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Comment by judge2020 | Hacker News Reader

judge2020

> but it’s pretty clear that it would be extremely difficult to compete with YouTube if every user has to pay the actual unit costs to upload, convert, and play videos.

That's on the user side, though. Like AWS and Azure, chances are GCP/Google's internal hardware division bills internal teams similarly to external customers (especially as Sundar continues to demand cost cuts). Of course users themselves can't go and make their own website and experience the same economies of scale that only big companies can achieve, but if competitors come in (like ByteDance) there's nothing stopping them from stealing marketshare from YouTube if they invest in some colocated servers in key markets.

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> Like AWS and Azure, chances are GCP/Google's internal hardware division bills internal teams similarly to external customers (especially as Sundar continues to demand cost cuts)

Having worked on such large conglomerates it’s closer to friends & family discount than from large external company discount.

There’s also transfer pricing and other accounting ways to improve numbers.

This is so widespread that one such company had <company color> dollars (internal purchases) and green dollars (external customers) pricing.

That's simple Managerial Accounting 101.

Every major company operates the same way.

When Disney+ "buys" the right to stream the latest Marvel movie from Marvel Studios, the company as a whole has to back out the revenue so not to count it twice. But still show Disney+'s profit.

Why would they have to “back out” revenue”? Revenue for one department has to be an expense for another if they are buying and selling from each other, and that would cancel out in the company wide financials.

Disney+ buying from or selling to Marvel would not show up as profit or loss for Disney.

Let's take a simpler example. Apple Retail Stores and Apple corporate. For awhile Apple Store profits were broken out separately.

Making up numbers:

It costs Apple $800 to make a MacBook. It "sells" the MacBook to Apple Retail for $900 wholesale. Apple corporate now has revenue of $900 from the Mac it sold.

Apple Retail sells the same Mac to the end user for $1000. Apple Retail now has revenue of $1000.

Apple Corporate claims revenue of $900

Apple Retail claims revenue of $1000.

Apple claims a revenue of $1900. But it has to back out $900 of revenue so it doesn't double count it.

Apple wants to show that Apple Retail is profitable.

I used Apple instead of Disney in the example because it is much simpler to show one item being transferred from Apple to Apple retail than it is to show a group of movies being transferred to Disney and Disney selling a subscription.

Revenue is independent of expenses. It cancels out when you calculate profit.

I spoke about "revenue" and then I said "profit". I was inconsistent. "Profit" would have been cancelled out. "Revenue" would have had to be backed out.

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