I'm no Alphabet fan, but their sprinkling through this article seems out of place. There are so many good examples (like Uber), that picking on Google and Microsoft, or even Facebook seems unnecessary.
The bottom line us that these 3 businesses make money. Billions per quarter. It's coming in so fast they quite literally dont know what to do with it all.
The market is fine with billions lost on the metaverse because its a drop in the bucket. An EU fine doesn't move the needle.
Yes, Google and Facebook are ad companies, and yes they'd like to be more diverse than that, but the fact remains that ads on Google and Facebook work. People keep spending money there because it works. There's real value in efficient advertising and Google and Facebook have provided that real value.
MS already has a diverse business, from OS to Office, from Azure to Xbox, from Teams to Flight Simulator. Bing can afford to be a long-play and seems to be gaining traction.
I also cannot help but think that if this article was written in 2006 Amazon would have been the (legitimate) poster child for the point he's making. Billions spent, never profitable. But look at them now.
Of course there are failures. Of course most of the money is wasted [1]. This is not a secret , its not even a bug, its baked into the VC model. It's been obvious since forever.
The VC model is but one kind of business model, designed for a specific kind of business. And as a model it is applied to a vanishingly small number of actual businesses overall.
[1] money is not "wasted" in the sense that water can be wasted by leaving a tap on. It is spent. Salaries, infrastructure, rent, cars, food, whatever - its all "trickling down" to people or actual profitable companies. Selling shovels, and jeans, is more profitable than digging for gold, and less risky, but that one gold digger who strikes it rich keeps hope up for all the others.
It’s still very clearly wasted though? That money could have gone to more profitable and genuinely innovative businesses that benefit society, instead of startups that were meant to tank from the very beginning. And money isn’t the only resource being wasted here but time. There are also plenty of companies that fail so hard that employees, to whom you believe the wealth trickles down to, are left with nothing to show for what they have supposedly done there, and could even cost them reputation-wise in their careers. This arrangement is hardly anything that the working class should be thankful for.
We all know 90% of VC money will eventually generate no return. That's precisely the model. The problem us that it's hard to predict which 10% will win.
The alternative to VC funding is either traditional bank finance, or boot-strapping. Incidentally neither is terribly more effective at picking winner's- its commonly reported (although I don't know how accurate) that 90% of businesses will fail within 5 years. It kinda makes sense, most ideas kinda suck.
Selling equity to raise money is the worst kind of financing. Most businesses are better off getting bank loans, or bootstrapping. Learning how yo make do, how to build profit on a shoestring, how to be efficient is a good thing.
VC money is useful for a different kind of business. One which needs significant capital, but has potential for massive returns.
I find it hard to feel sympathy for employees who go to work for a startup, get significant salaries, know the risks, and squander their salaries well enough to have nothing to show from it. In an era of a pitiful minimum wage I don't think they're the "working class".
While individual time is certainly wasted either thus model (and indeed all models) societal time is not. By trying lots of things simultaneously we save time overall.
It has ever been thus. When airplanes were invented everyone and their friend started a plane company. Innovation exploded. There was consolidation and now we have a handful. There are startups in the aviation space, but nibbling at the fringes, not aiming to be "the Boeing killer".
Cars are interesting because there's a disruptive transition coming (well, 2 actually). This opens the door to a Tesla (Not to mention a bunch of other EV startups that failed.) In the long run I expect Tesla to either get acquired into an existing manufacturer, die, or become a niche brand. The bulk of EVs will be made by VW , Toyota,GM,Ford etc .
This doesn't mean Tesla money is wasted. It showed the makers there's a market for EVs. That changes the world.
> The bottom line us that these 3 businesses make money. Billions per quarter. It's coming in so fast they quite literally dont know what to do with it all.
Revenue might be going up, but are they actually providing additional value to users? Or just gutting them more thoroughly?
I look at the amount of utility that Google's products provided back in 2013, and I look at how much they provide now. Can't say the improvement has been anywhere close to stock price
Are you measuring utility to people who were searching or watching YouTube in 2013 and 2023?
Or measuring the utility to advertisers on Google’s platforms in 2023 and projected into 2033, many of whom weren’t using Google ads in 2013.
Google didn’t give me individually a ton more utility (arguably less in search), but I think it did give their actual customers (advertisers) a ton more utility in aggregate.
>> look at the amount of utility that Google's products provided back in 2013, and I look at how much they provide now. Can't say the improvement has been anywhere close to stock price
The stock price I'd not a reflection of utility. Its a reflection of future profit.
As a user, you are not Google's customer. Their customer is the advertiser, and the utility to them is just fine. Advertising on Google and Facebook delivers measurable returns, and if that measure is positive then people continue to do it.
Last I checked their figures (just now) I don't think Uber is a great example. Never yet made a profit, living off capital and their VC gamblers.
Agree they did have billions of income. But it cost them MORE billions to get there. They can't (yet, if ever) be considered a successful business - at best they are potentially successful.
I think you misunderstood. He is saying that Uber is a better example of such a failure, not that it is a better business.
Alphabet, Meta and MS at least have vast profits in the present, not just potential, so they are indeed "better" businesses than Uber, as you say, and thus bad examples to make this point.
The bottom line us that these 3 businesses make money. Billions per quarter. It's coming in so fast they quite literally dont know what to do with it all.
The market is fine with billions lost on the metaverse because its a drop in the bucket. An EU fine doesn't move the needle.
Yes, Google and Facebook are ad companies, and yes they'd like to be more diverse than that, but the fact remains that ads on Google and Facebook work. People keep spending money there because it works. There's real value in efficient advertising and Google and Facebook have provided that real value.
MS already has a diverse business, from OS to Office, from Azure to Xbox, from Teams to Flight Simulator. Bing can afford to be a long-play and seems to be gaining traction.
I also cannot help but think that if this article was written in 2006 Amazon would have been the (legitimate) poster child for the point he's making. Billions spent, never profitable. But look at them now.
Of course there are failures. Of course most of the money is wasted [1]. This is not a secret , its not even a bug, its baked into the VC model. It's been obvious since forever.
The VC model is but one kind of business model, designed for a specific kind of business. And as a model it is applied to a vanishingly small number of actual businesses overall.
[1] money is not "wasted" in the sense that water can be wasted by leaving a tap on. It is spent. Salaries, infrastructure, rent, cars, food, whatever - its all "trickling down" to people or actual profitable companies. Selling shovels, and jeans, is more profitable than digging for gold, and less risky, but that one gold digger who strikes it rich keeps hope up for all the others.