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This reminds me of the concept of predatory pricing which is when a business lowers their prices to below cost in order to drive out all its competitors and cre

This reminds me of the concept of predatory pricing which is when a business lowers their prices to below cost in order to drive out all its competitors and create a monopoly. https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing https://www.ftc.gov/advice-guidance/competition-guidance/gui... I do wonder if it could be argued (maybe even in the current monopoly case against google) whether youtube engaged in predatory or below-cost pricing in order to drive out all of its competitors, establish a monopoly, and now use that monopoly in order to "raise prices" i.e. increase the amount of ads on its service in order to maximize its profit margins. Although this does seem to be the business plan of basically every startup out there. Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices and have a profit margin that far exceeds what should be normal.

selcuka 3y ago
> Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices Slightly off topic, but the business plan of most startups seems to be "get VC funding, and exit". What you wrote may be the business plan of VCs. I don't understand the valuation of many startups these days (even in the hypothetical case where they capture 100% of their potential market one day).
- gmerc 3y ago
  VCs don’t invest because your business has a bright future as a valuable, sustainable operation . Not anymore. The crypto dynamics have shifted the expectations so far to cheap, quick moment they most VCs, especially the a16z kind are more about “Can I juice this business and it’s metrics enough to sell it to someone to hold the bag”. Ironically I think the large numbers involved are basically part of that PR game - they act as proof that the business is worth it and attract attention and bagholder interest. The crypto economy worked like that too - the NFT wash trading, the signal metrics used to sell the idea that there is value where there is none. Probably something something wework too.
  - uncletammy 3y ago
    > The crypto dynamics have shifted the expectations so far to cheap, quick moment they most VCs, especially the a16z kind are more about “Can I juice this business and it’s metrics enough to sell it to someone to hold the bag”. This strategy existed long before "crypto"
    - gmerc 3y ago
      And crypto is just tulips 2.0.
JumpCrisscross 3y ago
> Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices Google, YouTube's owner, isn't a VC. YouTube was its best when it was burning VCs' cash.
wodenokoto 3y ago
They did. They ran at a huge deficit for a very long time while expanding. But this seems to be the play book for all VC funded web apps. Facebook and MySpace did the same. In fact, you can argue that moving towards profitability too soon and too fast is what killed MySpace. But that argument only works if you are willing to see the growth phase as something other than predatory pricing. I think your comment is a sobering input to the whole startup discussion.
- greatNespresso 3y ago
  Agreed. Bruce Schneier allocated a chapter in his last book, .A hacker's mind': "Venture capital itself is not a hack. The hack is when unprofitable companies use VC funding to ignore the dynamics of the market economy. We don’t want some central planner to decide which businesses should remain operational and which should close down. But this is exactly what happens when venture capital firms become involved. The injection of VC money means that companies don’t need to compete with each other in the traditional manner, or worry about the normal laws of supply and demand. They can do what would normally be crazy things—give away their products, pay extravagant salaries, sustain enormous financial losses, provide a service that actually harms people—because of that external funding source. It’s basically central planning by elite investors, something that would be called communism if the government did it."
  - literalAardvark 3y ago
    Hah, I'd given some thought to malinvestment in capitalism but never quite connected it to malinvestment under central planning. It feels about right... it's almost the same thing. Except there are multiple competing "central authorities" with money, so the ones who fuck up do get burned a lot harder than they would if they were part of the very big government.
  - jampekka 3y ago
    That's more or less the opposite of communism.
    - 3y ago
pasttense01 3y ago
Youtube got to its current position not by lowering prices but instead by Google making sure that Youtube videos are returned at the top of Google search results. Competing video websites don't have this advantage.
- Gud 3y ago
  YouTube had already beat its competitors before it was sold to Google.
  - JimDabell 3y ago
    Including Google Video. Google did try the tactic of using their search engine to promote their own video platform, but it was against YouTube and Google only bought them because it didn’t work.
    - chii 3y ago
      it didnt work because people don't search for videos via google usually. They get the video directly from youtube, or was linked by friends virally. Plus the early days of google (before youtube acquisition), i dont think their video search was as good as the text search anyway (but i might be misremembering of course...).
      - lobocinza 3y ago
        Their video search still sucks.
        aifooh7Keew6xoo 3y ago
        I'd go a lot further than "sucks". The video results for most of my queries are like 90% SEO garbage without a video even being present on the linked page. It's abject failure.
deleted 3y ago
[deleted]
HeavyStorm 3y ago
_Dumping_, how it was called when I was young, is the main strategy of most startups out there: operate at a loss until they establish themselves (usually as the sole provider of certain services or goods) then start to climb the prices. It _should_ be illegal, but since it's the current status quo, it won't change anytime soon.
- kikokikokiko 3y ago
  I think that the amount of free services we got in the last decade is the strongest argument IN FAVOR of dumping. They got there through subsidized services, now they want to fleece everyone, let's see how it goes. My guess is that competitors will arise and gain market share. It's happening to Uber down here in Brazil. The prices are getting too high, Brazilians are migrating to other apps, especially InDrive, a russian based app. Capitalism is great.
  - HDThoreaun 3y ago
    I strongly believe that, at least for youtube, there are no forthcoming competitors to gain market share. Network effect is too strong, and if even an inkling of that happens the policies that lead to people leaving will be rolled back just enough.
    - kikokikokiko 3y ago
      Policies being rolled back are just the market forces adjusting itself in real time. I'm pretty sure the current trend of forcing ads on everyone will not be feasible, and I reaaaaally hope Google keeps pushing people until a peertube-like option can become a reasonable alternative to the current monopoly. I can even see "torrents for YouTube videos" becoming a thing if they keep enshitificating it.

selcuka 3y ago

> Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices Slightly off topic, but the business plan of most startups seems to be "get VC funding, and exit". What you wrote may be the business plan of VCs. I don't understand the valuation of many startups these days (even in the hypothetical case where they capture 100% of their potential market one day).

gmerc 3y ago
VCs don’t invest because your business has a bright future as a valuable, sustainable operation . Not anymore. The crypto dynamics have shifted the expectations so far to cheap, quick moment they most VCs, especially the a16z kind are more about “Can I juice this business and it’s metrics enough to sell it to someone to hold the bag”. Ironically I think the large numbers involved are basically part of that PR game - they act as proof that the business is worth it and attract attention and bagholder interest. The crypto economy worked like that too - the NFT wash trading, the signal metrics used to sell the idea that there is value where there is none. Probably something something wework too.
- uncletammy 3y ago
  > The crypto dynamics have shifted the expectations so far to cheap, quick moment they most VCs, especially the a16z kind are more about “Can I juice this business and it’s metrics enough to sell it to someone to hold the bag”. This strategy existed long before "crypto"
  - gmerc 3y ago
    And crypto is just tulips 2.0.

JumpCrisscross 3y ago

> Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices Google, YouTube's owner, isn't a VC. YouTube was its best when it was burning VCs' cash.

wodenokoto 3y ago

They did. They ran at a huge deficit for a very long time while expanding. But this seems to be the play book for all VC funded web apps. Facebook and MySpace did the same. In fact, you can argue that moving towards profitability too soon and too fast is what killed MySpace. But that argument only works if you are willing to see the growth phase as something other than predatory pricing. I think your comment is a sobering input to the whole startup discussion.

greatNespresso 3y ago
Agreed. Bruce Schneier allocated a chapter in his last book, .A hacker's mind': "Venture capital itself is not a hack. The hack is when unprofitable companies use VC funding to ignore the dynamics of the market economy. We don’t want some central planner to decide which businesses should remain operational and which should close down. But this is exactly what happens when venture capital firms become involved. The injection of VC money means that companies don’t need to compete with each other in the traditional manner, or worry about the normal laws of supply and demand. They can do what would normally be crazy things—give away their products, pay extravagant salaries, sustain enormous financial losses, provide a service that actually harms people—because of that external funding source. It’s basically central planning by elite investors, something that would be called communism if the government did it."
- literalAardvark 3y ago
  Hah, I'd given some thought to malinvestment in capitalism but never quite connected it to malinvestment under central planning. It feels about right... it's almost the same thing. Except there are multiple competing "central authorities" with money, so the ones who fuck up do get burned a lot harder than they would if they were part of the very big government.
- jampekka 3y ago
  That's more or less the opposite of communism.
  - 3y ago

pasttense01 3y ago

Youtube got to its current position not by lowering prices but instead by Google making sure that Youtube videos are returned at the top of Google search results. Competing video websites don't have this advantage.

Gud 3y ago
YouTube had already beat its competitors before it was sold to Google.
- JimDabell 3y ago
  Including Google Video. Google did try the tactic of using their search engine to promote their own video platform, but it was against YouTube and Google only bought them because it didn’t work.
  - chii 3y ago
    it didnt work because people don't search for videos via google usually. They get the video directly from youtube, or was linked by friends virally. Plus the early days of google (before youtube acquisition), i dont think their video search was as good as the text search anyway (but i might be misremembering of course...).
    - lobocinza 3y ago
      Their video search still sucks.
      - aifooh7Keew6xoo 3y ago
        I'd go a lot further than "sucks". The video results for most of my queries are like 90% SEO garbage without a video even being present on the linked page. It's abject failure.

deleted 3y ago

[deleted]

HeavyStorm 3y ago

_Dumping_, how it was called when I was young, is the main strategy of most startups out there: operate at a loss until they establish themselves (usually as the sole provider of certain services or goods) then start to climb the prices. It _should_ be illegal, but since it's the current status quo, it won't change anytime soon.

kikokikokiko 3y ago
I think that the amount of free services we got in the last decade is the strongest argument IN FAVOR of dumping. They got there through subsidized services, now they want to fleece everyone, let's see how it goes. My guess is that competitors will arise and gain market share. It's happening to Uber down here in Brazil. The prices are getting too high, Brazilians are migrating to other apps, especially InDrive, a russian based app. Capitalism is great.
- HDThoreaun 3y ago
  I strongly believe that, at least for youtube, there are no forthcoming competitors to gain market share. Network effect is too strong, and if even an inkling of that happens the policies that lead to people leaving will be rolled back just enough.
  - kikokikokiko 3y ago
    Policies being rolled back are just the market forces adjusting itself in real time. I'm pretty sure the current trend of forcing ads on everyone will not be feasible, and I reaaaaally hope Google keeps pushing people until a peertube-like option can become a reasonable alternative to the current monopoly. I can even see "torrents for YouTube videos" becoming a thing if they keep enshitificating it.