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What We Learned About Digital from Frightful Five’s Q4 2021 Earnings (Thinks Out Loud Episode 338)

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The Frightful Five, the AGFAM — Apple, Google, Facebook, Amazon and Microsoft — have all reported their quarterly or annual earnings for the past quarter. And given their dominance as digital leaders, it’s always worth combing through their releases and earnings call discussions to get a sense of the "State of Digital." So, what is the "State of Digital" right now? What have we learned about where digital is — and where it’s going — from the Frightful Five’s Q4 2021 earnings calls?

This episode of Thinks Out Loud breaks it down for you. We look at why what these digital leaders say continues to demonstrate that "Content is King; Customer Experience is Queen; and Data is the Crown Jewels." We also explore how those three areas of focus have changed and what you need to know to put them to work for you today. We also dive into whether it’s time — or not — to put some energy into the metaverse for your business. And we look at why the war for talent isn’t going away anytime soon.

Want to learn more? Here are the show notes for you.

Thinks Out Loud Episode 338: What We Learned from AGFAM’s Q4 2021 Earnings Headlines and Show Notes

Show Notes and Links

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Past Insights from Tim Peter Thinks

You might also want to check out these slides I had the pleasure of presenting recently about the key trends shaping marketing in the next year. Here are the slides for your reference:

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Recorded using a Heil PR-40 Dynamic Studio Recording Mic and a Focusrite Scarlett 4i4 (3rd Gen) USB Audio Interface into Logic Pro X for the Mac.

Running time: 26m 08s

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Transcript: What We Learned from the Frightful Five’s Q4 2021 Earnings

Well, hello again, everyone and welcome back to Thinks Out Loud, your source for all the digital expertise your business needs. My name is Tim Peter. This is episode 338 of the big show. Thanks so much for tuning in. I really, really appreciate it. I think we’ve got a really cool show for you today.

The Frightful Five — or the AGFAM — Reported Earnings; What Did We Learn?

So it’s earnings season. All of the big players in digital are giving their quarterly reports or their annual reports depending on how they structure their fiscal year.

And I like looking at their quarterly earning call, their annual reports and the like to see what the big digital leaders talk about, the AGFAM: Apple, Google, Facebook, Amazon, Microsoft. I also look at people within specific industries. So folks like Spotify, folks like Shopify, folks like Expedia or Booking.com. Now some of them have not yet reported that the only folks that I can consistently point to at the moment are the AGFAM: Apple, Google, Facebook, Amazon, Microsoft.

Trends in Quarterly Earnings

And there are a number of trends that I think are worth noting. As we talk about being digital leaders and building digital companies. There’s so much we can learn from these folks. I talk all the time about having a "core and explore" strategy. And you can’t build a "Core and Explore strategy" — meaning, "Core," put 80% of your efforts, put the bulk of your efforts, 90% of your efforts, into the things that you know work and, say, "Explore" 10%, 20% of your time, your budget, your resources to test new ideas. Well, you can’t have a "Core and Explore strategy," you can’t have a "Core and Explore approach" if you don’t know what the Core is.

And the AGFAM — Apple, Google, Facebook, Amazon, Microsoft — are going to have a better sense of what that core is than anybody. They’re also really not a bad source of knowing where to explore. But what’s interesting is where you see the themes that run across all of these companies. And this time there were quite a few themes that really resonated, some of which we’ve seen before, but I just want to show how they underscore while why these things are important.

The Generational Shift to Digital Continues

So the first is that we are still living through a generational shift to digital. If you look at the earnings of these significant players, they’re all killing it. They are all absolutely crushing it. We’re seeing double-digit growth across the board, just some random headlines. By the way, none of this is meant to be stock advice. I can’t tell you whether or not you should invest in these companies or not. I can only say these are the trends that have appeared that are interesting to your business as a business person and as a digital leader, but will these companies continue to do well? I’m not the guy to ask for that. Past performance is no predictor of future success and all that kind of stuff.

So just some quick numbers though. They’re all up double-digits for the most part. Apple is up 11% last quarter. Its annual year is a little different. Its fiscal year is not a calendar year so they were only talking their second quarter revenues and their revenue for the last quarter was up 11% year on year. That’s up 11% from $111 billion. So that’s a pretty good number. When we talk about Google, Google was up huge. They saw 80% year on year growth full year in cloud investments.

When we talk about Amazon, Amazon is up double-digits I want to say 20 some-odd percent. Microsoft’s cloud revenue grew 32%. They’re seeing $10 billion in ad revenues. Amazon is seeing about $10 billion in ad revenues, 10 billion each. That’s crazy. One of my favorite stats, Amazon Web Services is now a $71 billion annualized run rate business. $71 billion per year. Apple services were $72 billion in the last 12 months. Their CFO, Luca Maestri — and I’m so sorry I don’t know how to pronounce his name correctly; I apologize — but Luca, the CFO, said that they’re a $72 billion company just in services in the last 12 months, which according to Luca is the size of a Fortune 50 company. These companies, these giants have Fortune 50 companies embedded within them, which is crazy that they’re making so much revenue from these things.

That’s something that we really have to talk about what a remarkable shift we continue to see. Because this isn’t growth on small numbers. It’s one thing, if you’re a million dollar company and you double your size or you go up 20% or if you’re a $10 million company and you go up 20% or even a $100 million dollar company and you go up 20%. These are companies that are generating tens of billions, if not $100 billion and growing at 20% per year. That says so much about what a shift to digital. We are still seeing massive, massive shift.

Content is King, But With a Couple of Twists

Now, where are they putting their focus? Well, none of these are going to come as a surprise. You’ve heard me talk about content is king, customer experiences, queen and data is the crown jewels any number of times. And they remain large, but within them they talked about very specific things.

Partnerships with Creators
So first content, lots and lots of discussion from Facebook, from Google, from Apple talking about partnerships with creators. Now, if you’re not familiar with that term, there really is a shift in language. People used to talk about influencers on social and they’re talking more about creators now. And it’s not that creators aren’t influencers. It’s also a recognition that the best partners in this area are those who are using the media to tell great stories. They’re not just talking about, "Oh my gosh, I did this thing." They’re really creating great audiences and great content that their audiences want to engage with. And if their audience is your audience, they’re the sorts of people you want to partner with.

So it’s not just content that you are creating content. It’s content where you’re partnering with others to create that great content and help you create that great content, and help you tell a great story about your brand.

Increasing Use of Video
One type of content in particular came up again and again and again, which is video. Google specifically talked a lot about YouTube, both short and long form video content and how important that is. Facebook talked a lot about how much … It listed reels as one of its core strategic investments for the coming year.

Reels is short-term video partly because TikTok is killing it. They called out TikTok by name and essentially why that’s so important for connecting with young adults. By the way, I always talk about how millennials are adults approaching 40. It was really weird to hear Mark Zuckerberg who is a millennial talking about, this was a quote, "Young adults." He’s turning 37 or he is 37. He turns 38 this year. So clearly it goes to show that millennials are growing up and becoming the actual adults and now they want to connect with young adults using reels. That’s really critical to their business.

Full disclosure: Video is something I encourage with my clients and my clients are doing some tremendous work using video. It’s something I don’t use and probably need to do more of. One of the things I did with this podcast was audio was a big part of my mobile strategy. If you look at my numbers if I share my numbers with you, or if I were to share my numbers with you, you would see that the overwhelming majority of people who listen to this podcast do so on mobile. You’re probably listening on a mobile device right now. And I did that very deliberately as part of the mobile strategy for my business.

What I haven’t done is said, "Okay, how do we connect with video for this business?" But I can tell you my clients are and they’re doing some tremendous things there. And clearly when you hear what Facebook is saying, when you hear what Google is saying, even when you hear what people like Apple or Amazon are saying with regard to Apple TV and with regard to Amazon Prime Video, they very much consider video core to their business success. They’re just doing it more with long form video as opposed to short form.

Data is the Crown Jewels, Now With Added Privacy

Now if that’s content, let’s talk about data is the crown jewels. And Satya Nadella of Microsoft loves giving me great quotes to use. In his opening remarks he said that, "No asset is more strategic than data. In the next three years, we’ll create more data than we did in the last 10."

Clearly your ability to use customer data in an appropriate way to inform your content strategy, to improve your targeting in ads and media is critical. So much so Facebook specifically called out Apple’s App Tracking Transparency or ATT and the loss of conversion data as something that really hurt its results. Facebook kind of got kicked in the teeth in their most recent quarterly earnings. They did much worse than projected. And they basically said that ATT was a contributing factor. The big contributing factors for Facebook — and I’m not here to diss Facebook by any stretch — they really talked about a number of factors that hurt them, but it was the App Tracking Transparency. And it was people switching to TikTok.

Facebook’s "Seven Major Investment Priorities"

The loss of young adults when they look at their seven major investment priorities, their Reels — which is their short form video platform. Community messaging — which by the way, I just saw my first ever WhatsApp ad campaign. It definitely suggests that Facebook is trying to diversify away from the core Facebook app. They’re getting hit there undoubtedly by things like Slack or Discord or Telegram.

So Reels, community messaging, commerce — which we’ll talk more about in a second — ads, privacy — which I’m going to talk a lot more about in a second — AI, and the metaverse. And I’m going to talk about that in one more second, too. But the point here being that they definitely are seeing themselves get burt by people switching to TikTok or switching to short form video on other platforms, and on their inability to get the data that they needed to make ads as effective as they wanted.

Privacy
Which brings up the next element of data that’s really important. Privacy was a big topic across the board.

Microsoft talked about it. Apple talked about it. Facebook talked about it. They said it was one of their seven core investment strategies going forward. It’s just really, really key to what’s going on. And what we’re learning here is that you cannot build a business on personally identifiable information — or PII — that you don’t get explicit permission to use. Privacy is playing an increasingly important role in your customer’s decision-making process. And we’re clearly seeing that in what these digital are talking about.

What "Customer Experience is Queen" Means This Year

Now, of course, I’ve talked about "Content is King." We’ve talked about "Data is the Crown Jewels" a little bit. Let’s talk about "Customer Experience is Queen."

Ecommerce Still Has Lots of Growth Potential
First, as mentioned, the ongoing shift to e-commerce continues. Even with the enormous growth we’ve seen to date, there’s still lot of potential to be realized. Again, Facebook talked about the fact that commerce is one of their core focuses. Google both itself and in YouTube is hugely important. Google spent an enormous amount of time talking about this. They spent a lot of their earnings called diving into e-commerce. To me, they see Amazon as their biggest competition. They’ve partnered with Shopify. They’ve talked about how they can connect ads on YouTube to commerce and buying what you see.

Clearly, this is really important to them. Facebook as well talked about commerce as one of its core investments that it needs to do in the coming year. They talked about a live stream that they did where John Mayer and a new brand — that I apologize I want to say it’s Laundress, but I may be mistaken — partnered on a livestream shopping experience that generated $40,000 in revenue in an hour. So clearly they’re all thinking about commerce really, really critically. And putting it at the core of their business and recognizing despite how big e-commerce already is, there’s still enormous, enormous opportunities to grow here.

Amazon talked about the fact that third party sellers now represent over half of all sales on its platform. So lots of interesting things there.

Video and Ecommerce Connecting
By the way, one of the really fascinating things that I saw here was that Google talking about live shopping on YouTube. I find moves like that fascinating for a bunch of reasons.

One is that it’s always worth remembering that the second biggest search engine in the world at least in terms of keyword volume is YouTube. They clearly are seeing lots of connections between YouTube and commerce.

They cited specific cases where companies are conducting shopping livestream streams. And it makes me wonder what keyword volumes, what activity data tells them this because it’s not nothing. They clearly see data that tells them this. I also have talked about this before, but I really think Google sees Amazon as one of its biggest competitors now. Their partnership with Shopify strongly suggests that they want something more there and recognize the risk or the threat to them that Amazon represents.

Mobile Remains MASSIVE
The last customer experience thing that I want to talk about of course is that mobile remains huge. Apple said they now have an active installed base of 1.8 billion devices. That’s about one Apple device for every four to four and a half people on the planet. That’s crazy when you consider that their market share compared to Android devices is actually kind of small. They talked about they paid developers more than $260 billion since the App Store’s launch that’s 19 billion per year, over the last 13 years or about $1.6 billion per month.

Obviously, I’m straight-lining the numbers. They were undoubtedly much smaller in the early days and much larger today, but it gives you a sense of scale and a sense of mobile’s importance in your customers’ lives. The people building apps that sell on just one platform, just Apple’s App Store split a billion, $1.6 billion every month. That’s about an annual wage. There’s about a half million developers listed on the App Store today. So that’s an annual wage of about 38,000 bucks, which $38,000 isn’t a huge number, but that’s pretty crazy. I mean, of course some folks are making a ton more and some are making diddly-squat, but it suggests how transformative this technology has been.

The Metaverse, in Business Terms, Isn’t Real Yet
Just by way of contrast and I don’t mean to diss the metaverse, but by way of contrast Facebook has said, "People have spent more than $1 billion on Quest Store content. That’s total. That’s less than Apple’s App Store shares with developers in a single month, not what people pay, what Apple pays out. So we’re kind of in very, very early days here. I don’t mean to say that it won’t happen. I think there’s a lot of interesting things here, but we’re in very early days.

Sometimes people like to ask "What inning are we in?" using baseball terms. And to me it sounds like we’re still just pulling into the parking lot outside the field. It’s a cool technology. There’s something there eventually. But as I said at the top of the show, you can’t do core and explore if you don’t know what core is. And today the metaverse no matter how you define it or how much you hear about it just isn’t core yet. Could be someday, but not today, not yet.

The Battle for Talent, However, Is Very, Very Real
The last big trend that people talked about and this one gets outside. Our typical content is king, customer experience is queen, data’s the crown jewels framing. But is the battle for talent? And just as for example and everybody talked about this. Everyone of the AGFAM talked about this, but Amazon has 1.6 million employees. It has doubled in the last two years. Doubling your workforce is insane when you’re starting with 800,000 people. They added 400,000 people in 2021 alone, more than 400,000 people.

If you need entry-level, low wage people, you’re now always competing with Amazon if they’re have a service center anywhere close to you. By the way, if you’re competing for high skilled, high tech talent, you’re competing with the entire AGFAM. For instance, Amazon raised its maximum base pay as part of its compensation. They raised that from $160,000 to $350,000. So if it feels like labor’s getting more expensive and for many of you listening to this, I know it is, it is.

Conclusion: What We Learned from the Frightful Five’s Q4 2021 Earnings

So what have we learned from the AGFAM? What have we learned from their earnings calls?

We’ve learned that we’re still living through a generational shift to digital, that that hasn’t changed anytime soon.

We’ve learned that content still is king, particularly when it’s content sourced from creators and video content. We’ve learned that customer experience is queen, that the ongoing shift to e-commerce continues and continues to grow at remarkable rates. And that mobile remains the way your customers want to interact with the content and the services that you offer.

We’ve learned that data is the crown jewels, but privacy especially plays a key role in how we actually use that data and that we need to focus more on privacy and protecting that data as if our entire business depended on it.

And we’ve learned that talent is getting more expensive and probably will be for some time to come.

And at last, there may be some "Explore" opportunities in the metaverse, but we’re not quite there yet. So don’t lean in too hard until you see it work better in the real world.

So I plan to tell you what’s going on with Shopify when I hear about that in a week or so. I plan to tell you more as we learn more, but that seems like a really good place to wrap up for this week.

Show Closing and Credits

And looking at the clock on the wall, we are way out of time for this week. I want to remind you, you can find the show notes for today’s episode as well as an archive of all past episodes by going to timpeter.com/podcast. Again, that’s timpeter.com/podcast. Just look for Episode 338.

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Show Outro

With that said, I want to say just one more time how much I very much appreciate you tuning in every single week. It means the world to me. I would not this show without you. You are the reason this whole show exists. So with that, I hope you have a wonderful rest of the week, a great weekend. And I’ll look forward to speaking with you here on Thinks Out Loud next time. Until then, please be well, be safe and as always, take care, everybody.

Tim Peter is the founder and president of Tim Peter & Associates. You can learn more about our company's strategy and digital marketing consulting services here or about Tim here.

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