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Your company doesn't have to make a profit for it to be (legitimately) worth a lot of money...Amazon is a great example.

Bishonen88 7y ago
Out of so many companies in the world, this might be the worst example. Amazon, whilst perhaps not doing super well in terms of profits, does not burn through its investors money and diversifies like crazy.
fastball 7y ago
Amazon does make a profit though. And when they weren't, it was by choice and they were not burning billions in investor dollars to do it. But yes, I probably should've said "Viability" instead of "Profitability".
- ralph84 7y ago
  Every unprofitable growth company says they’re doing it “by choice”. And every unprofitable growth company burns investor dollars (where else would the dollars come from?). During Amazon’s unprofitable years many people were saying the exact same things about Amazon that people say about Uber now. Of course that doesn’t mean every unprofitable growth company is Amazon, but Amazon’s success means companies won’t stop trying to emulate it.
  - stevehawk 7y ago
    Except Amazon was cash flow positive but "not profitable" because it was heavily reinvesting in itself. It was making shareholders mad because they wanted that cash back as dividends. Uber is not cash flow positive and not investing in itself near the scale Amazon was, assuming that we are not counting heavily subsidized rides as self investment.
    - tim333 7y ago
      Making some dumb shareholders mad. Amazon has been a great investment for anyone who held it long term.
  - aguyfromnb 7y ago
    >During Amazon’s unprofitable years many people were saying the exact same things about Amazon that people say about Uber now. Maybe "people were saying" the same things about Amazon then as Uber now, but that doesn't mean they are correct. Completely different business models. Amazon had billions in free cash flow going back to 2005, just no accounting profits. Uber has negative free cash flow. We hear the same thing about Tesla ("they're reinvesting profits!"), but they have something like $10B negative free cash flow since inception. All profitable companies are alike; each unprofitable company is unprofitable in its own way.
    - 8ytecoder 7y ago
      People look at profits with a narrow focus. It's entirely possible for a widely profitable company to have no future than a company reporting a narrow loss. It's also possible that a company has reached it's end of days for lack of a way to sustain profits. Hypothetically speaking, if there were a reporting mechanism that clearly separated operational expenditure from re-investments, Amazon and Uber would likely be in two different ends altogether. More importantly, Amazon didn't just reinvest into existing products, they were also adding entire new categories of businesses (AWS), new models of operation (2-day shipping) and relentlessly adding new categories (wider selection) - all at the same time. It's possible that Uber might be doing something similar, I'm just not that aware of the breakdown of Uber's expenditures and losses.
- mywittyname 7y ago
  They were also cashflow positive for a very long time. Indicating that they could become profitable, but chose not to so they could reinvest in the business. This is something that I don't think yet applies to Uber, as they are still subsidizing the service itself.
ummonk 7y ago
Amazon didn't really have bad unit economics. It just spent a lot on growth and R&D, but the core business was profitable from early on, unlike Uber and WeWork.
- aianus 7y ago
  Uber has positive unit economics. Uber gets ~20% of what you spend on a ride and their per-unit expenses are basically moving a few bits around and having someone in a Filipino call center present to provide customer support.
  - ummonk 7y ago
    After taking into account driver incentives (which should be classified as cost of revenue, not sales and marketing), their unit economics are unprofitable.
    - frockington1 7y ago
      Now that I'm thinking of it Uber and WeWork both have 'alternative' accounting methods. Would love to see if 'alternative' accounting is a strong negative indicator for post-IPO health
      - fastball 7y ago
        Not quite what you are looking for, but I got a kick out of this. https://www.profgalloway.com/yogababble https://www.profgalloway.com/yogababble
    - aianus 7y ago
      I have had an Uber driver account for years and have never had an incentive (besides things like surge pricing which are paid by riders) That may depend on the market, but the unit economics in my market (Toronto) are undoubtedly positive.
    - colinmhayes 7y ago
      UberX is now making money overall. UberEats is the division that is siphoning off driver incentives and costing them billions.
lm28469 7y ago
Yeah sure, you can sell 10$ pizzas for 5$ as long as you fill the gape with investor's money ... and by pizzas I mean taxi rides. That's called a zombie company btw, https://www.bis.org/about/areport/areport2019.pdf https://www.bis.org/about/areport/areport2019.pdf
cleansy 7y ago
Yes but AMZN did not make a billion of losses on two billions in revenue. They had way saner levels of P/L in the beginning[1], their revenues rose by more than 100% quarter per quarter base. that's not what's happening at UBER or WE Inc. 1: https://money.cnn.com/1999/10/27/technology/amazon/ https://money.cnn.com/1999/10/27/technology/amazon/

Bishonen88 7y ago

Out of so many companies in the world, this might be the worst example. Amazon, whilst perhaps not doing super well in terms of profits, does not burn through its investors money and diversifies like crazy.

fastball 7y ago

Amazon does make a profit though. And when they weren't, it was by choice and they were not burning billions in investor dollars to do it. But yes, I probably should've said "Viability" instead of "Profitability".

ralph84 7y ago
Every unprofitable growth company says they’re doing it “by choice”. And every unprofitable growth company burns investor dollars (where else would the dollars come from?). During Amazon’s unprofitable years many people were saying the exact same things about Amazon that people say about Uber now. Of course that doesn’t mean every unprofitable growth company is Amazon, but Amazon’s success means companies won’t stop trying to emulate it.
- stevehawk 7y ago
  Except Amazon was cash flow positive but "not profitable" because it was heavily reinvesting in itself. It was making shareholders mad because they wanted that cash back as dividends. Uber is not cash flow positive and not investing in itself near the scale Amazon was, assuming that we are not counting heavily subsidized rides as self investment.
  - tim333 7y ago
    Making some dumb shareholders mad. Amazon has been a great investment for anyone who held it long term.
- aguyfromnb 7y ago
  >During Amazon’s unprofitable years many people were saying the exact same things about Amazon that people say about Uber now. Maybe "people were saying" the same things about Amazon then as Uber now, but that doesn't mean they are correct. Completely different business models. Amazon had billions in free cash flow going back to 2005, just no accounting profits. Uber has negative free cash flow. We hear the same thing about Tesla ("they're reinvesting profits!"), but they have something like $10B negative free cash flow since inception. All profitable companies are alike; each unprofitable company is unprofitable in its own way.
  - 8ytecoder 7y ago
    People look at profits with a narrow focus. It's entirely possible for a widely profitable company to have no future than a company reporting a narrow loss. It's also possible that a company has reached it's end of days for lack of a way to sustain profits. Hypothetically speaking, if there were a reporting mechanism that clearly separated operational expenditure from re-investments, Amazon and Uber would likely be in two different ends altogether. More importantly, Amazon didn't just reinvest into existing products, they were also adding entire new categories of businesses (AWS), new models of operation (2-day shipping) and relentlessly adding new categories (wider selection) - all at the same time. It's possible that Uber might be doing something similar, I'm just not that aware of the breakdown of Uber's expenditures and losses.
mywittyname 7y ago
They were also cashflow positive for a very long time. Indicating that they could become profitable, but chose not to so they could reinvest in the business. This is something that I don't think yet applies to Uber, as they are still subsidizing the service itself.

ummonk 7y ago

Amazon didn't really have bad unit economics. It just spent a lot on growth and R&D, but the core business was profitable from early on, unlike Uber and WeWork.

aianus 7y ago
Uber has positive unit economics. Uber gets ~20% of what you spend on a ride and their per-unit expenses are basically moving a few bits around and having someone in a Filipino call center present to provide customer support.
- ummonk 7y ago
  After taking into account driver incentives (which should be classified as cost of revenue, not sales and marketing), their unit economics are unprofitable.
  - frockington1 7y ago
    Now that I'm thinking of it Uber and WeWork both have 'alternative' accounting methods. Would love to see if 'alternative' accounting is a strong negative indicator for post-IPO health
    - fastball 7y ago
      Not quite what you are looking for, but I got a kick out of this. https://www.profgalloway.com/yogababble https://www.profgalloway.com/yogababble
  - aianus 7y ago
    I have had an Uber driver account for years and have never had an incentive (besides things like surge pricing which are paid by riders) That may depend on the market, but the unit economics in my market (Toronto) are undoubtedly positive.
  - colinmhayes 7y ago
    UberX is now making money overall. UberEats is the division that is siphoning off driver incentives and costing them billions.

lm28469 7y ago

Yeah sure, you can sell 10$ pizzas for 5$ as long as you fill the gape with investor's money ... and by pizzas I mean taxi rides. That's called a zombie company btw, https://www.bis.org/about/areport/areport2019.pdf https://www.bis.org/about/areport/areport2019.pdf

cleansy 7y ago

Yes but AMZN did not make a billion of losses on two billions in revenue. They had way saner levels of P/L in the beginning[1], their revenues rose by more than 100% quarter per quarter base. that's not what's happening at UBER or WE Inc. 1: https://money.cnn.com/1999/10/27/technology/amazon/ https://money.cnn.com/1999/10/27/technology/amazon/