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Would you consider a company like Ticketmaster a tech company in that case? What about pre-merger DirecTV? (In the former case I think it pretty much meets th

Would you consider a company like Ticketmaster a tech company in that case? What about pre-merger DirecTV? (In the former case I think it pretty much meets the definition but is not traditionally thought of in this way; in the latter I think they are very dependent on low-margin but non-zero scaling but clearly tech-enabled in the same Netflix has become)

dumbfoundded 7y ago
Honestly, I haven't done any research on Ticketmaster so I'll spell out my thinking more hypothetically. Ticketmaster has a $0 marginal additional customer cost. That's great. That's the model of a tech company. The real question is where the ceiling is for scaling event offerings. I don't know if Ticketmaster has enough dominance in negotiation to basically get listings for free and 100% penetration of events. I'm sure Netflix doesn't get shows/movies for free. Most tech companies have a ceiling. Generally, that ceiling is defined by the market. If ticketmaster already has monopolistic dominance in event tickets, there's not really a way to increase the size of the business. At that point for valuations, you start using a discounted cash flow model with some risk built in for the competition. The reason companies like Facebook and Google show enormous multiples is because the size of their market is basically the internet. When pricing the stock, people expect Google and Facebook to continue growing. Once everyone is online, the multiples should decrease substantially.
- mrtksn 7y ago
  So the tech in "Tech company" doesn't stand for technology but for "scalable"?
  - dumbfoundded 7y ago
    From my understanding, software tech companies were the first companies to have near $0 marginal cost customers. Generally, I don't think people refer to GE, Boeing, any energy company or any auto company as "tech" companies. These companies develop significant technology. Tech seems to be branding for modernism, software, and rapid low-cost expansion. Lots of businesses are scalable in some sense. There are a lot of MacDonalds out there. I would say the primary difference is adding a new customer costs virtually nothing. This seems to be a relatively unique property of software companies.
  - maehwasu 7y ago
    Yup. It’s a metonym that’s getting at the idea of “bits, not atoms.” Plenty of companies use extremely impressive tech to manipulate atoms, but, by convention, we call the ones that manipulate bits “tech companies.”
  - dodobirdlord 7y ago
    It's short for "Information Technology", which is what these companies used to be called and illuminates the whole "scale" factor that has come to dominate discussions about what distinguishes them.

dumbfoundded 7y ago

Honestly, I haven't done any research on Ticketmaster so I'll spell out my thinking more hypothetically. Ticketmaster has a $0 marginal additional customer cost. That's great. That's the model of a tech company. The real question is where the ceiling is for scaling event offerings. I don't know if Ticketmaster has enough dominance in negotiation to basically get listings for free and 100% penetration of events. I'm sure Netflix doesn't get shows/movies for free. Most tech companies have a ceiling. Generally, that ceiling is defined by the market. If ticketmaster already has monopolistic dominance in event tickets, there's not really a way to increase the size of the business. At that point for valuations, you start using a discounted cash flow model with some risk built in for the competition. The reason companies like Facebook and Google show enormous multiples is because the size of their market is basically the internet. When pricing the stock, people expect Google and Facebook to continue growing. Once everyone is online, the multiples should decrease substantially.

mrtksn 7y ago
So the tech in "Tech company" doesn't stand for technology but for "scalable"?
- dumbfoundded 7y ago
  From my understanding, software tech companies were the first companies to have near $0 marginal cost customers. Generally, I don't think people refer to GE, Boeing, any energy company or any auto company as "tech" companies. These companies develop significant technology. Tech seems to be branding for modernism, software, and rapid low-cost expansion. Lots of businesses are scalable in some sense. There are a lot of MacDonalds out there. I would say the primary difference is adding a new customer costs virtually nothing. This seems to be a relatively unique property of software companies.
- maehwasu 7y ago
  Yup. It’s a metonym that’s getting at the idea of “bits, not atoms.” Plenty of companies use extremely impressive tech to manipulate atoms, but, by convention, we call the ones that manipulate bits “tech companies.”
- dodobirdlord 7y ago
  It's short for "Information Technology", which is what these companies used to be called and illuminates the whole "scale" factor that has come to dominate discussions about what distinguishes them.