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Hate to rain on this (TBH I don't): Shopify has raised (per Crunchbase) about $122M in funding. At the current rate, they will see $374M in GMV on their best

Hate to rain on this (TBH I don't): Shopify has raised (per Crunchbase) about $122M in funding. At the current rate, they will see $374M in GMV on their best day of the year. Shopify has between 1K and 5K employees (again Crunchbase). Let's make the most conservative analysis and assume 1K. If they are paid $20 per hour (low estimate I think), that is $41M in employment costs per year. With taxes, office rent, healthcare, etc, lets just lowball again and call it $50M/yr for all the people costs. Again I think this is a huge underestimate if the crunchbase number is accurate. Lets assume no marketing, hosting or other costs of any kind. The internet claims 100k stores use shopify. Lets assume they all pay for the standard tier plan, and pay month to month. That is $79 * 100k = 7.9M per month in revenue. Again, huge over estimate, since I would guess 95% of the customers use the cheapest tier, and the largest companies most likely negotiate better than advertised fees. Finally lets assume their BEST day is only about twice as good as their average day. This is probably overestimating their revenue by about 10x, at least. That would mean they are bringing in well under $47.4M in gross revenue, on over $50M in fixed costs. So in other words, even if black friday were half the days in the year, they still would lose substantial money. This is after 12 years of business. It's unlikely they will ever turn a profit. If they were going to experience some kind of exponential growth to defeat this analysis, 12 years of the fastest growth in the internet have already gone by, so it seems unlikely going forward.

dragonzooord 10y ago
Shopify is a public company. You don't need to speculate on their revenue or expenses, you can just look it up. They earned $99.6 million in Q3. They expect revenues in the range of $379 million to $381 million for 2016. And they are still losing money, although getting close to break even. Their market cap is 3.86B, so 10 times revenue, so the market is expecting them to continue to grow rapidly. https://investors.shopify.com/events/Events-Presentations/default.aspx#section_news https://investors.shopify.com/events/Events-Presentations/de...
- justin_vanw 10y ago
  Hey, you're right! https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IEI5WOmYJMb9sAHUo7SQBA https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IE... Revenue growth with corresponding increases in costs and expenses. NOT getting closer to profitability, in fact operating losses are increasing in proportion to revenue (almost a linear relationship in every quarter and year in the reports). Again, this is a failing business. 12 years in and no profit, profit not within reach, costs growing in lockstep with revenues. EDIT: So I was curious how they had such high revenues when clearly subscription fees can't account for it. Found this in the financial statement: "We principally generate merchant solutions revenues from payment processing fees from Shopify Payments. Shopify Payments is a fully integrated payment processing service that allows our merchants to accept and process payment cards online and offline. As a result of the launch of Shopify Payments in August 2013, we have seen significant growth in the revenues generated from our merchant solutions. In addition to payment processing fees from Shopify Payments, we also generate merchant solutions revenue from transaction fees, Shopify Shipping, Shopify Capital, referral fees from partners, and sales of point-of-sale ("POS") hardware. Our merchant solutions revenues are directionally correlated with the level of GMV that our merchants process through our platform. Merchant solutions revenues increased from $34.5 million in the six months ended June 30, 2015 , to $77.0 million in the six months ended June 30, 2016 , representing an increase of 123.4%" So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. EDIT2: So found the cashflow in the statement. They charged $76M for these fees, and paid out $56M. Not bad actually! However, that $20M in net is still much lower than the costs to generate the business, $56M just in marketing.
  - slgeorge 10y ago
    > So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. You don't understand the meaning of the word revenue.

dragonzooord 10y ago

Shopify is a public company. You don't need to speculate on their revenue or expenses, you can just look it up. They earned $99.6 million in Q3. They expect revenues in the range of $379 million to $381 million for 2016. And they are still losing money, although getting close to break even. Their market cap is 3.86B, so 10 times revenue, so the market is expecting them to continue to grow rapidly. https://investors.shopify.com/events/Events-Presentations/default.aspx#section_news https://investors.shopify.com/events/Events-Presentations/de...

justin_vanw 10y ago
Hey, you're right! https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IEI5WOmYJMb9sAHUo7SQBA https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IE... Revenue growth with corresponding increases in costs and expenses. NOT getting closer to profitability, in fact operating losses are increasing in proportion to revenue (almost a linear relationship in every quarter and year in the reports). Again, this is a failing business. 12 years in and no profit, profit not within reach, costs growing in lockstep with revenues. EDIT: So I was curious how they had such high revenues when clearly subscription fees can't account for it. Found this in the financial statement: "We principally generate merchant solutions revenues from payment processing fees from Shopify Payments. Shopify Payments is a fully integrated payment processing service that allows our merchants to accept and process payment cards online and offline. As a result of the launch of Shopify Payments in August 2013, we have seen significant growth in the revenues generated from our merchant solutions. In addition to payment processing fees from Shopify Payments, we also generate merchant solutions revenue from transaction fees, Shopify Shipping, Shopify Capital, referral fees from partners, and sales of point-of-sale ("POS") hardware. Our merchant solutions revenues are directionally correlated with the level of GMV that our merchants process through our platform. Merchant solutions revenues increased from $34.5 million in the six months ended June 30, 2015 , to $77.0 million in the six months ended June 30, 2016 , representing an increase of 123.4%" So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. EDIT2: So found the cashflow in the statement. They charged $76M for these fees, and paid out $56M. Not bad actually! However, that $20M in net is still much lower than the costs to generate the business, $56M just in marketing.
- slgeorge 10y ago
  > So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. You don't understand the meaning of the word revenue.