Analysis of the Internet
Software and Services Industry
BE 530 Course Project
The industry I have chosen for this project is the Internet Software & Services. Companies in the Internet Software and Services Industry develop and market internet software and provide internet services including online databases and interactive services, web address registration services, database construction, and internet design services, to name a few Information Technology is currently one of the largest ten sectors in S&P 500 with a sector weight of 17%. (See fig.1)
The Information Technology Sector is split into three industry groups: software and service(39.14%); technological hardware and equipment(44.9%); the semiconductors and semiconductor equipment (12.79%).
Fig.2 Info Tec Industry Croup Weights
The IT industry dominating firms include eBay, Google, Yahoo! and VeriSign, etc. While other firms play an import role in the industry, I would like to focus analyzing the above mentioned four companies for the purpose of this paper.
Within the IT sector, the Internet Software and Services Industry helps consumers and businesses realize and find services that are suitable for their needs. In order to do so, the companies in this particular industry develop and/or provide on-line databases and interactive services, web address registration services, database construction and internet design services, based on which the related applications are created and promoted.
There are five major firms and some small firms in this industry. Although the history data shows that none of the five firms’ profits equal to zero in the past five years, the profits are business profit. All we need to find is financial profit. The low barrier to enter the Internet Software and Services Industry make it a very open industry. The large number of new applications being offered by small start-up companies provides the best evidence for the low barrier. Hence, this industry is monopolistic competitive
Technology is likely to be the most important factor for the Internet Software and Service Industry. This industry is constantly changing and improving itself, due to its fiercely competitive nature (John O’Shaughnessy & Maggie McRae Spring 2010). But the threat bought in by new members is low, since it is difficulty for start-up companies to succeed in this industry. New companies cannot steal the market share from well established companies which have been in this market for a long time, hence very competitive.
The government can affect Internet Software and Service Industry in a variety of ways. The most common way is government regulation. For example, the government could monitor activities on the Internet, which decreases the interest of using internet. Government spending affects the development of the industry as well. The government could financially support the development of certain applications by some firms, making them the main player of the field.
Google has biggest market cap of 170.17B. Its main revenue comes from providing online advertisement. For the six months ended 30 June, 2011, Google's revenue increased 23% to $17.60B, and its net income increased 12% to $4.30B. The net income did not increase as much as revenue did because of an increase in the cost, and a decline of its sales. Google has an increasing profit in the past5 years. (data from ychart.com)
Google Inc. profit in 5 years
Google Inc. profit chart in 5 years
The second place is eBay with a 28.67B market cap. eBay provides online platform, services and tools to help individuals and merchants globally to establish online and mobile commerce and payments. For the six months ended 30 June, 2011, eBay Inc.'s revenue increased 17% to $5.31B. But its net income decreased 7% to $759.3M. Marketplaces and payments segments are the contributors of the...
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