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"Xu said the company became “contribution margin positive” in the last year, which means that it’s profitable on a per-order basis. In fact, DoorDash has become

"Xu said the company became “contribution margin positive” in the last year, which means that it’s profitable on a per-order basis. In fact, DoorDash has become profitable in its earliest markets." Its funny this is a milestone for a company at this stage. Congrats you aren't losing money on every order!

notyourday 9y ago
Creative accounting at its finest. Company is either GAAP profitable, pro-forma profitable, EBITDA profitable, cashflow profitable, cashflow neutral or money losing. All other metrics are creative accounting that put lipstick on a pig masking money losing status. DoorDash is money losing.
- bfrog 9y ago
  Which is amusing given they don't have to pay the actual labor to deliver goods or make food. Are they set up in the valley paying mega wages perhaps?
  - ac29 9y ago
    Not sure why you think they don't pay their drivers. The exact amount is unclear, but according to this FAQ [0], it is "at least $1" per order, and at least a variable "guaranteed amount" that door dash will pay up to, regardless of customer tips. [0] https://dasherhelp.doordash.com/new-dasher-pay-model-faq https://dasherhelp.doordash.com/new-dasher-pay-model-faq
thesimon 9y ago
>> became “contribution margin positive” in the last year, which means that it’s profitable on a per-order basis. >Congrats you aren't losing money on every order! Seems like an overstatement as fixed costs are still not covered when they are "contribution marigin positve".
- apendleton 9y ago
  Definitely. At least, though, it means there's a path to profitability just by increasing volume, right? Like, if every new order brings it more than it marginally costs, with enough eventually you'd cover your fixed costs, so it seems like at least a rough validation of the business model (assuming their total addressable market is as big as they think it is). Vs, say, Uber, which is as far as I know still losing money on every ride and has no path out aside from not at all certain, majorly disruptive technical innovation.
WisNorCan 9y ago
> Congrats you aren't losing money on every order! I think this misunderstands how marketplaces are built. Traditional economics would agree with you and say that selling $1 at $0.90 is insanity. Traditional economics have been slow to catch up with marketplace economics although there have been some recent papers that start explaining a better framework. If you know that a marketplace has strong network efforts and improved performance at scale. The right strategy is to understand the trade-off between time and $ required to get to scale in your marketplace. The optimal strategy often means subsidizing a market at a price below your actual cost for early markets. The fact that Door Dash talks about their business in terms of early vs. late markets with different economics means that they are using this playbook. There are of course many companies that think they are building a marketplace with a network effect when they are actually just losing money. I don't know DoorDash specifically.
- teambljck 9y ago
  Possible to share link to said papers? I'd love to get up to speed on the first principles behind the frameworks
- Mitchhhs 9y ago
  Yeah that's the problem here its really hard to tell the difference between the two. Sometimes it feels like a "new economy" excuse. Question, what is a good example of a market place that is now highly profitable where the unit economics/contribution margin were negative for a very long time. Amazon is not an example, I guarantee they were making contribution margin on every book sold fairly early on.
  - not_that_noob 9y ago
    Investors found that particular religion with Google. Losing money hand over fist till they put in adwords. They had to fight investors to put in one of the most profitable models on the planet. Ever since then, the game has changed. Investors now believe fervently, and founders realized investors may not know everything. Everyone else who came after drafted in Google's wake (I'm looking at you Zuck)

notyourday 9y ago

Creative accounting at its finest. Company is either GAAP profitable, pro-forma profitable, EBITDA profitable, cashflow profitable, cashflow neutral or money losing. All other metrics are creative accounting that put lipstick on a pig masking money losing status. DoorDash is money losing.

bfrog 9y ago
Which is amusing given they don't have to pay the actual labor to deliver goods or make food. Are they set up in the valley paying mega wages perhaps?
- ac29 9y ago
  Not sure why you think they don't pay their drivers. The exact amount is unclear, but according to this FAQ [0], it is "at least $1" per order, and at least a variable "guaranteed amount" that door dash will pay up to, regardless of customer tips. [0] https://dasherhelp.doordash.com/new-dasher-pay-model-faq https://dasherhelp.doordash.com/new-dasher-pay-model-faq

thesimon 9y ago

>> became “contribution margin positive” in the last year, which means that it’s profitable on a per-order basis. >Congrats you aren't losing money on every order! Seems like an overstatement as fixed costs are still not covered when they are "contribution marigin positve".

apendleton 9y ago
Definitely. At least, though, it means there's a path to profitability just by increasing volume, right? Like, if every new order brings it more than it marginally costs, with enough eventually you'd cover your fixed costs, so it seems like at least a rough validation of the business model (assuming their total addressable market is as big as they think it is). Vs, say, Uber, which is as far as I know still losing money on every ride and has no path out aside from not at all certain, majorly disruptive technical innovation.

WisNorCan 9y ago

> Congrats you aren't losing money on every order! I think this misunderstands how marketplaces are built. Traditional economics would agree with you and say that selling $1 at $0.90 is insanity. Traditional economics have been slow to catch up with marketplace economics although there have been some recent papers that start explaining a better framework. If you know that a marketplace has strong network efforts and improved performance at scale. The right strategy is to understand the trade-off between time and $ required to get to scale in your marketplace. The optimal strategy often means subsidizing a market at a price below your actual cost for early markets. The fact that Door Dash talks about their business in terms of early vs. late markets with different economics means that they are using this playbook. There are of course many companies that think they are building a marketplace with a network effect when they are actually just losing money. I don't know DoorDash specifically.

teambljck 9y ago
Possible to share link to said papers? I'd love to get up to speed on the first principles behind the frameworks
Mitchhhs 9y ago
Yeah that's the problem here its really hard to tell the difference between the two. Sometimes it feels like a "new economy" excuse. Question, what is a good example of a market place that is now highly profitable where the unit economics/contribution margin were negative for a very long time. Amazon is not an example, I guarantee they were making contribution margin on every book sold fairly early on.
- not_that_noob 9y ago
  Investors found that particular religion with Google. Losing money hand over fist till they put in adwords. They had to fight investors to put in one of the most profitable models on the planet. Ever since then, the game has changed. Investors now believe fervently, and founders realized investors may not know everything. Everyone else who came after drafted in Google's wake (I'm looking at you Zuck)