The rise of the “successful” unsustainable company

Post by Tipzntrix » Tue, Oct 23, 2012, 7:13 PM UTC

patmcguire wrote: post #46

api wrote: post #2

This is diplomatic and charitable. When I see a repeat pattern of GroupOn and Zynga type companies I see someone who knows how to pump and dump. It's not quite fraud but it's getting close, given how loose these sorts of people typically play the truth.

Groupon may never make money, but some company with a similar business model will eventually make a profit. What deal of the day sites offer that no one did before is an immediate and essentially limitless supply of customers. Even if most companies lose their shirt on that, there are going to be some industries and situations where infinite customers at a temporary loss makes business sense, and once the market for…

Post by wtvanhest » Tue, Oct 23, 2012, 7:23 PM UTC

nkohari wrote: post #49

hammock wrote: post #35

Why does this idea exist that every company needs to be sustainable? Is it not the natural way of markets that 1) an opportunity is identified, 2) exploited for profit, until 3) competition drives profitability away? So long as capital stays productive, from a societal point of view it shouldn't matter whether it stays in one company for 20 years or moves from company to company every three.

Finance doesn't work that way at all, though. Capital is invested because of the potential of growth, and therefore return. You wouldn't buy stock in a company at $10 if you expected it to be worth $10 for the entire time you held the shares. It's not like the people who bought ZNGA stock at $10 were somehow rewarded with $7 worth of stock in some other company when their shares dipped to $3.

Post by scott_s » Tue, Oct 23, 2012, 7:32 PM UTC

mindstab wrote: post #25

I'm surprised no one's mentioned Twitter. They are one of the most successful internet things and yet they still don't seem to have any really solid way to monetize that. They are now part of culture but are they revenue positive? The things they are doing lately don't make sense until you take that into account: Restricting 3rd party apps and APIs? Seems to be driving users away... Except that if all your users are…

Post by im3w1l » Tue, Oct 23, 2012, 7:38 PM UTC

hammock wrote: post #35

Why does this idea exist that every company needs to be sustainable? Is it not the natural way of markets that 1) an opportunity is identified, 2) exploited for profit, until 3) competition drives profitability away? So long as capital stays productive, from a societal point of view it shouldn't matter whether it stays in one company for 20 years or moves from company to company every three.

Post by zacharycohn » Tue, Oct 23, 2012, 8:07 PM UTC

wtvanhest wrote: post #52

taylonr wrote: post #42

Earlier quoted context omitted.

That's a fair point. But I think if you look at most non-startup companies that stay around for 3-4 years they don't typically have the valuations that the startups do in the same time. For example, Joe's Plumbing shuts down after 2 years because Joe realizes he has to manage his books, do advertising, manage any junior plumbers etc. In the end he spends 50% of his time doing plumbing and 50% of his time doing "busin…

I wasn't referring to lifestyle businesses like you describe. I was referring to real companies with billion+ dollar valuations. Plenty of them fail (either reorg or liquidate), are bought and the products become useless etc. Here is a list of 2012's bankruptcies by assets: http://www.turnaroundletter.com/largest-bankruptcies-this-ye... There isn't a single "software" company on the list. Now, I also understand that…