Last week, the Aramco IPO set a world record—the largest IPO ever. Aramco, also called “Saudi Aramco,” is a Saudi Arabian state-controlled oil company. In fact, Aramco is the world’s largest and most profitable company. Before the Aramco IPO, Google (GOOGL) discussed partnering with the company. Amazon (AMZN) also discussed a similar cooperation with Aramco.
Aramco IPO works toward business diversification
As CNBC reported, the Saudi government intends to use the proceeds from Aramco’s IPO to diversify the country’s economy. Currently, the Saudi economy depends on oil sales. In an effort to diversify the economy, the Saudi government invested in SoftBank’s Vision Fund. The fund focuses on tech investments.
Aramco has set its sights on the tech sector to help diversify the Saudi economy. As a result, Google and Amazon came into the picture. Aramco discussed forming a cloud computing joint venture with Google.
Aramco’s desire to diversify its revenue sources outside oil markets aligns with Google’s goal. Currently, Google depends on the advertising market for its revenues. In the third quarter, Google parent Alphabet derived 84% of its revenues from advertising. Google faces challenges even though the digital advertising market continues to expand. The challenges put the company’s future in that market at risk. For example, Google is losing its market share. Regulators think that the loss might threaten the competition.
Due to these challenges, Google wants to diversify its business outside the advertising market. As a result, the company has ventured into the cloud computing business. Now, Google is one of the world’s top cloud companies. However, the company still has a long way to go before it catches cloud computing market leaders Amazon and Microsoft (MSFT).
$25.6 billion raised through the public listing
The Aramco IPO raised $25.6 billion. There haven’t been any updates about Aramco’s discussions with Google and Amazon on the cloud venture. The IPO windfall should supercharge Aramco’s tech investments to diversify its revenue sources.