market. True, these phones had improved a lot compared to previous phones. However, they were still hard to use, not practical and used primarily for business. Not a consumer device.

Steve Jobs would put an end at all that with the launch of the iPhone, which would become a massive commercial success. Still in 2017 iPhone sales accounted for the most of Apple revenues. The story of the iPhone and how it got to be – from the technological standpoint – has been told many times.

Thus, this time I want to focus on the business story. How Steve Jobs, rather then the greatest visionary we all think, he might have been a great deal maker instead. Able to squeeze any industry he set up to disrupt, with deals that took advantage of already established oligopolies, cartel, and center of powers.

How he managed to do that is still a mystery to me. This time I want to focus on the deal that made the iPhone a wild success: the AT&T deal. The iPhone success isn’t just about a technological device that innovated and was years ahead of its competitors. This is the story of a tool, primarily subsidized by the carriers industry which without it would have probably never had taken off as he did, and it all starts with one of the most inaccurate predictions of our time, from Steve Ballmer, former Microsoft’s CEO.

Was Steve Ballmer wrong about the iPhone price?

Steve Ballmer is often cited as the one who got it wrong several times about the future of the tech market. However, in my opinion when it comes to technology – but in general to any real-world forecast – we all wrong. Only a few lucky ones are right at hindsight. The success of a technology is not just the result of how good it was. That is often a combination of several variables, including distribution, the state of complementary technologies, and marketing efforts (to list some of the factors).

Steve Ballmer as Microsoft CEO was undoubtedly understating Apple products. But he was right about the iPhone price. How do you make a costly product like iPhone appealing to the consumer market? The answer resides in the “subsidized economy of mobile carriers.”

The $11 billion industry of mobile phones that didn’t care about handsets

Before Steve Jobs with the iPhone changed the rules of the game, the mobile phone industry represented a multi-billion dollar industry where the mobile carriers saw the handsets business as a commodity they could use. While that strategy had paid back in the past to bring in new subscribers, the whole industry needed a shake.

And Apple was ready to give that. One of the first players that understood that the iPhone could be a potential hit – or at least could revitalize their brand was Cingular (later AT&T). In an attempt to be branded as an “innovative company” and steal subscribers from ita rivals the time seemed right for the Apple‘s deal. Before we get to that point, there is another step of the story to understand here.

Jobs first attempt to enter the mobile market was a defeat, but it set the stage for the iPhone

As the story goes, Steve Jobs had understood he had to bet on the mobile market by producing its handset, which would be something in the middle between a phone and an iPod. That phone was Rokr, and it was in partnership with Motorola.

When the Rokr came out – noted cultofmac – “In the end, the Rokr E1 proved disastrous. With its cheap plastic design, poor camera and a 100-song limit, it fell far short of the iPod’s promise of 1,000 songs in your pocket. Designed to make listening to your music easy, and pitched as the “iTunes phone,” it also failed on that front. The Rokr E1 required that users buy songs via iTunes, then transfer them to the device using a cable.“

The demo of Steve Jobs on the “iTunes phone” might well be considered the least successful one. Yet those mistakes would set the stage for the iPhone.

Steve Jobs didn’t wait too long before losing all his enthusiasm for the Motorola-Apple partnership. That’s why in September 2006 Apple discontinued support for the Rokr. Time to change strategy and this time with a bold move.

Apple enters the mobile stage and takes it all

The Cingular team was the first to understand a change in the carriers business model. Where before handsets providers were a mere commodity used to lock as many new subscribers with cheap phones. There was a chance now to be perceived an innovator in the space. And what partner would best fit this role than the company that had first disrupted the computer industry and then moved to the music industry?

Steve Jobs made a deal with AT&T, as reported by Wired “in return for five years of exclusivity, roughly 10 percent of iPhone sales in AT&T stores, and a thin slice of Apple’s iTunes revenue, AT&T had granted Jobs unprecedented power.“

However, Apple in return got a revenue-share model where it received $10 for every iPhone customer subscribing to an AT&T plan, plus total control over the design, manufacturing, and marketing of the iPhone. That was an unprecedented deal! That was the beginning of the end for the mobile carrier’s dominance over the smartphone companies – or at least Apple.

As of December 31, 2009, AT&T served 85.1 million wireless customers, compared to 77.0 million at December 31, 2008. Part of this staggering growth was also due to the iPhone success.

[image error]

A companion read with this article “The Untold Story: How the iPhone Blew Up the Wireless Industry – from Wired.”

Handpicked related articles:

Who Owns Apple? How The Trillion Dollar Apple Inc. Has Changed Hands
What Is the Receivables Turnover Ratio? How Amazon Receivables Management Helps Its Explosive Growth
Amazon Case Study: Why from Product to Subscription You Need to “Swallow the Fish”
What Is Cash Conversion Cycle? Amazon Cash Machine Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
The Power of Google Business Model in a Nutshell
Starbucks Business Model In A Nutshell

The post That Single Deal That Made Apple’s iPhone The Most Successful Product Of Our Time appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 25, 2018 11:32

August 24, 2018

How Does Twitter Make Money? Twitter Business Model In A Nutshell

Twitter makes money in two ways: advertising and data licensing. In short, businesses can advertise on twitter news feed. Or enterprises can use Twitter data for their analyses.

For the first time in its history, Twitter posted profits, in 2018. This is the right moment to understand and dissect the Twitter, business model.

Twitter operating segments

Twitter generates revenues via Advertising and data licensing.

Twitter Advertising Services

Twitter generates most of its advertising revenue by selling Promoted Products that consist of the following:

• Promoted Tweets, labeled as “promoted,” appear within a user’s timeline, search results or profile pages just like an ordinary Tweet regardless of device, whether it be desktop or mobile. Using its proprietary algorithms, Twitter tries to understand the interests of each user and deliver Promoted Tweets that are intended to be relevant to a particular user. Promoted Tweets are pay-for-performance or pay-for-impression, priced through an auction

• Promoted Accounts. Promoted Accounts, labeled as “promoted,” provide a way for advertisers to grow a community based on pay-for-performance advertising that is priced through an auction

• Promoted Trends. Promoted Trends, labeled as “promoted,” appear at the top of the list of trending topics or timeline for an entire day in a particular country or on a global basis. Promoted Trends are sold on a fixed-fee-per-day basis

Data Licensing and Other

Data licensing and other revenues comprise:

Offering data products and data licenses that allow data partners to access, search and analyze historical and real-time data on the platform consisting of public Tweets and their content
Provide mobile advertising exchange services through Twitter MoPub exchange. This is a mobile ad exchange where Twitter receives service fees from transactions completed on the exchange. In short, this is a marketplace where buyers and sellers purchase and sell advertising inventory. Thus, it matches buyers and sellers

A quick glance at Twitter historical financials

[image error]

Based on the Twitter annual report for 2017 the company has grown from about $664 million in revenues to over a $2.5 billion. Nonetheless back in 2017, the company wasn’t profitable yet.

Also, if we compare those numbers with Google and Facebook advertising revenues, we can understand the proportion of Twitter.

[image error]

In 2017, Google generated over 95 billion dollars in advertising alone.

[image error]

In 2017, Facebook generated $39.9 billion in revenues from advertising alone.

What about Twitter? While it generated almost $2.5 billion in total revenues. What about advertising? A quick glance below:

[image error]

In 2017, Twitter made $2.1 billion in advertising. Data licensing and other revenues totaled $333.3 million

Twitter, Facebook, Google advertising revenues compared

[image error]

If we look at the overall revenues generated by Google, Facebook, and Twitter from Advertising you understand the proportion of Twitter.

What are the Twitter key metrics? The factors that affect Twitter growth

Each company has a few critical metrics to monitor on a daily, weekly and monthly basis. Those are the metrics Twitter looks at for the success of its business:

Monthly Active Users (MAU) MAUs gets defined as a Twitter user who logged in or was otherwise authenticated and accessed Twitter through our website, mobile website, desktop or mobile applications, SMS or registered third-party applications or websites in the 30-day period ending on the date of measurement.

[image error]

Changes in Daily Active Users/Daily Active Usage (DAU). Daily active users or daily active usage, as Twitter users who logged in or were otherwise authenticated and accessed Twitter through our website, mobile website or mobile applications on any given day.

[image error]

Changes in Ad Engagements and Cost per Ad Engagement. Defined as an ad engagement as a user interaction with one of the pay-for-performance advertising products. In short, once a user completes an objective set out by an advertiser such as expanding, Retweeting, liking or replying to a Promoted Tweet, viewing an embedded video, downloading or engaging with a promoted mobile application, clicking on a website link, signing up for marketing emails from advertisers, following the account that tweets a Promoted Tweet, or completing a transaction on an external website.

The change in metrics, such as monthly and daily active users and change in ad engagement can cause the business. User growth trends reflected in the MAUs, changes in DAUs and monetization trends reflected in advertising engagements are vital factors that affect Twitter revenues.

How much does Twitter spend on R&D compared to other tech companies?

Research and development expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation, for engineers and other employees engaged in the research and development of Twitter products and services.

[image error]

In 2017 the R&D expense was about 22%. To put things in context, we can look at Microsoft as a comparison:

[image error]

If we look at R&D % over revenues, the 22% from Twitter seems to be high. However, for many in the tech space, Microsoft isn’t any more an “innovative” company. Also, if we look at the absolute numbers, Microsoft has spent $13 billion. In 2017, Amazon and Google spent respectively $22.6 billion and $16.6 billion in R&D.

How much does Twitter spend on Sales & Marketing compared to its revenues?

Selling an ad network at the times of Google and Facebook isn’t an easy endeavor. As specified in its annual report, “sales and marketing expenses consist primarily of personnel-related costs, salaries, commissions, benefits and stock-based compensation for the employees engaged in sales, sales support, business development and media, marketing, corporate communications and customer service functions. In addition, marketing and sales-related expenses also include advertising costs, market research, tradeshows, branding, marketing, public relations costs” and so on.

[image error]

The sales and marketing effort is quite considerable, and it took 29% of the revenues in 2017.

In the first quarter of 2018, Twitter posted its first profit, ever

Twitter finally posted a profit in 2018:

[image error]

As of the three months, ending in June 2018 Twitter posted a hundred million in net profit. This is a critical turning point for the future of the company.

It is crucial also to remark that since 2015 the company has embarked in a drastic change in terms of objectives and business strategy.

Back in 2015, Twitter co-founder and CEO, Jack Dorsey announced with a Tweet what I believe has represented the turning point at business level:

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 24, 2018 15:54

Who Owns IKEA? IKEA Business Model In A Nutshell

IKEA as a brand comprises two separate owners. INGKA Holding B.V. owns IKEA Group, the holding of the group. At the same time that is held by the Stichting INGKA Foundation, which is the owner of the whole Group. IKEA Group is not the owner of the brand, which is managed by Inter IKEA Systems B.V., part of Inter IKEA B.V. that is the real owner of the IKEA Concept. Thus, IKEA Group is a franchisee that pays 3% of royalties to Inter IKEA Systems.

This organization might sound a bit confusing at first, but I looked into it to see how its business model work.

IKEA Group, the retailer vs. Inter IKEA Systems, the worldwide franchisor

The IKEA organization is peculiar. While many believe that IKEA as a concept and IKEA as a store are owned, operated and run by the same people. In reality, the organization of this company is way more complicated.

At this stage, it is critical to making a distinction between two entities: IKEA Group run by INGKA Holding B.V. and the IKEA worldwide franchisor, run by Inter IKEA Systems B.V.

While the IKEA Group takes care of the centers, retails, customer fulfillment, and all the other services related to IKEA products.

Inter IKEA Systems B.V., which is the owner of the IKEA Concept, and the worldwide franchisor of IKEA stores take care of the processes, distribution of products, training of its staff and other related activities in line with the franchising agreements.

Inter IKEA and IKEA Group have separate owners and logic of business:

IKEA Group, who runs IKEA stores is the franchisees and owned by a holding called INGKA Holding B.V., which in turn is owned by the foundation Stichting INGKA.
Inter IKEA Systems, owner of the IKEA Concept, which is the worldwide franchisor and owned by Inter IKEA Holding B.V.

Let’s dive more into IKEA unusual ownership structure.

IKEA Group Holding ownership structure

[image error]

The INGKA Holding B.V. is the holding of the group. At the same time, this is owned by the Stichting INGKA Foundation, which is the owner of IKEA Group. As a foundation, the profits generated from IKEA activities can be used in two ways: either reinvested in the IKEA Group or they can be donated for charitable purposes through the foundation.

The foundation is based in the Netherlands. The image below explains quite well how the IKEA Group is organized:

[image error]

Inter IKEA Holding ownership structure

[image error]

According to the Inter IKEA website, “Inter IKEA Holding B.V. (located in the Netherlands), is the owner of IKEA range and supply (IKEA of Sweden AB and IKEA Supply AG), production (IKEA Industry AB) and franchising (Inter IKEA Systems B.V.) businesses. This structure simplifies and improves the IKEA franchise system, creating better conditions for increased customer focus and future expansion.“

Thus, Inter IKEA Holding B.V. comprise:

IKEA range and supply (IKEA of Sweden AB and IKEA Supply AG), takes care of 9,500 products in the IKEA range, 24 purchasing offices, 1,000 home furnishing suppliers in 51 countries as of 2017.
production (IKEA Industry AB) counts 40 factories operated by IKEA Industry as of 2017
franchising (Inter IKEA Systems B.V.) counts 11 separate franchise agreements via Inter IKEA Systems B.V.

As remarked on IKEA’s franchisor website:

Around the globe, a large number of companies operate under the IKEA trademarks. All IKEA franchisees are independent of Inter IKEA Group. A large group of franchisees are owned and operated by INGKA Group. Inter IKEA Group and INGKA Group have the same founder, and a common history and heritage, but have operated under different owners and management since the 1980s.

The ownership changes came into effect on 31 August 2016. Once again, I want to remark that The Inter IKEA Group structure, is now composed of three core businesses:

franchising,
range and supply and
industry.

While IKEA Group is owned by INGKA Holding B.V., which is owned by the Stichting INGKA Foundation. Inter IKEA Group is owned by Interogo Foundation, based in Liechtenstein and established in 1989.

Its main purpose is “to own and govern Inter IKEA Group and to invest in Inter IKEA and thereby in the further expansion of the IKEA Concept, in order to secure the independence and the longevity of the Group and the IKEA Concept” tells us its official page.

What is the IKEA Group business model?

The IKEA Group business model is a franchisee that pays a 3% fee to Inter IKEA Systems B.V. that acts as a franchisor. As of September 2017, the company recorded over €36 billion in revenues, €3 billion in operating income and almost €2.5 billion in net income.

[image error]

At geographical level Europe, with Germany brings in 15% of the revenues, while US 14%.

[image error]

The revenue growth since 2008 has been quite fast. The IKEA Group went from €21.5 billion in 2008 to €36.3 billion in 2017, an almost 70% increase.

[image error]

What is the Inter IKEA Systems business model?

Inter IKEA Systems B.V. follows a franchising business model. In fact, the stores are operated via franchising agreements that will pay a 3% franchise fee. On the other hand, the franchisees (the stores paying the fee to Inter IKEA Systems) have in exchange the right to operate the stores under the IKEA concept and IKEA brand. Thus, they gain access to systems, methods, and procedures that go from staff training, manuals, store layouts, display concepts and so on.

The source of revenues for this group is given by three main operating segments:

wholesale product sales to retailers,
franchise fees
and other income

Total revenues in 2017 amounted to €23 billion.

[image error]

As reported on Inter IKEA website “The acquisition (of IKEA of Sweden AB, IKEA Supply AG and IKEA Industry AB—and their related businesses, which was completed on 31 August 2016) has had a substantial positive impact on the result.”

From the Inter IKEA Group Financial Summary for 2017, it is interesting to look at the simplified overview of its franchise system:

[image error]

The whole franchise system consists of:

IKEA assignments, in which the sales and supply, productions and communications
IKEA franchise agreements with INGKA (owner of the IKEA Group) and oher 10 franchisees.

The IKEA Franchise System in A Nutshell

As specified on Inter IKEA official site:

As the IKEA business was expanding in the early 1980s, IKEA founder, Ingvar Kamprad, realised that he needed to protect the IKEA Concept. After a long search, Ingvar decided that a franchise system would be the best choice for IKEA. It would allow for international expansion while protecting the underlying concept and stimulating an entrepreneurial spirit. Inter IKEA Systems B.V. is the IKEA franchisor who continuously develops the IKEA Concept and ensures its implementation in all markets. IKEA franchisees run the day-to-day retail business and pay a franchise fee. Together, the companies in the franchise system develop and improve how people discover and interact with IKEA and IKEA products. Inter IKEA Systems B.V. has assigned other IKEA companies to develop the range, supply and communication. IKEA of Sweden AB develops the IKEA home furnishing product range, IKEA Food Services AB develops the IKEA Food & Beverages product range, IKEA Supply AG manages purchasing and distribution and IKEA Communications AB produces IKEA communication. The diagram below shows a simplified overview of the IKEA franchise system. Inter IKEA Systems B.V., IKEA of Sweden AB, IKEA Food Services AB, IKEA Supply AG and IKEA Communications AB are companies within the Inter IKEA Group. Inter IKEA Group also includes other companies like IKEA Industry AB. The IKEA franchise system is people-oriented and encourages everyone to contribute. It forms an interdependent framework and lays a solid foundation for the IKEA Brand while enabling a scalable and dynamic value chain. Last, but not least, it answers Ingvar Kamprad’s three desired intentions: allowing and encouraging IKEA to remain entrepreneurial; enabling international growth; and keeping the IKEA Concept strong and consistent.

Handpicked related articles:

Sources for the analysis: https://www.ikea.com/ms/en_US/pdf/yea... https://preview.thenewsmarket.com/Pre...

The post Who Owns IKEA? IKEA Business Model In A Nutshell appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 24, 2018 13:10

August 22, 2018

Who Owns Google? Under The Hood Of The Tech Giant That Conquered The Web

The most prominent institutional shareholders are BlackRock, Fidelity (entities affiliated with it) and the Vanguard Group. Larry Page and Sergey Brin together have 51% of voting power. Then we have other individual shareholders like Eric Schmidt, CEO of the company from 2001 to 2015. Sundar Pichai, new CEO and John Doerr, venture capitalist and early investor in Google.

There is an essential difference between ownership and control. And it starts with the different kind of common stocks issued over the years by Google – now Alphabet Inc.

Google’s Class A, Class B and Class C stocks: Not all shares are born equal

When a company decides to issue equity in the form of common stocks, it can do so in several types depending on the limitations that the owners of the company want to give to voting powers.

Google’s Class B Common Stocks

In Google’s case, each holder of Class B common stock is entitled to ten votes per share. Class B common stocks holders have ten votes for each director nominee and ten votes for each of the proposals to be voted on.

We can define the Class B stocks as on common shares on steroid. In fact, they empower those who own them to keep control of the company. Page and Brin, Google’s founders wanted to keep as much power of the future decisions of the company they leveraged on Class B Common Stocks to have a higher weight on the company’s decisions.

Google’s Class A Common Stocks

Google’s Class A common stocks are entitled to vote. Each share of Class A common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on.

Google’s Class C Common Stocks

Holders of Class C capital stock have no voting power as to any items of business that will be voted on at the Annual Meeting. Those do confer ownership in the company and the right to be paid based on dividends and the company’s stock appreciation.

Who are Google’s Directors and Executive Officers?

[image error]

This list is worth looking like those are the people in charge of several “corporate functions.”

Board of directors

During 2017, the Board of Directors was composed of thirteen directors with following committees:

1. an Audit Committee, which primary function is to oversee accounting and financial reporting processes

2. a Leadership Development and Compensation Committee, the purpose is to oversee the compensation programs.

3. a Nominating and Corporate Governance Committee, the main purpose is to assist the Board of Directors in identifying individuals qualified to become members of the Board of Directors

4. an Executive Committee, serves as an administrative committee of the Board of Directors to act upon and facilitate the consideration by senior management and the Board of Directors of certain high-level business and strategic matters.

From time to time, the Board of Directors may also establish ad hoc committees to address particular matters.

[image error]

What is the compensation for those directors? While it might change we can look at compensation for 2017:

[image error]

What’s the compensation for Google’s executives?

As a multi-billion tech giants, Google’s compensations are very competitive and based on the following elements:

the base salary that provides a steady income to employees
equity awards, primarily based on the performance of each employee that will receive those awards

In assessing the compensation part, Google took into account (at least for 2017) the following “peers companies:”

Amazon.com, HP, Oracle Corporation, Apple, Intel Corporation, QUALCOMM, Cisco Systems, International Business Machines (IBM), The Walt Disney Company, eBay, Microsoft, Yahoo!, Facebook.

Bellow the table summarizing the compensations of the top executives at Google:

[image error]

We can break down all the compensations in base salary, bonuses, stock awards, option awards, non-equity incentives plans and non-qualified deferred compensations earnings.

In terms of salary both Page and Brin get a symbolic $1. Eric Schmidt as technical advisor got $1,250,000 together with other compensations for a total of $4,726,592. Current CEO, Sundar Pichai earns $650,000 of base salary in 2017. To notice Pichai received almost $200 million in stock awards in 2016. In 2017 the total compensation was $1,333,557.

What’s the difference between Stock awards and Option awards

When it comes to stock awards, they usually can get “vested” (it means exercised or monetized) at a certain date. For instance, we can see how in 2017 both Eric Schmidt and Sundar Pichai “vested” millions of dollars of stock awards:

[image error]

Former Google’s CEO, Eric Schmidt in 2017 vested over forty million dollars in stocks, while new CEO, Sundar Pichai vested over a hundred-thirty million dollars in stock awards.

When it comes to option awards the executive or employee that receives it will have a fixed price to buy the stock at a specified date:

[image error]

For instance, in this table that shows the unvested (not yet exercised) stock options held by Schmidt and Pichai by December 2017, you notice the so-called exercise price.

That means, for instance, that in 2021 Eric Schmidt can purchase 181,840 Google’s stocks at $306.61. Just to put things in context at the time of this writing the price of Google’s stock (Alphabet Class A stocks) is $1,225.42. Thus, if in 2021 the stock of Google will depend on those level, Schmidt will earn on the difference between the exercise price and the current price when options get vested.

I suggest you look at our Financial Options simple guide:

What Is a Financial Option? The Complete Beginner’s Guide to Financial Options

Google ownership structure before its 2004 IPO

[image error]

As defined in the proxy statement before Google’s IPO percentage ownership is based on 162,550,115 shares of Class A common stock and 114,732,822 shares of Class B common stock outstanding at March 28, 2005.

At the time, just like today Brin and Page seemed to be obsessed with control and ownership. In fact, at the time both of them held over 55.6% of voting power.

Back then the other individual investors with a consistent stake in the company were – at the time – CEO Erick Schmidt, venture capitalist John Doerr, venture capitalist Michael Moritz and Omid Kordestani, who at the time was in charge of Business Development and Sales and one of those who helped Google scale up (he closed the AOL deal).

Who owns Google now?

As of January 31, 2018, there were 298,492,525 shares of the registrant’s Class A common stock outstanding, 46,961,288 shares of the registrant’s Class B common stock outstanding, and 349,843,717 shares of the registrant’s Class C capital stock outstanding.

[image error]

The most prominent institutional shareholders (those with more than 5% of Google’s – now called Alphabet – share) are BlackRock, Fidelity (entities affiliated with it) and the Vanguard Group.

If we look at the individuals owning the company we have Larr Page and Sergey Brin, that together have 51% of voting power. Then we have Eric Schmidt, CEO of the company from 2001 to 2015. Sundar Pichai, new CEO and John Doerr, venture capitalist and early investor in Google.

Who are Google’s top five individual investors and owners?
Larry Page

Founder of Google together with Sergey Brin, Page was the inventor of the PageRank algorithm that made Google the success we know today. Director Since 1998 Larry Page, Chief Executive Officer of Alphabet. He has served as a member of Board of Directors since its inception in September 1998.

Sergey Brin

Founder of Google together with Larry Page. Director Since 1998 Sergey Brin, President of Alphabet, has served as a member of Google Board of Directors since its inception in September 1998.

Eric E. Schmidt

Defined as the first “grown-up” brought as CEO when Brin and Page were still in their 20s, Schmidt is director Since 2001. He has served as a member of our Board of Directors since March 2001 and as Executive Chairman of Google Board of Directors from April 2011 to January 2018. Eric holds a Doctoral degree and a Master of Science degree in computer science from the University of California, Berkeley.

John Doerr

One of the venture capitalist being – almost – since the beginning, John Doerr was director Since 1999 and has served as a member of Google Board of Directors since May 1999. John Doerr has been a General Partner of Kleiner Perkins Caufield & Byers, a venture capital firm, since August 1980.

Sundar Pichai

Newly appointed CEO – since 2017 – he has served as a member of Google Board of Directors since 2017. He previously served as Google’s Senior Vice President of Products, from October 2014 to October 2015.

And as Google’s Senior Vice President of Android, Chrome, and Apps from March 2013 to October 2014. Since joining Google in April 2004, Sundar Pichai has held various positions, including Google’s Senior Vice President, Chrome and Apps; Senior Vice President, Chrome; and Vice President, Product Management. Prior to joining Google, Sundar worked in engineering and product management at Applied Materials, Inc., a semiconductor company, and in management consulting at McKinsey & Company, a management consulting firm.

The data used in this article comes from the official Proxy Statement of Alphabet.

Key takeaway

Over the years, while the ownership of Google has slightly changed, one thing has remained constant, control and ownership by its founders. Brin and Page still represent the major individual shareholders.

Also, as Google issued several kinds of common stocks, Brin and Page are the ones who – with their Class B common stocks – preserved their control over the company.

Even when back in the 2000s a “grown-up” CEO, Erick Schmidt was brought in, Brin and Page still had more than 50% of voting power. The company has adopted several collective decision-making systems over the years. Yet Brin and Page remain in control of the future of the company.

[image error]

Handpicked related articles:

The post Who Owns Google? Under The Hood Of The Tech Giant That Conquered The Web appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 22, 2018 14:34

Who Owns Apple? How The Trillion Dollar Apple Inc. Has Changed Hands

Based on Apple Inc. Proxy statement for 2018 its main institutional investors are the Vanguard Group and BlackRock, Inc. While its major individual shareholders are Art Levinson, Tim Cook, Bruce Sewell, Al Gore, Johny Sroujli and others.

What about Steve Jobs and Steve Wozniak, its mythical founders? Do they still Apple?

Does Steve Jobs still own Apple’s stocks?

Had Steve Jobs kept its Apple’s IPO stocks until the end he’d probably be worth over a hundred billion dollars, considering that Apple in August 2018 Apple surpassed a trillion dollar market cap and Steve Jobs initially had an 11% stake of the company.

However, when he left the company – after he was ousted – he sold its Apple stocks in 1985. He used that money to buy Pixar. In 2006 Pixar got sold to Disney, and Steve Jobs got in exchange around 8% stake in the company.

As shown in Walt Disney financials, Laurene Powell Jobs Trust still owned 7.8% of the company’s stocks in 2016, corresponding to 128,301,176 shares. As of 2018 that information is missing which tells us that Jobs’ wife sold part of those stocks. Thus, going below the 5% shares that makes it mandatory for her to report on Walt Disney financials.

[image error]

From Walt Disney Proxy Statement of 2016

What about Apple Inc.?

If we look back at the Apple Inc. Ownership structure in 2011 when Steve Jobs left us, we can see how many stocks he owned at the time:

[image error]

Those stocks which amounted to 5,546,451 consisted of the 0.60% of the company (on a total of 921,043,522 shares at the time) which was held indirectly through a trust fund.

We don’t know how many stocks of Apple and Disney the trust run by Jobs’ wife owns. As the ownership has gone below the 5%, there is no obligation to file a report as a shareholder.

That is why in Apple’s. Ownership you might not see Steve Jobs.

Does Steve Wozniak still own Apple’s stocks?

To understand Steve Wozniak position when it comes to money it is worth recounting what he said at the Nordic Business Forum in Sweden as reported by Investopedia, “when it shot up high, I said, ‘I don’t want to become one of those people that watches it, watches it, and cares about the number,'” Woz said. “I don’t want that kind of care in my life. Part of my happiness is not to have worries, so I sold it all — just got rid of it — except just enough to still experiment with.”

In another interview for Fortune “I do not invest. I don’t do that stuff. I didn’t want to be near money, because it could corrupt your values.”

In a 2014 thread – after the movie “Jobs” came out – with a long comment on Google+ Steve Wozniak stressed a few points:

And when Jobs (in the movie, but really a board does this) denied stock to the early garage team (some not even shown) I’m surprised that they chose not to show me giving about $10M of my own stock to them because it was the right thing. And $10M was a lot in that time.

Referring to the fact that Jobs had denied stock options to one of the early Apple employees from day one. Steve Wozniak gave away $10 million of his stocks.

In short, as of now, Steve Wozniak net worth seems to be around $100 million. Thus, even if that is expressed in Apple’s stocks that are way less than 5%. Below the amount required to be reported by law.

That is why you might not see Steve Wozniak among the Apple Inc. Investors.

What about the other investors?

Who owns now Apple? Apple Inc. top investors

As reported on Apple proxy statement for 2018 “5,087,056,000 shares of Apple’s common stock were issued and outstanding as of 2018. Unless otherwise indicated, all persons named as beneficial owners of Apple’s common stock have sole voting power and sole investment power with respect to the shares indicated as beneficially owned.”

[image error]

Apple’s mythical founders Steve Jobs and Wozniak are missing as they now own less than five percent of the company’s stocks.

The first two top investors for Apple are institutional investors:

The Vanguard Group
BlackRock, Inc.

The top five Apple individual investors are:

Art Levinson

Art Levinson is an American businessman and Chairman of Apple Inc. since 2011. He was addressed Chairman to replace Steve Jobs in 2011, after his death.

Tim Cook

Apple’s CEO Tim Cook was the former COO (chief operating officer) under Steve Jobs. Graduated from Auburn University in 1982, Cook spent 12 years in IBM. He joined Apple in 1998 until he became CEO in 2011.

Bruce Sewell

Sewell is an Apple’s executive who joined the company from Intel Corporation in 2009. He announced his retirement in 2017 after eight years of leading the company’s legal and security efforts.

Al Gore

Former US Vice President Al Gore has been sitting in Apple’s board of directors since 2003. As reported at the time by Apple, “Al brings an incredible wealth of knowledge and wisdom to Apple from having helped run the largest organization in the world—the United States government—as a Congressman, Senator and our 45th Vice President. Al is also an avid Mac user and does his own video editing in Final Cut Pro,” said Steve Jobs, Apple’s CEO. “Al is going to be a terrific Director and we’re excited and honored that he has chosen Apple as his first private sector board to serve on.”

On February 2017 Al Gore sold part of its Apple stocks – more precisely he sold 215,437 stocks at a $136.72 as reported to the SEC – which netted him over $29 million. According to the Apple proxy statement he still owns 112,064 shares which if he was going to sell at current price – $215.36 – he could sell for over $24 million.

Johny Sroujli

Johny Srouji is Apple’s senior vice president of Hardware Technologies, which now reports to CEO Tim Cook. He joined Apple in 2008 after working at Intel and IBM.

Key takeaway

Apple Inc. had a troubled history where it changed in ownership several times in the course of its history. When the company was going public Steve Jobs didn’t recognize ownerships to some of the early employees. That is why Steve Wozniak sold at a symbolic price $10 million worth of stocks to those early employees. Thus, he became a minor shareholder in comparison to Steve Jobs.

When Jobs was ousted from the company in 1985, he sold his Apple shares and moved on to Pixar. When Pixar got acquired by Disney, Jobs got almost 8% of the company. At his death, the shares went to its trust, now managed by his wife. Part of the stocks in Apple and Disney were liquidated below the 5%. Thus making it impossible to know exactly how many shares the Jobs Trust owns.

Now Apple Inc. is owned by two main institutional investors (Vanguard Group and BlackRock, Inc). While its major individual shareholders comprise people like Art Levinson, Tim Cook, Bruce Sewell, Al Gore, Johny Sroujli and others.

To notice that former US Vice President, Al Gore, has been in Apple’s board of directors since 2003. Back in 2017, Al Gore sold part of his shares for over $29 million. Now he owns a remaining 112,064 shares that at today value are worth over $24 million.

Handpicked related articles:

The post Who Owns Apple? How The Trillion Dollar Apple Inc. Has Changed Hands appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on August 22, 2018 13:19