The Google-Facebook Economy Is 2x

Despite advertising regulations, Google and Facebook are profitable. Google made $22.8 billion in advertising in 2016. In 2015, this figure totaled $30.8 billion. Last year, it will top $35 billion, but even at that…

Despite advertising regulations, Google and Facebook are profitable.

Google made $22.8 billion in advertising in 2016. In 2015, this figure totaled $30.8 billion. Last year, it will top $35 billion, but even at that rate, its revenue will be only about 14.2 percent of its total income.

Facebook made $40.2 billion in 2016, its highest income ever, and has plans to grow even more with its $13 billion acquisition of Whatsapp.

In fact, Facebook and Google are basically already bigger than the U.S. Government itself. When you combine their federal spending across federal agencies, agencies that share federal funds, and welfare spending on mass populations, you still come to about $1.2 trillion—18 percent of the budget.

When you factor in student loans that the U.S. Government backs and job training programs run by the U.S. Government, it comes to almost $2 trillion, more than 21 percent of the entire economy.

Unsurprisingly, Google and Facebook are the big winners. They are the only companies in the world that are capable of producing twice as much revenue as the U.S. Government, and they also benefit when our consumption increases. Their advertising drives us to shop and to use their services more.

For example, check out the following math:

If you take your GDP of $26.4 trillion at a 3 percent interest rate and you turn the money into a Netflix subscription, your current monthly cost will go from $72 to $124, plus you could rent a second Netflix account for $20/month.

Now multiply that by the U.S. Department of Education. If the U.S. Government would just shut its mouth and fund higher education, it would make $104 billion on their own. With even less money to spend, they can go shopping. The U.S. Government can’t spend that at great savings, so we will all have to deal with it.

However, the number of options in the economy means that other companies and services can capture the customers the Government cannot. These other companies and services are lucrative, too. This is happening right now.

The most obvious example of this is mobile apps. The combination of the rise of iPhones and iPads has changed the marketplace dramatically, and everyone has a mobile phone.

Young people have hit the middle class through mobile apps. The two biggest messaging apps, Snapchat and Whatsapp, have attracted many of the smartphone users of the mid-20s to late 30s age range. They also provide a large segment of America with a network with instant, open-ended relationships, which translates into increased productivity.

The emergence of augmented reality apps, which can make things look live in your living room, means that technology is improving rapidly, but also that you can have better-quality conversations and ideas.

Cars are still considered as middle-class goods. But the emergence of Tesla and other electric vehicles will create tremendous efficiencies and a significant number of jobs. Elon Musk, the founder of Tesla, came in for criticism for being (accurately) perceived as a man with no plan, but he’s finally got one. Here is that plan:

“(It’s) extremely unlikely that ‘post-air pollution’ cars will be those that are totally unsustainable to own for the life of the vehicle,” Musk writes. “If we look at what an average car would run on in 2030, emissions are roughly comparable now to today and getting lower. Two hundred gallons of gas a year versus 20 gallons per year.

“It’s much more likely that the companies I’m investing in will be autonomous and transportable fleet cars at affordable prices, that have electricity built into them, making for less expensive rides. It’s a major shift but much less difficult than Tesla developing the car.

“It is also really hard to achieve a goal of the increased mass market availability of the car at the desired price for what you pay for the car. I’ve invested in industry standards that will allow industry compliance. Then I’ll provide the platform to enable their actual implementation.”

Tech companies like these have succeeded because they know that the goal of the economy is to create wealth—and the best way to do this is to make it easy for everyone to do what they want.

Without this attitude, it would be impossible for them to make so much money.

This article appeared in The Atlantic, the news site of The Atlantic Group LLC, which has offices in Washington, D.C., and San Francisco. The Atlantic is a subsidiary of The Atlantic Co. (http://www.theatlantic.com) © 2017

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