

Ask HN: Why can't any companies turn a damn profit? - justinbaker

With all of the LinkedIn and Groupon hype, as well as other companies like Pandora, why can none of them turn profits? These companies seem to hemorrhage money like no tomorrow, with investors only looking at revenue not profit. I'm curious of everyone else's opinions.
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staunch
LinkedIn blows it on a bloated staff and expenses. No excuse, they just suck.

Pandora has been bent over by content owners. They're not powerful enough to
dictate reasonable terms.

Groupon is waging all out war to dominate. They're hoping when the dust
settles they'll own one of the richest markets in the world.

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polyfractal
Maybe I'm cynical, but I think they are trying to grab a ton of money while
the getting is good, knowing that their business model is not sustainable.
They spend enormous sums of money on sales-staff (to get the deals from
vendors) and many vendors say they are unhappy after the groupon goes live.
Apparently most groupon-buyers are cheap one-time-visitors and the local
vendor doesn't recoup their expenses.

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veyron
The valuation metrics look at revenue growth, not sales and not profit. Wall
Street loves the mystical growth metric and have cash by the fistful ready to
stuff into firms that can show some sort of growth. Especially with hard-to-
value tech companies, showing a strong number of users makes a marginally
profitable (or even unprofitable) firm appear to be strong.

Supposing that the target is to attain the highest valuation, the right idea
is to spend as much money as possible to show strong growth numbers. Then,
when you hit the peak growth rate, sell it to the public!

When a more attractive professional network or daily discount site emerges,
the value may dip. That being said, if the target is to make the most money,
the easiest way is to ride the bubble

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nudge
<http://37signals.com/bootstrapped>

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rick888
I've noticed this too.

Many startups focus on getting acquired and moving on the next "big thing"
rather than finding a steady revenue stream.

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justinbaker
They are getting their IPO's too, and I feel sorry for the sad saps who lose
money. Second Bubble is coming!

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curt
From what I've read Groupon makes a fortune. The others like LinkedIn are
trying to convert their user base into a revenue stream without driving the
users away.

The problem with many web 2.0 companies is that they don't have a clear
revenue stream.

~~~
tnorthcutt
Groupon does not make a profit: <http://www.geekosystem.com/groupon-ipo/>

~~~
curt
Wow, I read something a year ago saying they were making $30 million that
year. They must have crazy expanded.

