I beg to differ, if you dont make a profit, youre not a business. I dont care if you raised tonnes of money from investors, built a talented team, built an amazing product and sold it to facebook/google/yahoo for a huge sum. Thats failure because you couldnt make more revenue than the costs you had.
You effectively missed the point of the blog post.
The author isn't suggesting that revenue is insignificant compared to a user base; this is an extreme example of undercutting competitors via price slashing, and it's historically not necessarily a good idea.
That said - Tumblr has so many users that it's difficult not to be valuable. A social network can be a currency of its own - having ownership of a platform that tens or hundreds of millions of people use daily puts you in a position to make revenue in a number of creative ways.
Ev Williams' specific point is such that if you achieve that many users, you will eventually not find it difficult to be profitable. How could you? People wondered about Facebook this way. Then they introduced ads - the number of users only climbed.
Conversely, if Facebook maximized its potential for revenue streams before solidifying organic user base increases, they would have plateaued a long, long time ago. That's the point.
I still take issue with the idea of "oh we'll worry about making money later" If facebook is the prime example then just take a look at what a piece of crap its become for users. Facebook couldn't find a decent revenue model so now they're cannibalising their users by making the experience terrible. Which in my opinion, long term is going to be their downfall.
Also, getting lots of users and then just slapping ads on your site is also a terrible business model and its what you tend to do if you haven't bothered to think it through clearly before starting.
I'm not sure he's missing the point - more that he's disagreeing with it.
There's clearly a few high profile examples of companies with massive user bases who have either found a genuine way to monetise their users, or at least sold/floated their companies in a way that's been massively profitable for the initial investors.
But it doesn't automatically follow that it's always going to be easy to monetise them. There's always only ever going to be a handful of social sites that manage to attract huge numbers of users, and even some of those fall flat on their faces when it comes to making real revenue.
Even Facebook is struggling to find a way to get actual ongoing profits out of their users, and the longer it takes them to figure out how to do this, the more nervous investors are going to be about big IPAs for future social media companies.
Working on the assumption that "because site X has managed to monitise their user base, we will automatically be able to" sounds like the kind of baseless assumption that led to the first dot com crash.
