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I would argue that revenue is a weird metric to measure company size too. Doubly so when comparing companies like Exxon and Facebook, which have very different

I would argue that revenue is a weird metric to measure company size too. Doubly so when comparing companies like Exxon and Facebook, which have very different operating costs.

dmwallin 6y ago
Revenue tells you roughly how much value you are creating for other actors in the economy.
- quicklime 6y ago
  It does that in a one-sided way though. Do car dealers create value for car makers, or the other way around? The way revenue is measured seems to imply that retailers are the ones who create value for manufacturers, but not vice versa. In that sense, revenue is more of a measure of “how long and costly is your supply chain, and how close are you to the customer facing side of it?”
  - ChrisLomont 6y ago
    >Do car dealers create value for car makers Both - read about consumer and producer surplus in econ. > The way revenue is measured seems to imply .... Revenue estimates how much buyers were willing to pay for the product, but each buyer retains their surplus, so revenue undercounts the value to the buyers. But it's a decent representation of value added.
- refurb 6y ago
  Not necessarily. Take a wholesale distributor. Buy a product for $99 and sell for $100. Your revenue will be massive, but the value you create is low. I’d say earnings are a better, but still not great measure of value added.
  - ChrisLomont 6y ago
    >but the value you create is low. Apparently they add at least $1 in value to every transaction, otherwise buyers would not use that service, and simply buy the $99 product. In fact, they probably add more than $1 in value since they were selected. If they have massive revenue, as you posited, then they added massive value to buyers in total, exceeding their profits. Read about consumer and producer surplus.
- lowdose 6y ago
  Platforms facilitate interactions between producers that create value which others consume. Thereby comparing revenue of a platform against a traditional business model doesn't make sense because the cost and profit drivers are inverted.
  - ChrisLomont 6y ago
    >that create value which others consume. and > Thereby comparing revenue of a platform against a traditional business model doesn't make sense When two entities trade, by far they do it because they both benefit. There is no difference between platforms and other businesses. Each provides value to customers, and the sum of the benefits each gains each trade (often called consumer and producer surplus in economics) is the net gain to the pair. Revenue is a very good measure of how valued these trades are to customers. In fact, almost all customers would pay more for the benefit (up to but not exceeding their consumer surplus).
    - lowdose 6y ago
      > almost all customers would pay more for the benefit. This is where you are wrong, how many paying customers does Google have VS users? Platforms that are value aggregators decoupled value production from internal capacity.

I would argue that revenue is a weird metric to measure company size too. Doubly so when comparing companies like Exxon and Facebook, which have very different operating costs.

dmwallin 6y ago

Revenue tells you roughly how much value you are creating for other actors in the economy.

quicklime 6y ago
It does that in a one-sided way though. Do car dealers create value for car makers, or the other way around? The way revenue is measured seems to imply that retailers are the ones who create value for manufacturers, but not vice versa. In that sense, revenue is more of a measure of “how long and costly is your supply chain, and how close are you to the customer facing side of it?”
- ChrisLomont 6y ago
  >Do car dealers create value for car makers Both - read about consumer and producer surplus in econ. > The way revenue is measured seems to imply .... Revenue estimates how much buyers were willing to pay for the product, but each buyer retains their surplus, so revenue undercounts the value to the buyers. But it's a decent representation of value added.
refurb 6y ago
Not necessarily. Take a wholesale distributor. Buy a product for $99 and sell for $100. Your revenue will be massive, but the value you create is low. I’d say earnings are a better, but still not great measure of value added.
- ChrisLomont 6y ago
  >but the value you create is low. Apparently they add at least $1 in value to every transaction, otherwise buyers would not use that service, and simply buy the $99 product. In fact, they probably add more than $1 in value since they were selected. If they have massive revenue, as you posited, then they added massive value to buyers in total, exceeding their profits. Read about consumer and producer surplus.
lowdose 6y ago
Platforms facilitate interactions between producers that create value which others consume. Thereby comparing revenue of a platform against a traditional business model doesn't make sense because the cost and profit drivers are inverted.
- ChrisLomont 6y ago
  >that create value which others consume. and > Thereby comparing revenue of a platform against a traditional business model doesn't make sense When two entities trade, by far they do it because they both benefit. There is no difference between platforms and other businesses. Each provides value to customers, and the sum of the benefits each gains each trade (often called consumer and producer surplus in economics) is the net gain to the pair. Revenue is a very good measure of how valued these trades are to customers. In fact, almost all customers would pay more for the benefit (up to but not exceeding their consumer surplus).
  - lowdose 6y ago
    > almost all customers would pay more for the benefit. This is where you are wrong, how many paying customers does Google have VS users? Platforms that are value aggregators decoupled value production from internal capacity.