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If you have negative contribution margins, scale only accelerates your demise. Driving toward scale with those economics is exactly what it means to "lose money
by _sentient 11y ago
If you have negative contribution margins, scale only accelerates your demise. Driving toward scale with those economics is exactly what it means to "lose money on every sale, but make it up in volume".
Is selling something at a unit loss better than shipping something for free? Maybe, but in the case of software the marginal cost per unit is near zero, so scale can be achieved without huge amounts of capital. Hardware doesn't quite enjoy quite the same leverage.
- roymurdock 11y ago> If you have negative contribution margin, scale without an appropriate reduction in total cost only accelerates your demise. Which is the hallmark of a non-viable business. I agree that it's easier to scale software, but I'd be interested to hear whether or not you think software is a saturated space that has engendered a sense of entitlement in many would-be customers. If you can't convert/monetize your userbase, nothing else really matters.
- _sentient 11y agoI agree with the last premise, but we already have a way to get people to pay for products they are used to getting for free. It's advertising. And while I would personally avoid the model, it has spawned/supported many of the greatest tech companies over the last decade.