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.
Doubly so when comparing companies like Exxon and Facebook, which have very different operating costs.
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?”
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.
I’d say earnings are a better, but still not great measure of value added.
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.
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).
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.