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Tech Rout Sinks Stocks as Lines of Defense Crumble: Markets Wrap

commandlinefan 9y ago
I honestly still can't wrap my head around how (most) tech companies are actually supposed to be making money. Nobody (including advertisers) seems to be willing to pay for any of this stuff, but it still costs a fortune to make. Some of the big players like Netflix and Amazon seem to be making real money from real customers (but still don't appear to be that profitable?) but Twitter? Facebook? Even Google? Where the hell is the money actually coming from? Google has massive operating costs - are there really enough online advertisers to subsidize an operation like that? I've often wondered if the investments in tech have been coming from speculative investors who were hoping to get in on the "ground floor" of something that would eventually become profitable.
- nostrademons 9y ago
  You very much underestimate how large the size of the advertising sector of the economy is. It's over $550B worldwide [1], 5x Google's total revenue, and enough to pay every current Alphabet employee roughly $6M yearly. And Google and Facebook together are taking up 99% of all new add dollars spent (i.e. all the growth in advertising is going to those two). In 1988 TV & radio broadcasting (all ad-supported) employed close to 400K people, which is roughly 3x what Google, Facebook, and Twitter combined do. Remember that these companies are all effectively B2B companies - their customers are other businesses, and their product is access to consumers. If you've ever worked on the sales & marketing side of a business, you'll know that a.) companies are willing to spend a lot to gain new customers and b.) spending that money with Google or Facebook is a no-brainer today. These facts are largely hidden from the general public, though, because the average person doesn't like being thought of as a product and wants to believe their consumption choices actually belong to themselves. [1] https://www.statista.com/topics/990/global-advertising-market/ https://www.statista.com/topics/990/global-advertising-marke... [2] https://www.bls.gov/opub/mlr/2000/08/art1full.pdf https://www.bls.gov/opub/mlr/2000/08/art1full.pdf
Hydraulix989 9y ago
If there were actually legitimate causes of concern for the market crashing other than Trump trolling on Twitter, then I'd be worried and sell off my stocks. But there's not.

I honestly still can't wrap my head around how (most) tech companies are actually supposed to be making money. Nobody (including advertisers) seems to be willing to pay for any of this stuff, but it still costs a fortune to make. Some of the big players like Netflix and Amazon seem to be making real money from real customers (but still don't appear to be that profitable?) but Twitter? Facebook? Even Google? Where the hell is the money actually coming from? Google has massive operating costs - are there really enough online advertisers to subsidize an operation like that? I've often wondered if the investments in tech have been coming from speculative investors who were hoping to get in on the "ground floor" of something that would eventually become profitable.

nostrademons 9y ago
You very much underestimate how large the size of the advertising sector of the economy is. It's over $550B worldwide [1], 5x Google's total revenue, and enough to pay every current Alphabet employee roughly $6M yearly. And Google and Facebook together are taking up 99% of all new add dollars spent (i.e. all the growth in advertising is going to those two). In 1988 TV & radio broadcasting (all ad-supported) employed close to 400K people, which is roughly 3x what Google, Facebook, and Twitter combined do. Remember that these companies are all effectively B2B companies - their customers are other businesses, and their product is access to consumers. If you've ever worked on the sales & marketing side of a business, you'll know that a.) companies are willing to spend a lot to gain new customers and b.) spending that money with Google or Facebook is a no-brainer today. These facts are largely hidden from the general public, though, because the average person doesn't like being thought of as a product and wants to believe their consumption choices actually belong to themselves. [1] https://www.statista.com/topics/990/global-advertising-market/ https://www.statista.com/topics/990/global-advertising-marke... [2] https://www.bls.gov/opub/mlr/2000/08/art1full.pdf https://www.bls.gov/opub/mlr/2000/08/art1full.pdf

Hydraulix989 9y ago

If there were actually legitimate causes of concern for the market crashing other than Trump trolling on Twitter, then I'd be worried and sell off my stocks. But there's not.