5 ms·

Never really understood how WeWork was considered to be a “tech company” when in reality, at least to an outsider looking in, it was always a real estate compan

by ArjA 7y ago

Never really understood how WeWork was considered to be a “tech company” when in reality, at least to an outsider looking in, it was always a real estate company. I guess being a real estate company doesn’t attract as many investors and hype as a tech company does. Maybe I’m wrong and they are a tech company but it really does not appear like it. Makes way more sense for them to have some one with real estate experience run them rather than some tech exec.

tootie 7y ago
By that note, Uber is a taxi company and Netflix is a TV broadcaster. Which is pretty much true.
- Barrin92 7y ago
  yep, entirely fair statement. What defines tech companies is essentially low marginal cost of production as they scale and a defensible technological advantage. It's becoming pretty clear that neither Uber nor Netflix have that. Uber's biggest costs are drivers, marketing and regulatory issues which keep piling up. Netflix biggest asset appears to be original content as the platform itself has plenty of competition, and costs for content seem to go up linearly.
- raverbashing 7y ago
  However, for those, tech is an essential part of business, and it is not trivially replicable. (at the scale they operate at least) Wework not so much it seems
- GauntletWizard 7y ago
  Netflix was a tech company. Their web-based logistics was every bit as much tech as Amazon. Their streaming platform was groundbreaking - Video-On-Demand services had existed before, but they brought new scale and techniques to it, at a time when that was still very hard. But no, Netflix is no longer special there - Their tech is tried and true, the problems are still interesting but well solved. They ceased being a tech player... five years ago?
  - phonon 7y ago
    Netflix is responsible for more than 10% of downstream internet traffic. Dealing with that is definitely not "off the shelf". (E.g. caching servers set up at ISPs). That being said, only a small percentage of their market cap is related to their technology. They could outsource the whole thing to BAMTech and it probably wouldn't affect them much.
    - jedberg 7y ago
      I think you and the person above you are underselling Netflix's innovation. Yes it's true, they mostly solved the problem of streaming video over the internet, and most changes there are incremental. But they are currently innovating massively in machine learning and other data analytics. They are also innovating in "Hollywood tech". Hollywood still uses old tech to move from capturing the actors performance to putting it in front of viewers. They mostly still track their assets with Excel (or on paper!). Netflix can get a show from filming to viewers a lot faster than most of Hollywood can.
      - unapologetic 7y ago
        > But they are currently innovating massively in machine learning and other data analytics. I bet I could find that exact sentence used somewhere to justify wework as a "tech company".
        jedberg 7y ago
        You probably could, but I would say their machine learning isn't a core part of their product that drives profits. The machine learning at Netflix has a huge impact to the product. Streaming drops 20%+ when the recommendations are offline.
- catdog 7y ago
  True but on the other hand the technology they develop plays a central role in how they operate which sets them apart from the traditional taxi company/broadcaster. WeWork seems to just rent out real estate and at least on the surface it does not look like tech is defining fundamentally how they do it.
  - ethbro 7y ago
    It all comes down to demand for me. These legacy+tech companies create additional demand by virtual of their tech. Uber services opportunities that couldn't be serviced by traditional taxi companies (on demand, low latency rides). Which makes the crux of these businesses "Does your technology create enough additional, currently-unserved demand to hit your growth targets?"
basch 7y ago
They own a bunch of software companies like meetup and fieldlens. They were making a play to become the Creative Cloud or 365 of both building management and the gig economy workers. That vision has been clipped now, before we ever saw a chance to see it finish playing out. If part of their valuation was future potential, then I agree they were worth more while trying to be something new, than they are as just a real estate shell.
btown 7y ago
The funny thing is that “value added economy-of-scale brand-driven tech-driven real estate” is pretty much just table-stakes real estate. The hotel industry has been doing this for decades and has never seen these kinds of multiples. The weird thing is that SoftBank should have known this years ago.
mhdhn 7y ago
Remember when Amazon was just a bookstore?
- chii 7y ago
  That was before AWS came into the picture. Amazon is definitely a tech company that sells widgets on the side, seeing as AWS is where the majority of their profits are derived. By leveraging this large profit margin, they are able to sell at near break-even or even afford to lose some money to attract customers (like prime subscription discounts). This is how monopolies are started.
- rchaud 7y ago
  I remember Amazon having its own search engine as far back as 2000. So they weren't just a bookstore even then.
rchaud 7y ago
Because no one would entertain these ridiculous valuations unless they were told it was a tech play. Apparently that has been successful if justifying valuations that have no basis in reality.

by ArjA 7y ago

tootie 7y ago

By that note, Uber is a taxi company and Netflix is a TV broadcaster. Which is pretty much true.

Barrin92 7y ago
yep, entirely fair statement. What defines tech companies is essentially low marginal cost of production as they scale and a defensible technological advantage. It's becoming pretty clear that neither Uber nor Netflix have that. Uber's biggest costs are drivers, marketing and regulatory issues which keep piling up. Netflix biggest asset appears to be original content as the platform itself has plenty of competition, and costs for content seem to go up linearly.
raverbashing 7y ago
However, for those, tech is an essential part of business, and it is not trivially replicable. (at the scale they operate at least) Wework not so much it seems
GauntletWizard 7y ago
Netflix was a tech company. Their web-based logistics was every bit as much tech as Amazon. Their streaming platform was groundbreaking - Video-On-Demand services had existed before, but they brought new scale and techniques to it, at a time when that was still very hard. But no, Netflix is no longer special there - Their tech is tried and true, the problems are still interesting but well solved. They ceased being a tech player... five years ago?
- phonon 7y ago
  Netflix is responsible for more than 10% of downstream internet traffic. Dealing with that is definitely not "off the shelf". (E.g. caching servers set up at ISPs). That being said, only a small percentage of their market cap is related to their technology. They could outsource the whole thing to BAMTech and it probably wouldn't affect them much.
  - jedberg 7y ago
    I think you and the person above you are underselling Netflix's innovation. Yes it's true, they mostly solved the problem of streaming video over the internet, and most changes there are incremental. But they are currently innovating massively in machine learning and other data analytics. They are also innovating in "Hollywood tech". Hollywood still uses old tech to move from capturing the actors performance to putting it in front of viewers. They mostly still track their assets with Excel (or on paper!). Netflix can get a show from filming to viewers a lot faster than most of Hollywood can.
    - unapologetic 7y ago
      > But they are currently innovating massively in machine learning and other data analytics. I bet I could find that exact sentence used somewhere to justify wework as a "tech company".
      - jedberg 7y ago
        You probably could, but I would say their machine learning isn't a core part of their product that drives profits. The machine learning at Netflix has a huge impact to the product. Streaming drops 20%+ when the recommendations are offline.
catdog 7y ago
True but on the other hand the technology they develop plays a central role in how they operate which sets them apart from the traditional taxi company/broadcaster. WeWork seems to just rent out real estate and at least on the surface it does not look like tech is defining fundamentally how they do it.
- ethbro 7y ago
  It all comes down to demand for me. These legacy+tech companies create additional demand by virtual of their tech. Uber services opportunities that couldn't be serviced by traditional taxi companies (on demand, low latency rides). Which makes the crux of these businesses "Does your technology create enough additional, currently-unserved demand to hit your growth targets?"

basch 7y ago

They own a bunch of software companies like meetup and fieldlens. They were making a play to become the Creative Cloud or 365 of both building management and the gig economy workers. That vision has been clipped now, before we ever saw a chance to see it finish playing out. If part of their valuation was future potential, then I agree they were worth more while trying to be something new, than they are as just a real estate shell.

btown 7y ago

The funny thing is that “value added economy-of-scale brand-driven tech-driven real estate” is pretty much just table-stakes real estate. The hotel industry has been doing this for decades and has never seen these kinds of multiples. The weird thing is that SoftBank should have known this years ago.

mhdhn 7y ago

Remember when Amazon was just a bookstore?

chii 7y ago
That was before AWS came into the picture. Amazon is definitely a tech company that sells widgets on the side, seeing as AWS is where the majority of their profits are derived. By leveraging this large profit margin, they are able to sell at near break-even or even afford to lose some money to attract customers (like prime subscription discounts). This is how monopolies are started.
rchaud 7y ago
I remember Amazon having its own search engine as far back as 2000. So they weren't just a bookstore even then.

rchaud 7y ago

Because no one would entertain these ridiculous valuations unless they were told it was a tech play. Apparently that has been successful if justifying valuations that have no basis in reality.