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Is anyone surprised by this? Amazon had a net income of (241,000,000) in 2014 and a market cap well over $100 billion... I know the comparison is a little str

Is anyone surprised by this? Amazon had a net income of (241,000,000) in 2014 and a market cap well over $100 billion... I know the comparison is a little strange, but these big startups/tech companies (i.e. Uber/Amazon) feel remnant of the old Standard Oil days. Standard Oil would routinely operated at a loss to hamstring competition. A tech company (similarly) can operate at a loss, undercut it's competition, and skirt regulation until it reaches an economy of scale. At which point competition has been decimated and a monopoly (or oligopoly) is established. The ideal scenario for a profit maximizing business.

bluedino 11y ago
Uber isn't Amazon. They aren't selling phones and tablets at cost (or at a loss) in an attempt to get customers. They aren't investing in things like AWS or acquiring companies.
- cylinder 11y ago
  They are investing in expanding and protecting market share. Clearly they are already far and away the dominant player internationally. They're spending wildly on things like driver guarantees, paying fines on behalf of drivers, lobbying etc. If they can spread Uber around the world and defeat regulatory challenges they can become profitable.
- paulpauper 11y ago
  what matters is the cash flow. Amazon is cash flow positive meaning that their operations are very profitable, but they are reinvesting this profits into the business
  - tertius 11y ago
    Or rather, they have enough income above cost to pay for reinvestment. This lowers profits, for a reason.
- cryptoz 11y ago
  > They aren't investing in things like AWS Sure they are. Their investments in self-driving cars I think is an excellent comparison: self-driving cars will become a fundamental backbone of transportation in the future, kind of like AWS is for the internet right now. Uber's not the only one of course, but if they can grow to lead the pack with research, production and use of a large fleet of self-driving cars, then they are in a very good position for the future.
  - janlukacs 11y ago
    Are they actually doing that? Or just spending like crazy trying to expand. I find the comparison of Uber and Amazon a bit hillarious. Amazon is very profitable and keeps investing huge amounts every year, if they stop investing they will make a huge profit. Can we say that about Uber?
  - astazangasta 11y ago
    It simply isn't plausible that Uber will invent and deploy a completely new technology they have no experience with or expertise in. If this is where there valuation comes from and this is why they are running losses people should be afraid for their money. For that matter, give me a few billion, I can definitely cure cancer.
    - tertius 11y ago
      The same could be said for Google. But they just acquired and hired their way to having that expertise. I'm not holding my breath for great engineering from Uber, but that's a bias and at least I can see that. If you have insider information you may have more reason than I to have that bias.
  - dave_sullivan 11y ago
    I've heard talk of self driving cars at uber, but are they really "investing" in them? Self driving cars will be available for anyone to buy within 5 years -- Uber would be better off buying some of those. And so will their competitors. I'll say this: uber will be the next groupon, zynga, webvan, ... it's laws of physics, we've seen it before -- take a simple but good profitable product with early user growth, a big market (ppl needing cabs, groceries, stuff at discount, addictive entertainment), and then completely kill it through over-investment. Then they use the money to buy the growth they need to justify their ever-higher valuations. Market growth really looks more like a sigmoid than a hockey stick. Towards the top, near the plateau, it's possible to buy growth to feed the myth of the hockey stick. By doing this, you are incurring a sort of technical (real?) debt that is harder to pay back than people realize, particularly as margins get squeezed by inevitable competition. In Uber's case, they will also mostly lose in court.
- B4CKlash 11y ago
  I didn't intend to draw a direct comparison between the two companies. I was merely highlighting that valuation is not solely based on current day financials (it's actually an estimation of future discounted cash flows). That being said... Comparing present day Amazon with present day Uber is a massively unfair comparison. The former is the tech equivalent of an blue chip.
caminante 11y ago
AMZN's the posterchild for why comparing companies by net income alone is flawed.[1] [1]http://a16z.com/2014/09/05/why-amazon-has-no-profits-and-why-it-works/ http://a16z.com/2014/09/05/why-amazon-has-no-profits-and-why...

bluedino 11y ago

Uber isn't Amazon. They aren't selling phones and tablets at cost (or at a loss) in an attempt to get customers. They aren't investing in things like AWS or acquiring companies.

cylinder 11y ago
They are investing in expanding and protecting market share. Clearly they are already far and away the dominant player internationally. They're spending wildly on things like driver guarantees, paying fines on behalf of drivers, lobbying etc. If they can spread Uber around the world and defeat regulatory challenges they can become profitable.
paulpauper 11y ago
what matters is the cash flow. Amazon is cash flow positive meaning that their operations are very profitable, but they are reinvesting this profits into the business
- tertius 11y ago
  Or rather, they have enough income above cost to pay for reinvestment. This lowers profits, for a reason.
cryptoz 11y ago
> They aren't investing in things like AWS Sure they are. Their investments in self-driving cars I think is an excellent comparison: self-driving cars will become a fundamental backbone of transportation in the future, kind of like AWS is for the internet right now. Uber's not the only one of course, but if they can grow to lead the pack with research, production and use of a large fleet of self-driving cars, then they are in a very good position for the future.
- janlukacs 11y ago
  Are they actually doing that? Or just spending like crazy trying to expand. I find the comparison of Uber and Amazon a bit hillarious. Amazon is very profitable and keeps investing huge amounts every year, if they stop investing they will make a huge profit. Can we say that about Uber?
- astazangasta 11y ago
  It simply isn't plausible that Uber will invent and deploy a completely new technology they have no experience with or expertise in. If this is where there valuation comes from and this is why they are running losses people should be afraid for their money. For that matter, give me a few billion, I can definitely cure cancer.
  - tertius 11y ago
    The same could be said for Google. But they just acquired and hired their way to having that expertise. I'm not holding my breath for great engineering from Uber, but that's a bias and at least I can see that. If you have insider information you may have more reason than I to have that bias.
- dave_sullivan 11y ago
  I've heard talk of self driving cars at uber, but are they really "investing" in them? Self driving cars will be available for anyone to buy within 5 years -- Uber would be better off buying some of those. And so will their competitors. I'll say this: uber will be the next groupon, zynga, webvan, ... it's laws of physics, we've seen it before -- take a simple but good profitable product with early user growth, a big market (ppl needing cabs, groceries, stuff at discount, addictive entertainment), and then completely kill it through over-investment. Then they use the money to buy the growth they need to justify their ever-higher valuations. Market growth really looks more like a sigmoid than a hockey stick. Towards the top, near the plateau, it's possible to buy growth to feed the myth of the hockey stick. By doing this, you are incurring a sort of technical (real?) debt that is harder to pay back than people realize, particularly as margins get squeezed by inevitable competition. In Uber's case, they will also mostly lose in court.
B4CKlash 11y ago
I didn't intend to draw a direct comparison between the two companies. I was merely highlighting that valuation is not solely based on current day financials (it's actually an estimation of future discounted cash flows). That being said... Comparing present day Amazon with present day Uber is a massively unfair comparison. The former is the tech equivalent of an blue chip.

caminante 11y ago

AMZN's the posterchild for why comparing companies by net income alone is flawed.[1] [1]http://a16z.com/2014/09/05/why-amazon-has-no-profits-and-why-it-works/ http://a16z.com/2014/09/05/why-amazon-has-no-profits-and-why...