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In a lot of ways internet businesses are like buying bonds. You pay some cost to acquire a customer and will get revenue from them over time. You can calculat
by treis 4y ago
In a lot of ways internet businesses are like buying bonds. You pay some cost to acquire a customer and will get revenue from them over time. You can calculate a present value for that customer based on that future revenue. As long as that value is more than what you paid to acquire the customer you're making money.
And if your numbers are right then you, more or less, want to spend as much money as you can buying customers. So that's how companies with numbers like this continue to operate.
To put it simply, Klarna is spending a billion dollars to buy customers that will generate more than a billion dollars in revenue. The catch is that you have to pay now for later revenue. So your numbers look like crap until your existing customers far outnumber your new ones.
- disgruntledphd2 4y agoThis is a very, very dangerous business to be in unless your numbers are rock solid and you make sure your models reflect reality.
- deltree7 4y agoall businesses are risky. that's why we have capitalism and there are bunch of people who are willing to take the risk and rewarded for taking that risk
- geysersam 4y agoRewarded for luring people into consumption loan debt? Great system.
- deltree7 4y agodebt is a fantastic instrument that solves a production / consumption mismatch of both individuals and humanity. A 55 year old is the most productive member of a society, but that is also the age where you start to consume very little. Imagine if you had to 'save' to get your college education, your home, a laptop, or starting a business. There is a reason we don't ask babies to 'pay up' for milk or shelter. Imagine if Larry Page or Sergey Brin had to work and save to start Google. Imagine if government had to save trillions of dollars before investing in Carbon Capture and renewable energy generations. Yes, all good things can be abused. But you can't prevent good things for 95% society because a 5% of the society abuses it
- geysersam 4y agoNever said debt is intrinsically harmful. I do however think consumption debt, for goods such as clothes or the next iphone, is harmful. They're not investments, like an education or a car. It's a tax on people who don't have money in the bank to buy such things up front. Usually such loan "services" are marketed in a way that hides the effective cost of the loan to the customer. Especially problematic for young people less experienced handling money. > But you can't prevent good things for 95% society because a 5% of the society abuses it Sounds like you thought I suggested prohibiting debt in general. That's a misunderstanding. It's definitely possible to prohibit predatory lending strategies.
- deltree7 4y agoI would challenge that notion too. I rather travel the world, eat great food, take tennis lessons, dance into the night when I'm in 20's and 30's where I get the most enjoyment rather than in my 60s where my body is not in good physical shape to do any of those things. The fact that I travelled the world in my 20s may also enhance my own future productivity. I would even further claim that not enough people go into debt. There are plenty of young people (70% or more) in developing countries who can get into travel, education, iPhone/Samsung, great food debt and their country (and the rest of the world) will benefit immensely from it in the long run.
- geysersam 4y agoThis is delusional and besides the point. You can't loan for consumption in your 20-30s, planning to pay it back in your 40s and 50s. Klarna does not even offer loans beyond 36 months, and month 1 to 36 you have 20% interest rate! If you skip a payment there are steep fees. Klarna is for short term loans. Like, half a month. Klarna is definitely not offering their service to poor people in developing nations. Even if they did, how would a 20% interest loan for an Iphone help anyone escape poverty?
- deltree7 4y agoI never mentioned anything about Klarna. I merely commented on capitalism and debt
- yuliyp 4y agoThey're much riskier bonds. The market can change, or competitors can try to win customers over, or anything else to throw out those lifetime value calculations.