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Revenue is easy, profit is harder

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Re: Revenue is easy, profit is harder

#21

Post by wpietri »

grogenaut wrote: post #18
wpietri wrote: post #13

Earlier quoted context omitted.

Are we looking at the same numbers? I think Amazon was basically breakeven for 20 years, from 1997 to 2017: https://www.marketplacepulse.com/stats/amazon-net-income-112 And it looks like that recent profitability is more about AWS than their traditional core business: https://www.visualcapitalist.com/aws-powering-the-internet-a...

Amazon typically isn't spending the lion share on user acquisition, it's plowing it into expansion and infra. Most recent issues/losses were due to a massive investment in physical fulfillment centers due to pandemic demand.

I agree with what you say, but your tone to me sounds contradictory, so I'm puzzled. Amazon "plowing it into expansion and infra" sounds exactly like "they prioritized growth", doesn't it?

Re: Revenue is easy, profit is harder

#22

Post by wpietri »

gizmo wrote: post #16
wpietri wrote: post #13

Earlier quoted context omitted.

Are we looking at the same numbers? I think Amazon was basically breakeven for 20 years, from 1997 to 2017: https://www.marketplacepulse.com/stats/amazon-net-income-112 And it looks like that recent profitability is more about AWS than their traditional core business: https://www.visualcapitalist.com/aws-powering-the-internet-a...

Yes, but how do you get to breakeven? By reinvesting all your profits. High capex and no taxes because you don't have any income. And you can still raise money by issuing stock, which goes up in line with your FCF. You maximize growth at 0 profit and this also maximizes shareholder value.

So it sounds like you agree that they were "never profitable because they prioritized growth"? I'm not saying that's a bad thing; I think that ones of the things Bezos did right, and very much in contradiction to standard business dogma. I'

Re: Revenue is easy, profit is harder

#23

Post by codegeek »

I would nitpick the title a bit. Revenue is never easy. I think they should rephrase as "Revenue is relatively easier than profit especially if you have PMF". Once you hit PMF (which is where most startups fail), you can just pour money into growth and that's when revenue generation becomes relatively easier.

Re: Revenue is easy, profit is harder

#24

Post by hef19898 »

wpietri wrote: post #13
hef19898 wrote: post #6

Earlier quoted context omitted.

How so? Amazon didn't jave that many unprofitable quarters, even less years, during its history. That Amazon was never profitable because they prioritized growth is a meme made up buy various start-ups to explain their lack of profits and/or positive cash flow.

Are we looking at the same numbers? I think Amazon was basically breakeven for 20 years, from 1997 to 2017: https://www.marketplacepulse.com/stats/amazon-net-income-112 And it looks like that recent profitability is more about AWS than their traditional core business: https://www.visualcapitalist.com/aws-powering-the-internet-a...

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 quarters between 2004 (!) and end of 2021 (!). Then you have two tremendously negative quarters, Q1 and 2 2022, after equally tremendous profits in 2021. And those losses are driven by write offs on investments and aquisitions, so by no means operations driven.

That AWS is 10% or revenue and 90% of profits is not really impoetant as long as AWS is not spun off from Amazon's retail business. Which, by the way, generates most of Amazon's free cash flow.

Re: Revenue is easy, profit is harder

#25

Post by photochemsyn »

Remaining profitable is likely even harder, as other people will rush in and start providing similar products or services at competitive prices. In a heavily financialized system, the common solution is monopolization (buying up startup competition using pools of capital) - leading to situations like TicketMaster, which gets away with providing low quality-of-service to artists and their fans because they have no alternative to turn to.

Unregulated markets in a finance-centric economy inevitably drift toward the controlled monopolistic model for this reason. Advocates for unregulated free-markets either don't understand this or are simply being deceptive and are really trying to maximize profits by promoting the growth of monopolies.

Re: Revenue is easy, profit is harder

#26

Post by wpietri »

hef19898 wrote: post #24
wpietri wrote: post #13

Earlier quoted context omitted.

Are we looking at the same numbers? I think Amazon was basically breakeven for 20 years, from 1997 to 2017: https://www.marketplacepulse.com/stats/amazon-net-income-112 And it looks like that recent profitability is more about AWS than their traditional core business: https://www.visualcapitalist.com/aws-powering-the-internet-a...

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 very low because they thought they had better things to spend the money on. This was not a myth, this was a strategy. A long-running one. See, among many articles: https://www.nytimes.com/2013/10/22/technology/sales-are-colo...

Re: Revenue is easy, profit is harder

#27

Post by whitemary »

photochemsyn wrote: post #25

Remaining profitable is likely even harder, as other people will rush in and start providing similar products or services at competitive prices. In a heavily financialized system, the common solution is monopolization (buying up startup competition using pools of capital) - leading to situations like TicketMaster, which gets away with providing low quality-of-service to artists and their fans because they have no alt…

Regulated markets in a capital-centric economy serve, in aggregate, the interests of those who control capital, and therefore also drift toward monopoly. Liberals either don't understand this or are simply being deceptive by promoting the continuation of capitalism.

Re: Revenue is easy, profit is harder

#28

Post by TrueSlacker0 »

wpietri wrote: post #21
grogenaut wrote: post #18

Earlier quoted context omitted.

Amazon typically isn't spending the lion share on user acquisition, it's plowing it into expansion and infra. Most recent issues/losses were due to a massive investment in physical fulfillment centers due to pandemic demand.

I agree with what you say, but your tone to me sounds contradictory, so I'm puzzled. Amazon "plowing it into expansion and infra" sounds exactly like "they prioritized growth", doesn't it?

Or they are investing internally for the future. You can plow lots of money into internal improvements for little to no growth in revenue, but at their scale saving just 1% more is a large amount of money. Not to mention a possible strategic advantage.

Re: Revenue is easy, profit is harder

#29

Post by whitemary »

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.

Re: Revenue is easy, profit is harder

#30

Post by hef19898 »

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…

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 as an example to spend everything on growth, and profits will come, is fundamentally wrong.

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