WebSoft means companies that operate in the internet retailing, software and service development (social, search engine, web).
Mediobanca’s R & D published the 2018 edition of the study on global multinationals, with a focus on WebSoft corporations.
The WebSoft (Software & Web Companies) giants are 21 of 397 multinational companies of which Mediobanca R&D traces the identity.
Of the 21 WebSoft corporations, 13 have headquarters in the USA, five are Chinese and two are Japanese. Europe, and specifically Germany, has only one company.
In 2017, WebSoft accounted for 4.8% of the aggregate turnover of the world’s largest multinational companies. Moreover, 4.7% of the labour force, 8.1% of profits and even 19.4% of the value of the Stock Exchange. With revenues more than doubled since 2013.
In 2017, the 21 WebSoft recorded a total turnover of 626 billion euros, +123% on 2013 and +12 percent on 2016. An exceptional figure compared to the lower growth in revenues of multinational manufacturing and TLC (both +18% in 2013). And the contraction in energy and utilities revenues.
In addition, he again emphasizes Mediobanca R&D, the race continues. The first half of 2018 indicates a further growth of +27% compared to the same period last year.
The top three are the American giants, Amazon, Alphabet and Microsoft. Together, they control half of the aggregate turnover of the sector. The company founded by Jeff Bezos is first thanks to revenues of 148.3 billion euros. 23.7% of the aggregate total, and an average annual growth since 2013 +24.3%.
In second place Alphabet, Google’s holding company: with a turnover of 92.4 billion euros (+16.7%), determines 14.8% of the market. Closes the podium Microsoft with 75 billion euros (+3.7%) and a 12% share. However, the young Chinese Vipshop (+60.3%) and JD.com (+51.2%) are growing more, followed by the American Facebook (+50.7%).
Profitability and labour force
The overall industrial profitability of WebSoft is excellent, with an ebit margin of 18.4%, second only to that of pharmaceutical companies (25.5%). Compared to 2013, however, there is a decrease (-3.4 p.p.). Unlike the slight increase recorded by the world multinationals (ebit margin at 10.4%, +0.3 p.p.).
American companies are once again shining for industrial profitability. With Facebook scoring an ebit margin of 49.7%, up from 35,6% recorded in 2013. Following Oracle (36.4%) and Booking (35.8%).
In 2017, WebSoft employs over 1.6 million people worldwide. The figure is increasing by 848 thousand units (+112% compared to 2013). In other sectors, the rate of growth in employment is much lower. The manufacturing sector has increased by +1% and telco by +4%, while employment in the energy sector and utilities has fallen. But these increases largely depend on the massive strategy of WebSoft’s giants’ acquisitions.
Amazon, with 566 thousand employees (of which 89 thousand from Whole Foods Market in August 2017), is confirmed as the world’s first. The company recorded an increase in the workforce of +382,5% in 2013-2017.
Similar to the increase in employment of JD.com, which ranks in 2nd place with almost 158 thousand employees (+311,8%). Following Oracle with 137 thousand units (+12.3%).
Chinese WebSoft Growth
In 2017, the largest WebSoft, continues Mediobanca R&D, once again confirmed the US. In the first two places we always find Microsoft (163.3 billion euros tangible assets) and Alphabet (149.3 billion euros). While Amazon (95.5 billion euros) barefoot Oracle, third place in 2013.
But Chinese companies are the fastest to grow. In fifth place, Alibaba (scaling five positions, from the tenth), to the sixth Tencent (which was eighth) and to the tenth Baidu (it was 14th).
On the Stock Exchange
It lasted a long honeymoon between Bag and WebSoft. With an average increase in 2013-2017 of about 25% per year, the companies analysed are worth €3.623 billion at the end of 2017. It is more than six times the value of the entire Italian Stock Exchange and more of the GDP of Germany.
The Alphabet alone, whose value of the Stock Exchange is 608,2 billion euros at the end of 2017, is worth more than the entire Italian Stock Exchange, where the shares of 325 companies are exchanged. Google holding company leads the ranking of WebSoft with higher stock market value. It is followed by Microsoft (€544.8 billion), Amazon (€472 billion) and Facebook (€427.7 billion).
However, the latest data indicate a fallback, highlights Mediobanca R&D. Amazon’s first investment in the first half of November was to raise its capital by EUR 1 billion. With her all the major WebSoft have lost value. Alphabet from the 800 billion dollars reached at the end of August folded to about 700 in mid-November. Facebook, after exceeding 500 billion at the end of July, dropped to 350 in mid-November.
Control of founders
The principle \”one share, one vote Â” does not like different WebSoft. Alphabet, Facebook, but also the Chinese JD.com and Baidu, among others, have equipped with a multiple-voting structure. Structure that divides the shares into two or more categories with different rights. This system allows the founding members, also by virtue of their ‘charismatic’ role, to maintain full control of the company without possessing the majority of its capital.
As for taxes, in 2017 about two thirds of the profit before taxes of WebSoft was taxed in countries with facilitated taxation. Among them Ireland, Luxembourg, the Netherlands and so on.
This has led to a tax saving of € 12.1 billion. Thanks to an effective tax rate of 31%, compared to 41% expected. Over the five-year period 2013-2017, the cumulative savings exceed EUR 48 billion.
However, the tax reform launched by the United States in December 2017 generated a wider tax revenue. With WebSoft accounting for almost €18 billion more taxes. These are largely motivated by the one-time transition tax resulting from the repatriation of profits accumulated abroad. In particular Alphabet will have to pay to the US tax 8.5 billion euros, Oracle 6.5 billion euros and Facebook 2.1 billion euros.
The situation in Italy
The presence of WebSoft in Italy is through subsidiaries. Their headquarters are located almost entirely in the provinces of Milan and Monza-Brianza.
The 2017 aggregate of Italian branches has a turnover of more than 1.8 billion euros and employs more than 7,700 people. About 1,100 more employees than in the previous year.
In recent years, the tax structure of these subsidiaries has been investigated in depth, and Mediobanca R&D is still evidence. The last in order of time led to the recent closure of the tax litigation with the Revenue Agency by Facebook. The company will have to pay over 100 million euros. Following the 100 million paid by Amazon and the more than 306 paid out by Google.
The complete survey is available for download on the Mediobanca R&D website at this link.