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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
American consumers are a gold mine. The world’s largest economy also has one of the highest rates of GDP per capita. But the market for certain products can grow saturated. For homegrown Big Tech companies this presents a conundrum.
Take Meta. The social media giant continues to add users to its already gigantic consumer base. Some 3.96bn people log in to at least one of Meta’s apps at least once per month — up 7 per cent on last year. But this growth has been sourced in countries like Indonesia. These new users do not provide the same contribution in advertising revenue as US peers. In Asia-Pacific, users generated $5.12 revenue each in the last quarter. In the US and Canada, they generated $56.11. Revenue has almost doubled in both regions since the same quarter in 2018. But unequal user expansion is weighing down overall revenue per user.
The same dynamic is true at Tesla, where revenue and profits per electric vehicle are falling as sales overseas grow and local rivals engage in price wars. Sales outside the US accounted for over half of the total in the last quarter, dominated by China. The company has cut prices for its models in order to take on competitors like BYD. It has delivered 1.3mn vehicles so far this year and reported automotive sales revenue of nearly $58bn — a per vehicle figure of nearly $44,000. This is down from more than $51,000 the previous year.
China’s importance as a market explains the visits made by chief executives including Tesla’s Elon Musk, Apple’s Tim Cook and Intel’s Pat Gelsinger in 2023. For Apple, sales in China and Asia-Pacific accounted for more than $21bn in the past quarter — nearly a quarter of the total. At chip designer Nvidia, China accounts for more than 20 per cent of revenues.
In tech, investors prize top line growth. This is easier to source overseas but it weighs down on margins. Volume comes at a price.
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