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Commissions are revenue, but it's earnings (profit) that you should really care about. The mentality of "Revenue Growth At Any Cost" (spend $1.2 in CaC to buy $
by dannyw 5y ago
Commissions are revenue, but it's earnings (profit) that you should really care about. The mentality of "Revenue Growth At Any Cost" (spend $1.2 in CaC to buy $1 of revenue) is coming into an end, and my view is that only profitable businesses will survive.
Airbnb only reported positive earnings in the last quarter (which is great, hope they continue the trend), but I reckon a lot of "never made money" tech companies are going to continue to see their valuations sinking.
- kragen 5y agoAbsolutely true, and I should not have conflated revenue with profits in my comment. Plausibly AirBnB and Uber won't have a significant cost of sales in the long run, but plausibly they will. I doubt they'll have retail-like 5% profit margins though, so the difference might be a factor of 2 or 3.
- timdiam 5y agoIsn’t this line of reasoning assuming Uber / AirBnB capture 100% of the market? I don’t think that’s a realistic assumption.
- kragen 5y agoYes, more or less. AirBnB does have pretty close to 100% of some overnight lodging markets and are likely to take more, but they're a long way from having 100% of the market now; their revenues are only about US$5 billion a year. But I think the major threat to their business is not competition from the old guard with their trillion-dollar yearly revenues; they'll eat those guys' lunch, no problem. The real risk is that they'll be banned, like they are in New York, or soft-banned to favor local startups, like they are in China.