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I know you were trying to make a broader point, but Facebook has been flirting with 90% gross margins for more than 5 years.
by nemothekid 6y ago
I know you were trying to make a broader point, but Facebook has been flirting with 90% gross margins for more than 5 years.
- AnthonyMouse 6y agoBut then you have to ask, how can they do that? And the answer is, of course, the network effect of their social network. The value derives predominantly from that and not what the employees are doing -- if they did the same work for someone else who doesn't control a popular social network, it wouldn't create the same returns.
- jandrese 6y agoIn economics this is called a barrier to entry. Industries with lower barriers of entry are more competitive (see: restaurants) and have lower margins. Industries high high barriers to entry tend to gravitate towards monopolies. For industries with the highest barriers to entry (like tap water) markets don't work and we have to use heavy handed regulation to avoid letting the industry completely screw over the populace (see: water barons). Of course it is pretty weird to think of a social network as a utility.
- hajile 6y agoThey've conned their users into doing 99.9% of their work for them for free in the form of collecting, collating, and entering many petabytes of personal data to be ready for sale. I'd have super-high margins if I could do this in ANY industry.