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Interdependence is a big deal. Some real, present revenue to big companies comes from the startup world. Maybe it's where I live and what I do, but startups se

Interdependence is a big deal. Some real, present revenue to big companies comes from the startup world. Maybe it's where I live and what I do, but startups seem to pay for a ton of the Twitter and Facebook ads I see. Amazon makes good money running datacenters for them. Apple and Google see a lot of the value of their mobile platforms created by startup app developers. The big companies' current revenue helps determine how much they're willing to invest, including investments in the form of acquisitions, so the dollars invested into the system can themselves contribute to exit amounts in a weirdly circular way. I'm not the first to observe this. That in itself proves very little; both sustainable and unsustainable systems can feed on themselves. And all these large companies I'm mentioning are certainly sticking around. But it does suggest there are paths were one thing goes bad first--new investment falters, the market starts pricing ads drastically lower, big regulatory interventions shake up some subsector or other--and the ripples are bigger and reach further than might be expected.

timr 11y ago
Yeah, this is definitely a reasonably-sized elephant in the room. It's clear that a big chunk of tech revenues come from spending by other tech companies. You can't throw a stone in SOMA without hitting the fancy offices of a startup-servicing startup. In the late 90s, this happened because all of the companies were buying ad contracts from one another, booking the total value of the contract as revenue, and using that to pad revenue growth. Today's version is the deferred ARR, which turns a tiny cash flow from subscription software into a magically big top-line number. But what goes up quickly, can fall just as fast...it doesn't take many companies to pare back on spending before your fictional deferred revenue graph falls off a cliff.

timr 11y ago

Yeah, this is definitely a reasonably-sized elephant in the room. It's clear that a big chunk of tech revenues come from spending by other tech companies. You can't throw a stone in SOMA without hitting the fancy offices of a startup-servicing startup. In the late 90s, this happened because all of the companies were buying ad contracts from one another, booking the total value of the contract as revenue, and using that to pad revenue growth. Today's version is the deferred ARR, which turns a tiny cash flow from subscription software into a magically big top-line number. But what goes up quickly, can fall just as fast...it doesn't take many companies to pare back on spending before your fictional deferred revenue graph falls off a cliff.