Revenue is easy, profit is harder • Hacker News Board

Re: Revenue is easy, profit is harder

#31

Post by wpietri » Sun, Feb 19, 2023, 5:30 PM UTC

wpietri wrote: post #26

hef19898 wrote: post #24

Earlier quoted context omitted.

I see three negative Q3s before the chart basically explodes in the last couple of years. All other quarters saw profits around 100 million. It is only the chart that looks break even... And a couple of negative Q3 results are absolutely normal in commerce, especially eCommerece. All the stuff sold during Q4 needs to come from somewhere. So no, Amazon was definitelway more than just break even with three negative qua…

It's not just the graph. Their revenues were growing rapidly at the same time they were basically breaking even: https://www.marketplacepulse.com/stats/amazon-net-sales-94 So their profitability as a percentage of revenue was actually drastically declining. All during a period where investors were grumbling that they should start giving the money back to investors. But Amazon was intentionally keeping their profits v…

I see you've edited and added more, so let me also reply to this bit:

> That AWS is 10% or revenue and 90% of profits is not really impoetant

It's important if we're examining your claim that "Amazon was never profitable because they prioritized growth is a meme", because we're looking at the extent to which they reinvested gross profits from their core business.

Re: Revenue is easy, profit is harder

#32

Post by birdyrooster » Sun, Feb 19, 2023, 5:32 PM UTC

ecpottinger wrote: post #8

ghiculescu wrote: post #4

I love payback period, it's a great metric. But it's easy to take it too literally. It's meant to be a tool to help you make prioritization decisions ("what if we do this instead of that"), but people often use it as a management report ("we did this; here's the verdict"). Here's a SaaS example: if it costs you $1000 to acquire a customer that pays you $100/month, the PBP is 10. That doesn't sound amazing. But you ha…

My dad had great ideas for businesses. Yet each one he started failed for him. Why, because he has such unrealistic view on how long the payback period will be. He even founded with a partner what is now a national company, but at the time it did not make a big profit in the first year, so he sold his share of the business. He had "Get rich Quick" fever, and never saw that bussiness rarely become an overnight success…

Interesting to think that the company which he divested from may have made it because of his exit.

Re: Revenue is easy, profit is harder

#33

Post by hef19898 » Sun, Feb 19, 2023, 5:34 PM UTC

wpietri wrote: post #31

wpietri wrote: post #26

Earlier quoted context omitted.

It's not just the graph. Their revenues were growing rapidly at the same time they were basically breaking even: https://www.marketplacepulse.com/stats/amazon-net-sales-94 So their profitability as a percentage of revenue was actually drastically declining. All during a period where investors were grumbling that they should start giving the money back to investors. But Amazon was intentionally keeping their profits v…

I see you've edited and added more, so let me also reply to this bit: > That AWS is 10% or revenue and 90% of profits is not really impoetant It's important if we're examining your claim that "Amazon was never profitable because they prioritized growth is a meme", because we're looking at the extent to which they reinvested gross profits from their core business.

Sometimes I am really puzzled by the lack of financial literacy on a forum aimed at start-ups. I really am.

Also the goal post moving. I said Amazon basically never reported losses, which they didn't. You said they barely broke even, which they didn't, as the numbers behind the chart show. And that Amazon prioritizes growth is hardly news. That they do so at the expense of profitablility is just plain wrong so. And the chart you shared yourself tells as much.

Re: Revenue is easy, profit is harder

#34

Post by wpietri » Sun, Feb 19, 2023, 5:35 PM UTC

hef19898 wrote: post #30

wpietri wrote: post #26

Earlier quoted context omitted.

It's not just the graph. Their revenues were growing rapidly at the same time they were basically breaking even: https://www.marketplacepulse.com/stats/amazon-net-sales-94 So their profitability as a percentage of revenue was actually drastically declining. All during a period where investors were grumbling that they should start giving the money back to investors. But Amazon was intentionally keeping their profits v…

Man, break even means zero profit but also no losses. If EBITDA goes down or not is a different, and unrelated, question. And a different financial metric all together. Amazon was, in its entire history as a public company, profitable in every single quarter , except 5 (!). So no, they never spend all their money on growth (they did spend a lot so but never in unsustainable ways, which is the key here). Using Amazon…

I totally believe that a lot of startups are misusing the Amazon example. I also believe many of those startups will be royally screwed now that an era of easy money is ending. And personally, I'll be popping plenty of popcorn when they get their comeuppance.

But that doesn't mean I'm going to uncritically accept your claim that "Amazon was never profitable because they prioritized growth is a meme". Because it was basically true for a very long time. It was something many Amazon investors complained about long and loud because they wanted the cash, not future growth potential that they were skeptical of.

Re: Revenue is easy, profit is harder

#35

Post by leetrout » Sun, Feb 19, 2023, 5:35 PM UTC

ghiculescu wrote: post #20

gizmo wrote: post #11

This isn't another 2000 crash. The internet is much, much larger today. And the prize you get for being #1 in any market is enormous. It's so large that it pays to gamble with questionable growth strategies in the short term. Reasonable growth that balances LTV and CAC is nice and pragmatic but it's not a winning strategy when your competitors are putting the pedal to the metal.

On the contrary, I think the internet being bigger means the prize for being #2, 3, etc is great too. Very few markets are actually winner takes all.

Yep! And the second / late mover advantage.

For any that are unfamiliar:

https://insight.kellogg.northwestern.edu/article/the_second_...

Re: Revenue is easy, profit is harder

#36

Post by robertlagrant » Sun, Feb 19, 2023, 5:36 PM UTC

whitemary wrote: post #29

hinata08 wrote: post #14

Almost unrelated, but I also learned what was capital efficiency and payback period after playing Monopoly for the first time in years. Long story short, when the properties were eventually sold out, I burned my cash flow to buy more of them to other players, at a high price, when they needed money (it would also allow them to play longer) My logic was that by owning the most properties and by building houses and hot…

Monopoly was literally invented to illustrate the deceptions of capitalism. Great game.

It's the regulations that stop you building more places that are the issue : - )

Re: Revenue is easy, profit is harder

#37

Post by wpietri » Sun, Feb 19, 2023, 5:36 PM UTC

hef19898 wrote: post #33

wpietri wrote: post #31

Earlier quoted context omitted.

I see you've edited and added more, so let me also reply to this bit: > That AWS is 10% or revenue and 90% of profits is not really impoetant It's important if we're examining your claim that "Amazon was never profitable because they prioritized growth is a meme", because we're looking at the extent to which they reinvested gross profits from their core business.

Sometimes I am really puzzled by the lack of financial literacy on a forum aimed at start-ups. I really am. Also the goal post moving. I said Amazon basically never reported losses, which they didn't. You said they barely broke even, which they didn't, as the numbers behind the chart show. And that Amazon prioritizes growth is hardly news. That they do so at the expense of profitablility is just plain wrong so. And t…

I tried to work in good faith here, but now that you're just getting insulting, I'm done. You and your literal illiteracy are no longer my problem.

Re: Revenue is easy, profit is harder

#38

Post by hef19898 » Sun, Feb 19, 2023, 5:40 PM UTC

wpietri wrote: post #34

hef19898 wrote: post #30

Earlier quoted context omitted.

Man, break even means zero profit but also no losses. If EBITDA goes down or not is a different, and unrelated, question. And a different financial metric all together. Amazon was, in its entire history as a public company, profitable in every single quarter , except 5 (!). So no, they never spend all their money on growth (they did spend a lot so but never in unsustainable ways, which is the key here). Using Amazon…

I totally believe that a lot of startups are misusing the Amazon example. I also believe many of those startups will be royally screwed now that an era of easy money is ending. And personally, I'll be popping plenty of popcorn when they get their comeuppance. But that doesn't mean I'm going to uncritically accept your claim that "Amazon was never profitable because they prioritized growth is a meme". Because it was b…

Can we at least agree that any profits above zero are actually profits? And the question of just how profitable is a different financial metric?

Re: Revenue is easy, profit is harder

#39

Post by coffeebeqn » Sun, Feb 19, 2023, 5:43 PM UTC

ghiculescu wrote: post #20

gizmo wrote: post #11

This isn't another 2000 crash. The internet is much, much larger today. And the prize you get for being #1 in any market is enormous. It's so large that it pays to gamble with questionable growth strategies in the short term. Reasonable growth that balances LTV and CAC is nice and pragmatic but it's not a winning strategy when your competitors are putting the pedal to the metal.

On the contrary, I think the internet being bigger means the prize for being #2, 3, etc is great too. Very few markets are actually winner takes all.

Also people thinking that Google and Meta won’t be looked at like Oracle and IBM in 10-20 years are probably way too confident in the status quo

Re: Revenue is easy, profit is harder

#40

Post by kazinator » Sun, Feb 19, 2023, 5:44 PM UTC

Revenue is easy only if you ignore survivorship bias. Organizations without revenue perish. Organizations with revenue whose balance sheets don't show a profit don't necessarily perish.