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Startups like this don't create value. This is a very old hypothesis, and you are shadowing Marx in decrying parasitic middlemen. Value is such a indeterminate

Startups like this don't create value. This is a very old hypothesis, and you are shadowing Marx in decrying parasitic middlemen. Value is such a indeterminate notion that anyone could be said to be creating it, but so many activities we take for granted (and which render us service) are parasitic in some sense - taking rent, opening a store of any kind, transporting goods, paying interest, manufacturing goods are all based on taking advantage of a gap between buyer/seller or taking advantage of an inherent advantage of scale/capital (ownership of the means of production if you like). I think it's ok not to add any value other than getting a service/product to someone who wants it and doesn't want to spend energy looking for it. That's not what makes these companies regrettable. Google can earn $60 billion in revenue per year because they create even more value than that for its users and customers. Google is, strictly speaking, a middleman just like the companies above, it doesn't create significant value for end users with advertising (its primary source of revenue), that might even be a negative for customers. Google lives in the interstices between customers/customer data and advertisers and the value they create is mostly incidental to their main revenue stream (it is in services like gmail, gmaps, android etc), and designed carefully to ring-fence customers or guide them toward being the end product of advertising streams. Again, I don't think that's bad, but it's important to recognise that and its similarity to the activities of these other companies or others like Amazon or Apple which provide useful services at the same time as making money as middlemen. They could easily earn $60 billion a year by being evil, and we might not even notice if they were at first because we're too busy enjoying the nice free presents. The problem with the companies in this article I think, and any other company gone bad, is that the interests of consumer and customer become misaligned to such an extent that the company no longer serves its customers in the sense of seeing to their needs, but in the sense of serving them up to others.

7Figures2Commas 12y ago
This isn't an issue of middlemen, value or the alignment of interests between customer and company. It's an issue of legality. Google operates a legal business. It sells advertising on a service that it owns. Period. The parking companies in the article are knowingly inducing their "customers" to violate local laws that forbid the buying and selling of on-street public parking. These companies seek to profit from this and as a result are now in legal hot water themselves. As for ReservationHop, I believe restaurants may have legal recourse. California's unfair competition laws are fairly broad and I think an argument could be made that intentionally booking fake reservations for the purpose of advertising and reselling them would constitute an unfair and perhaps even fraudulent business practice.
- wpietri 12y ago
  And I'd add that even if it were technically legal to sell public parking spaces, it would still be a good thing to outlaw. The city's offering free public parking for a reason, and that reason isn't enriching a couple of entrepreneurs who moved here six months ago.
cromwellian 12y ago
> it doesn't create significant value for end users with advertising It doesn't? Google ads fund YouTube, Gmail, Docs, Chrome, Android, and lots of other hit Google services that are Google produced products/content, not a middle-man service between content producer and advertiser.
- lmm 12y ago
  That was the grandparent's whole point - the value (at least in this naive conception) Google creates comes from its non-advertising - and non-profitable - parts. (If some other organization got the profits Google was making as an advertising middleman, who's to say they wouldn't produce equally good products/content?)
- grey-area 12y ago
  it doesn't create significant value for end users with advertising
wpietri 12y ago
I don't think all middlemen are parasitic. The guy at my corner store, for example, creates value by stocking a carefully chosen set of products very near to my house and having them available at all hours. He's basically an L1 cache. And in being that, he's not making the problem of goods-getting worse for other people. I think you're wrong about Google. They create enormous value through the services they provide. They then monetize that mainly through advertising. They could monetize it other ways; if advertising were illegal, Google would still be raking in cash. But their search-related advertising, unlike traditional display advertising, actually creates value for both advertiser and viewer because it's relevant to what people are searching for. In user tests, a former colleague was having people do Google searches related to shopping. One guy, unprompted, said, "Hey, you want to know the secret for Google? ignore the stuff in the middle. The really good links are over here on the right." That is, he found the ads more valuable than the normal web content. Turning back to the companies mentioned, I think they are serving their customers well. The problem is that they are all creating negative externalities by forcing other parties to become unwitting free suppliers of goods they are selling. For the parking apps, it's the cities providing the public parking. For the reservation app, it's the restaurants.
- grey-area 12y ago
  Thanks for the clarification. Perhaps the operative distinction here is between parasitic and symbiotic corporations. Ideally they are symbiotic with other players in the eocsystem, rather than parasitic, but I think all corporations have a temptation and a tendency to end up as parasitic monopolies. Re Google, I wasn't saying they don't create value, far from it, I was saying they don't create value for readers with advertising. I concede this is a debatable point though for the reasons you mentioned, and it is really a subjective. Personally I don't find their advertising useful, and if anything think it targets me mostly with sites I've already engaged with and wastes the money of advertisers. There is a tension in their services because they depend on advertising, and the temptation (which thy have increasingly given in to on their search service recently) is to favour advertisers (the real customers) over end users - a classic problem in a two-sided market. To be clear though, I was not saying google are evil, but that just shifting the value around is what businesses do and what Google does - creating value is a very slippery and subjective concept and I'd argue their services which create value (mail etc) are funded by those that don't (advertising). So I would not use that particular behaviour as a criticism of the companies mentioned in the article - they might be objectionable, immoral or even illegal (I'd say probably all three) but they are not easy to distinguish from normal businesses in terms of how they shift value around.

7Figures2Commas 12y ago

This isn't an issue of middlemen, value or the alignment of interests between customer and company. It's an issue of legality. Google operates a legal business. It sells advertising on a service that it owns. Period. The parking companies in the article are knowingly inducing their "customers" to violate local laws that forbid the buying and selling of on-street public parking. These companies seek to profit from this and as a result are now in legal hot water themselves. As for ReservationHop, I believe restaurants may have legal recourse. California's unfair competition laws are fairly broad and I think an argument could be made that intentionally booking fake reservations for the purpose of advertising and reselling them would constitute an unfair and perhaps even fraudulent business practice.

wpietri 12y ago
And I'd add that even if it were technically legal to sell public parking spaces, it would still be a good thing to outlaw. The city's offering free public parking for a reason, and that reason isn't enriching a couple of entrepreneurs who moved here six months ago.

cromwellian 12y ago

> it doesn't create significant value for end users with advertising It doesn't? Google ads fund YouTube, Gmail, Docs, Chrome, Android, and lots of other hit Google services that are Google produced products/content, not a middle-man service between content producer and advertiser.

lmm 12y ago
That was the grandparent's whole point - the value (at least in this naive conception) Google creates comes from its non-advertising - and non-profitable - parts. (If some other organization got the profits Google was making as an advertising middleman, who's to say they wouldn't produce equally good products/content?)
grey-area 12y ago
it doesn't create significant value for end users with advertising

wpietri 12y ago

I don't think all middlemen are parasitic. The guy at my corner store, for example, creates value by stocking a carefully chosen set of products very near to my house and having them available at all hours. He's basically an L1 cache. And in being that, he's not making the problem of goods-getting worse for other people. I think you're wrong about Google. They create enormous value through the services they provide. They then monetize that mainly through advertising. They could monetize it other ways; if advertising were illegal, Google would still be raking in cash. But their search-related advertising, unlike traditional display advertising, actually creates value for both advertiser and viewer because it's relevant to what people are searching for. In user tests, a former colleague was having people do Google searches related to shopping. One guy, unprompted, said, "Hey, you want to know the secret for Google? ignore the stuff in the middle. The really good links are over here on the right." That is, he found the ads more valuable than the normal web content. Turning back to the companies mentioned, I think they are serving their customers well. The problem is that they are all creating negative externalities by forcing other parties to become unwitting free suppliers of goods they are selling. For the parking apps, it's the cities providing the public parking. For the reservation app, it's the restaurants.

grey-area 12y ago
Thanks for the clarification. Perhaps the operative distinction here is between parasitic and symbiotic corporations. Ideally they are symbiotic with other players in the eocsystem, rather than parasitic, but I think all corporations have a temptation and a tendency to end up as parasitic monopolies. Re Google, I wasn't saying they don't create value, far from it, I was saying they don't create value for readers with advertising. I concede this is a debatable point though for the reasons you mentioned, and it is really a subjective. Personally I don't find their advertising useful, and if anything think it targets me mostly with sites I've already engaged with and wastes the money of advertisers. There is a tension in their services because they depend on advertising, and the temptation (which thy have increasingly given in to on their search service recently) is to favour advertisers (the real customers) over end users - a classic problem in a two-sided market. To be clear though, I was not saying google are evil, but that just shifting the value around is what businesses do and what Google does - creating value is a very slippery and subjective concept and I'd argue their services which create value (mail etc) are funded by those that don't (advertising). So I would not use that particular behaviour as a criticism of the companies mentioned in the article - they might be objectionable, immoral or even illegal (I'd say probably all three) but they are not easy to distinguish from normal businesses in terms of how they shift value around.