2 ms·
No marginal cost? What do you call operating expenses, AWS for example?
by mfatica 7y ago
No marginal cost? What do you call operating expenses, AWS for example?
- opportune 7y agoPer user it is probably a few pennies per month if they are smart about it. Which is basically nothing as a percent of a single unit sale (subscribing user) compared to the marginal cost of selling cars
- mfatica 7y agoIf it's a few pennies for month how are their operating expenses greater than their revenue? Have you even looked at their public filing or are you just making assumptions?
- btown 7y agoCost of revenue was $51mm this year for 10mm active users, so $5/user. Per their S-1 https://www.sec.gov/Archives/edgar/data/1764925/000162828019004786/slacks-1.htm#s8d6204acc583485eb9f4e9bf211b5e4a https://www.sec.gov/Archives/edgar/data/1764925/000162828019... : "Cost of revenue consists primarily of expenses related to hosting Slack and providing ongoing customer support for paid customers. These expenses include employee compensation (including stock-based compensation) and other employee-related expenses for customer experience and technical operations staff, payments to outside service providers, third-party hosting costs, payment processing fees, and amortization expense associated with internally-developed and purchased technology. We expect our cost of revenue to continue to increase in absolute dollar amounts as we grow our business and revenue." That amortization could be significant; it's likely that they're not spending $5 in hosting and devops alone. It may not be pennies, but it's way less than the cost of a car.
- erikpukinskis 7y agoBecause they’re paying 1000 engineers to shoot for the moon, to justify the next valuation. In a fancy office. To service their order book, they just need a skeleton crew. And the order book should be the bottom line for the bulk of investors.
- icedchai 7y agoIt looks like sales and marketing is costing more than engineering.
- BubRoss 7y agoYou say that, but Twitter has many thousands of employees. They could be much more profitable if they weren't paying enormous amounts of money (for what end I have no idea, the site seems to always be getting less reliable and more bloated).
- chrisco255 7y ago1000 employees generating close to $1 billion in revenue. That's why software devs make the big bucks: economies of scale.
- kurthr 7y agoPfftht... only a million $ in revenue per employee? That's hardware level ROI. Software can be a lot more!
- track_me_now 7y agovalve @ $2M per employee was always considered about the best you can do, long term, at scale.
- btown 7y agoSince they need infinite storage even for non-paying users in case they pay for full historical search (though this can be on Glacier or some other type of archival storage), it's probably more than a few pennies, but your point is still entirely valid.
- erik_seaberg 7y agoHeh. If you do nothing but type at 216 wpm for 16 hours/day, you might generate 430 MB, which would cost $0.02/year to store on Glacier. That's before compression.
- mfatica 7y agoImages, file uploads, rich text and more all have to be saved as well.
- pbreit 7y agoI call that "almost no marginal cost".