Is it really high capital intensive? I make websites and i m not rich. Network levels are strong and global, but they do come and go every few years, its unlikely that facebook will be as long lived as disney or mcdonalds.
Yeah, you could build that capital for yourself rather than for a big company, if you wanted to; that doesn't mean it wasn't expensive.
That, and I think that big successful projects take a lot more than just someone who can build a decent website. Take friendster... one of my favorite examples 'cause it was one of the real-world cases of a company dying due to insufficient resources being put into systems administration and scaling. They were in the right place, at the right time, with the right product to become what facebook is now; they got traction, but due to performance and reliability issues, they ended up leaving an opening for Facebook to come in and eat their lunch.
And even getting to the point where facebook was is really hard.
I mean, it happens; Craigslist is a famous example, but usually you need more than one engineer worth of capital to build one of these things, and you need more than just engineers.
it wasn't, at all, if you re comparing it to almost any other industry sector
I mean, sure, a business starting with a million bucks is unlikely to become a multi-billion dollar business, but... I think it's a reasonable amount to start a reasonable business... and I think that's how McDonalds, at least, got it's start.
If you work in the industry and aren't familiar with concept yet, it's something that you would greatly benefit by reading up on. Capital intensity is about the RATIO of capital costs to operating costs. Compare the cost of developing a website with the cost of operating it. In general, the former are much higher than the latter--though there are some exceptions.
Actually, the total (absolute, not the ratio) cost is related to a third factor I didn't even list--constant or increasing returns to scale. This means that products can be VERY expensive to develop before an extra dollar of investment won't result in more than one additional dollar of profit. No surprise that there's a synergistic relationship here with capital intensity (very low per-unit costs). This isn't going to be super-applicable if you're building websites for small companies, but if you consider how much it would cost to develop a commercial operating system that was on par with what's currently out there (Android/iOS/Linux/MacOS/Windows/etc...) it would many millions on the low end to billions if you couldn't rely on open source.
> Capital-intensive industries use a large portion of capital to buy expensive machines, compared to their labor costs. The term came about in the mid- to late-nineteenth century as factories such as steel or iron sprung up around the newly industrialized world.
i dont know, computers are dirt cheap, and IT is famous for being particularly easy to enter into as a sector. I don't think i m the exception
Compare the cost of creating software (often many millions) to the per unit cost of copies of that software (zero).
Compare the cost of developing a new processor architecture and setting up the manufacturing plant (billions and billions) compared with the per-unit cost.
Compare the cost of building out a physical network infrastructure to cover a city (many millions) compared with the cost of connecting a single user to the box down the street.
Compare the cost to create all of Facebook's hardware and software infrastructure to the marginal cost of adding one more user to the platform.