Business Insider Turns A $2,127 Profit On $4.8 Million In Revenue | Hacker News Reader

Business Insider Turns A $2,127 Profit On $4.8 Million In Revenue

techcrunch.com

44 pointspclark22 comments

The original post is much more insightful.

http://www.businessinsider.com/business-insider-the-full-mon...

and

http://news.ycombinator.com/item?id=2297351

The important thing noted there, contrary to the vibe of the headline, is that they're in their growth phase and not even attempting to be profitable now. It was an unintentional fluke.

accidentally profitable! i approve :)

1. profit

2. ?

Felix Salmon had an interesting take on this topic as well for those interested.

http://blogs.reuters.com/felix-salmon/2011/03/07/the-economi...

As a private company, are there any laws that restrict me from lying to the public about my financials? As long as I'm not defrauding an investor or lying to the tax man or various regulatory bodies I can say anything I want, right?

I only ask because Blodget has proven himself very willing to do just that kind of thing in the past, though I'm unsure what the angle would be.

No of course you can't lie.

You have to selectively report, optimize withholding, use legitimate tax minimization strategy, diversify into a range of activities and shell companies.

But certainly not lie....

Are you sure you aren't thinking of public companies? I've been in a fair number of sales and M&A meetings where I heard people lying up a storm about corporate health or financials. Any laws to cite?

It could possibly fall under misrepresentation[1] law under certain circumstances. For example, as a service company, pretending you have solid revenues might induce a potential client into buying your services (if your client has a policy of only dealing with established companies).

[1] http://en.wikipedia.org/wiki/Misrepresentation

Umm, not paying taxes? Declaring a virtual loss on millions of dollars revenue would make for a nice tax "bonus".

can't directly lie, but people play games with accounting numbers all the time. for all we know, a large chunk of that revenue could be going to pay year-end bonuses.

but given they have 45 people, after salaries and benefits, and after all the costs of running the site, that kind of net profit doesn't seem entirely unreasonable on $4.8M rev.

oops - reposting the [deleted]

What law are you talking about that would penalize me if I sent out a press release tomorrow claiming my company is taking in $100bn a quarter?

Why vet the first number off of the second? Surely if you're willing to misrepresent one...

To be clear, I have no specific reason to doubt the numbers except that he's an unreliable source and that public disclosures of private company financials are so uncommon. If your brother in law got convicted of running a boiler room you're not going to take his stock picks at face value, right?

I'm not sure how meaningful "profit" is in the context of a privately owned company. Ok, so they only had $2,127 left over at the end of the year after costs, which sounds pretty small compared to the revenue number, but that's after paying the salaries of 45 employees, which presumably includes the owner. It seems slightly arbitrary where you draw the line between "profit" and "owners salary".

They have stock options for employees and a lot of VC capital, so the "owners salary" is hard to define. I'm sure the founders receive a nice salary, but the investors aren't going to be happy with having $2k left at the end of the year to split.

Business Insider is the only news service I follow on Twitter, I rather like their content and frequency, I do however think that they go rather overboard on their slideshows.

My guess is the goal of this catchy headline is to make readers thing "wow, how could they have turned such a small profit with all that revenue?" Of course, the lesson to be learned here is that revenue is an absolutely ridiculous way to gauge the health of a company. That's why it's so bizarre to see people talking about high valuations for companies like Facebook and using their revenue metrics as part of their arguments.

I think it's okay to use revenue as a measure of valuation as long as there is strong growth. A company may have 0 profit now but as it grows, it can control costs and hence turn a profit (economies of scale).

To be fair, software companies are known for their huge profit margins and as skhatri pointed out, economies of scale.

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