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Comment by ChrisLomont | Hacker News Reader

Market cap is a weird metric to measure company size or influence.

For example, by revenue, it's Walmart with 500B, Amazon at 280B, Exxon 264B, Apple 260B, CVS 256B, ... Alphabet 161B at 11th, Microsoft at 21st with 125B, ...

By employees it's Walmart at 2.2M, Amazon at 800K, ...., Microsoft in 21st place with 144K, ....

By profits, it's Berkshire Hathaway at 81B (massive growth), Apple at 55B (shrinking), MS 39B, Chase 36B, Alphabet 34B, BoA, Intel, Wells Fargo, Citigroup, .... FB 11th at 18B, .... Amazon 22nd at 11B....

https://en.wikipedia.org/wiki/List_of_largest_companies_in_t...

https://fortune.com/fortune500/2020/search/?f500_profits=des...

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I would argue that revenue is a weird metric to measure company size too.

Doubly so when comparing companies like Exxon and Facebook, which have very different operating costs.

Revenue tells you roughly how much value you are creating for other actors in the economy.

It does that in a one-sided way though. Do car dealers create value for car makers, or the other way around? The way revenue is measured seems to imply that retailers are the ones who create value for manufacturers, but not vice versa.

In that sense, revenue is more of a measure of “how long and costly is your supply chain, and how close are you to the customer facing side of it?”

>Do car dealers create value for car makers

Both - read about consumer and producer surplus in econ.

> The way revenue is measured seems to imply ....

Revenue estimates how much buyers were willing to pay for the product, but each buyer retains their surplus, so revenue undercounts the value to the buyers. But it's a decent representation of value added.

Platforms facilitate interactions between producers that create value which others consume. Thereby comparing revenue of a platform against a traditional business model doesn't make sense because the cost and profit drivers are inverted.

>that create value which others consume.

and

> Thereby comparing revenue of a platform against a traditional business model doesn't make sense

When two entities trade, by far they do it because they both benefit. There is no difference between platforms and other businesses. Each provides value to customers, and the sum of the benefits each gains each trade (often called consumer and producer surplus in economics) is the net gain to the pair.

Revenue is a very good measure of how valued these trades are to customers. In fact, almost all customers would pay more for the benefit (up to but not exceeding their consumer surplus).

> almost all customers would pay more for the benefit.

This is where you are wrong, how many paying customers does Google have VS users?

Platforms that are value aggregators decoupled value production from internal capacity.

Not necessarily. Take a wholesale distributor. Buy a product for $99 and sell for $100. Your revenue will be massive, but the value you create is low.

I’d say earnings are a better, but still not great measure of value added.

>but the value you create is low.

Apparently they add at least $1 in value to every transaction, otherwise buyers would not use that service, and simply buy the $99 product.

In fact, they probably add more than $1 in value since they were selected.

If they have massive revenue, as you posited, then they added massive value to buyers in total, exceeding their profits.

Read about consumer and producer surplus.

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