They are not profitable because they make bad business decisions.
Exactly this. Just like how reddit very quickly made enough in reddit gold sales to cover their server costs for decades, the only reason it’s operating at a loss is because they’re running it that way.
Lots of SaaS business models adopt this hyper revenue growth, but cash flow negative, unprofitable model. However this business model was only possible with a low interest rate environment of the past 15 years. It was relatively easy to get approved for loans and venture capital funding.
Think of companies like Uber and AirBnB. Their mission is to undercut their competition and be unprofitable until they become a monopoly. Once they get monopoly market share, they will try to show pricing power and raise prices on their consumers once there is no competition.
Compare that to Google or Facebook, who have always been profitable.
Interest rates are higher now so it is becoming more difficult to get cheap loans and fundraising. It will be interesting to see how this unprofitable model will survive or not.
I can cite an example of it with an inventory based company. KIA sold their cars at damn near a loss in the US for a long time to get a good foothold. And it worked. Iirc they had a bogo on cars at one point even.
Exactly this. Just like how reddit very quickly made enough in reddit gold sales to cover their server costs for decades, the only reason it’s operating at a loss is because they’re running it that way.
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Can you cite an example where this has actually worked/led to a stable business model?
Lots of SaaS business models adopt this hyper revenue growth, but cash flow negative, unprofitable model. However this business model was only possible with a low interest rate environment of the past 15 years. It was relatively easy to get approved for loans and venture capital funding.
Think of companies like Uber and AirBnB. Their mission is to undercut their competition and be unprofitable until they become a monopoly. Once they get monopoly market share, they will try to show pricing power and raise prices on their consumers once there is no competition.
Compare that to Google or Facebook, who have always been profitable.
Interest rates are higher now so it is becoming more difficult to get cheap loans and fundraising. It will be interesting to see how this unprofitable model will survive or not.
Amazon undercut like crazy and is utterly massive today. They’re basically the online shopping company.
Amazon is a goods-based business though, they ship massive amounts of inventory.
I can cite an example of it with an inventory based company. KIA sold their cars at damn near a loss in the US for a long time to get a good foothold. And it worked. Iirc they had a bogo on cars at one point even.
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