5 companies grab 70% of your online dollars

Matt Krantz | USA TODAY

The Internet was supposed to democratize and open up information, commerce and communication. But so far, the spoils are going to a relative few.

Now that social media giant Facebook (FB) has reported its quarterly profit, investors can see how lucrative Internet business has become for the industry's winners. Just five companies in the Internet Software and Services and Internet and Catalog Retail industries within the Russell 3000 index, including Amazon (AMZN), Google holding company Alphabet (GOOGL) and Facebook, collected 70% of the industry's more than $300 billion in revenue the past 12 months, according to a USA TODAY analysis of data from S&P Capital IQ. Even that statistic masks just how concentrated the Internet business is. Amazon and Alphabet together hauled in 57% of the total revenue generated by the Internet companies over the past 12 months.

A lion's share of the massive digital opportunity has been grabbed by a small cadre of online behemoths that continue to get even bigger.

Internet profit is even more concentrated than revenue is. Alphabet generated $16.4 billion in net profit over the past twelve months, which accounts for two-thirds of the aggregate net income collected by all the Internet companies in the Russell 3000. Since Amazon is a retailer and makes a profit on a smaller portion of its revenue than Alphabet, its profit the past 12 months is just 1.3% of the industry's total. Facebook trails Alphabet, claiming 11% of the industry's total net income.

Investors are quickly coming to terms that if they want a piece of the Internet and technology revolution, they'd better stick with the big companies that just keep getting stronger. The big three Internet companies -- Amazon.com, Alphabet, and Facebook -- command more than 70% of the industry's total market value of $1.5 trillion. Meanwhile, smaller players are falling further behind. Online coupon provider, Groupon (GRPN), is the latest smallish Internet company that has faded as the big players get even more dominant. Groupon is the 11th largest Internet company in the Russell 3000 by revenue, but has slipped to the point its shares are trading for just few bucks. Shares have lost nearly two-thirds of their value this year and are trading Thursday less than $3 a share.

Even Yahoo (YHOO), which some people continue to think of as an Internet titan, only brought in 1.6% of the Internet industry's revenue over the past 12 months and online streaming service Netflix (NFLX) brought in 2.1%.

This analysis has its limitations. It only includes publicly traded companies, therefore leaving out private Internet companies that might be relevant. There are also other broader technology companies that are active in online business but are not classified as Internet companies. Microsoft (MSFT) comes to mind as while it's not in the Internet industry - it is a key rival to Amazon for cloud services for businesses and its Bing search engine holds about 20% market search in U.S. searches. The same could be said about Apple (AAPL), which has become a peripheral player online due to its dominance in smartphone sales, at least in the U.S.

The Internet isn't alone in being highly concentrated. Ford (F) and General Motors (GM) together haul in two-thirds of the revenue generated by companies in the Automobile and Components industry. But that's a mature industry, so probably not all that surprising.

But the Internet is seen as being less established. Yet the numbers show just how concentrated the Internet has already become -- and why these giants are easily in the position to crush any small companies that stand in their way.

Follow Matt Krantz on Twitter @mattkrantz

FIVE INTERNET COMPANIES DOMINATE THE INDUSTRY'S REVENUE

Company, Symbol, % of Internet revenue *, Revenue TTM ($ bils)**

Amazon, AMZN, 33.2%, $100.6

Alphabet, GOOGL, 23.7%, $71.8

eBay, EBAY, 5.8%, $17.7

Facebook, FB, 5.3%, $15.9

Liberty Interactive, QVCA, 3.3%, $9.9

Source: S&P Capital IQ, USA TODAY

* Based on companies in the Internet and Catalog Retail and Internet Software and Services industries in the Russell 3000 index. Based on revenue reported the past 12 months.

** Trailing twelve months

Matt Krantz on Twitter: @mattkrantz.