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Comment by boredpeter | Hacker News Reader

This reminds me of the concept of predatory pricing which is when a business lowers their prices to below cost in order to drive out all its competitors and create a monopoly. https://www.ftc.gov/advice-guidance/competition-guidance/gui...

I do wonder if it could be argued (maybe even in the current monopoly case against google) whether youtube engaged in predatory or below-cost pricing in order to drive out all of its competitors, establish a monopoly, and now use that monopoly in order to "raise prices" i.e. increase the amount of ads on its service in order to maximize its profit margins.

Although this does seem to be the business plan of basically every startup out there. Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices and have a profit margin that far exceeds what should be normal.

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They did. They ran at a huge deficit for a very long time while expanding.

But this seems to be the play book for all VC funded web apps. Facebook and MySpace did the same. In fact, you can argue that moving towards profitability too soon and too fast is what killed MySpace. But that argument only works if you are willing to see the growth phase as something other than predatory pricing.

I think your comment is a sobering input to the whole startup discussion.

Agreed. Bruce Schneier allocated a chapter in his last book, .A hacker's mind':

"Venture capital itself is not a hack. The hack is when unprofitable companies use VC funding to ignore the dynamics of the market economy. We don’t want some central planner to decide which businesses should remain operational and which should close down. But this is exactly what happens when venture capital firms become involved. The injection of VC money means that companies don’t need to compete with each other in the traditional manner, or worry about the normal laws of supply and demand. They can do what would normally be crazy things—give away their products, pay extravagant salaries, sustain enormous financial losses, provide a service that actually harms people—because of that external funding source. It’s basically central planning by elite investors, something that would be called communism if the government did it."

Hah, I'd given some thought to malinvestment in capitalism but never quite connected it to malinvestment under central planning.

It feels about right... it's almost the same thing. Except there are multiple competing "central authorities" with money, so the ones who fuck up do get burned a lot harder than they would if they were part of the very big government.

That's more or less the opposite of communism.

It's not really. Communism is just the super monopoly on everything by one firm (plus a bunch of kooky religious like beliefs). This subset of VC funding uses is basically abusing external funding to gain market dominance so that one can abuse your customers with product changes that make the product more profitable for you. It's very equivalent to how an oligopolist/monopolist enters new markets using money from the rest of the business to undercut everyone in the new market and push them out. It's bad for society, just like communism.

This doesn't mean there's no place for VC funding, there's lots of legitimate uses for it (i.e. handling mismatched cost/revenue flows from expansion where there are a lot of upfront costs and cash flows come over the following years). Just that it's usually more profitable to be a monopolist/oligopolist and so that has been where the money has been flowing, at great detriment to society.

In every single example up to the parent comment, the end result is a market inequlabrium.

Left unchanged, the market can have new entrants that undercut the major player. In this case, any new video playform that has fewer ads could steal market share from youtube. Rumble has entered the market to do just that.

Network effects do make this challenging, but that is for the market to decide. The more creators that dual upload and then see number shifts over to a YouTube competitor, the better,as it will force YouTube back into competition.

The market will solve this.

I'm sorry to tell you this, but this is a complete fantasy that completely ignores the point that was made a couple of comments above. No one is undercutting Google. Period.and that is the point. They have a death grip on the user base.

Just look at Twitter, it completely spit in everyone's faces and even still people cannot get out of its grips on them.

The only platforms that have even remotely survived are platforms that also own an ad network, or some other secondary source of income (like Kick and their Crypto gambling site or Twitch with their ad stock) as a way to shovel users into that fire. The market cannot solve this and has no incentive to do so. Again, it's a complete fantasy that has not once proven true.

> Just look at Twitter, it completely spit in everyone's faces and even still people cannot get out of its grips on them.

People can get out of them. People refuse to get out of them. Likely this is because YouTube and Twitter are still the most efficient platforms regardless of their regressions.

I used to have FB. Now I don't. I used to have Twitter. Now I don't. I used to have Android. Now I have Grapheneos. I used to use gmail. Now I use Fastmail, Mailcow, and shared hosting. I used to have Instagram. Now I don't.

You can decide to not be a user of a service. You can build your own! Or more easily, you can migrate to a competitor.

All of this clamoring for more regulation is nonsense. We have a market that can solve these problems. But markets work by votes. The path is harder if you take the road less traveled.

I didn't even mention regulation. You're circle jerking with yourself with a fantasy idea of the "free market" that doesn't exist in reality. You can't consume your way out of large corporations having market dominance, idk where that insane notion even is born.

You can entirely consume your way out of it, and you can also build your way out of it.

It's not fantasy. This is how markets work; how economies work.

Let's look at something like FB. At one point they were absolutely the social company. But other competitors have entered the market. In some instances, new markets were created, like Tiktok. Those new products took users away from FB. In some instances, the users will never return. This has happened precisely because someone somewhere decided to make something and challenge the existing market.

> I didn't even mention regulation

My bad. I was getting this thread confused with the one about AI regulation.

“You” a market does not make.

People refuse to get out of them is the market. That is the point of their growth and dominance model.

> People refuse to get out of them is the market.

People refuse to get out of them because they are still the most efficient providers. Regardless of the user experience degradation, YouTube still offers the best product. For example, Rumble doesnt let me start looking for ve events from the beginning. YouTube does. Better experience.

My hypothesis: if YouTube only worked on Web Integrity browsers and forced a four hour ad before content was played, people woulf move elsewhere. They havent yet because YT is still the best.

I dont understand how people reach these conclusions - when we opened the conversation with discussions on the abuse of market power.

AND this is tech. The place that "network effects" was coined.

Private VCs using their money to control the economy doesn't really sound much like a "system of social organization in which all property is owned by the community and each person contributes and receives according to their ability and needs".

Private capitalists controlling the economy is practically the definition of capitalism. And it's bad for society indeed.

Yah, so you are really buying into the kooky religious like beliefs I see. Communism says what you have in quotations above, but it has never, ever worked that way for any serious amount of time. It always devolves into a system where the government owns everything or nearly everything and apportions things base don how it sees fit and that is a monopoly and a monopsony since the government is the sole provider of goods and services and the sole employer. It's a monopoly and it exercises power for the benefit of the bureaucracy that controls said monopoly with lip service to some idealized utopian BS.

That is not the definition of capitalism. The definition of capitalism is a system in which owners of capital control their capital in accord with their interests, which translates into competition because everyone else is also controlling their own capital and labor for their own interests. The natural outcome of this system is monopoly, which does closely resemble all the harms and dead weight loss of communism but, unlike under communism, the government is supposed to be there to stop total control, bust up the monopolies, and restore competition. It did a passable job of this until the Rehnquist supreme court in the 70s and it's time to start back in that pre-rehnquist direction. It's never time for communism.

He's literally complaining about one of the worst "features" of fiat money but attacks Bitcoin in his other publications. Amazing.

_Dumping_, how it was called when I was young, is the main strategy of most startups out there: operate at a loss until they establish themselves (usually as the sole provider of certain services or goods) then start to climb the prices.

It _should_ be illegal, but since it's the current status quo, it won't change anytime soon.

I think that the amount of free services we got in the last decade is the strongest argument IN FAVOR of dumping. They got there through subsidized services, now they want to fleece everyone, let's see how it goes. My guess is that competitors will arise and gain market share. It's happening to Uber down here in Brazil. The prices are getting too high, Brazilians are migrating to other apps, especially InDrive, a russian based app. Capitalism is great.

I strongly believe that, at least for youtube, there are no forthcoming competitors to gain market share. Network effect is too strong, and if even an inkling of that happens the policies that lead to people leaving will be rolled back just enough.

Policies being rolled back are just the market forces adjusting itself in real time. I'm pretty sure the current trend of forcing ads on everyone will not be feasible, and I reaaaaally hope Google keeps pushing people until a peertube-like option can become a reasonable alternative to the current monopoly. I can even see "torrents for YouTube videos" becoming a thing if they keep enshitificating it.

Youtube got to its current position not by lowering prices but instead by Google making sure that Youtube videos are returned at the top of Google search results. Competing video websites don't have this advantage.

YouTube had already beat its competitors before it was sold to Google.

Including Google Video. Google did try the tactic of using their search engine to promote their own video platform, but it was against YouTube and Google only bought them because it didn’t work.

it didnt work because people don't search for videos via google usually. They get the video directly from youtube, or was linked by friends virally.

Plus the early days of google (before youtube acquisition), i dont think their video search was as good as the text search anyway (but i might be misremembering of course...).

Their video search still sucks.

I'd go a lot further than "sucks".

The video results for most of my queries are like 90% SEO garbage without a video even being present on the linked page.

It's abject failure.

> Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices

Slightly off topic, but the business plan of most startups seems to be "get VC funding, and exit". What you wrote may be the business plan of VCs.

I don't understand the valuation of many startups these days (even in the hypothetical case where they capture 100% of their potential market one day).

VCs don’t invest because your business has a bright future as a valuable, sustainable operation . Not anymore.

The crypto dynamics have shifted the expectations so far to cheap, quick moment they most VCs, especially the a16z kind are more about “Can I juice this business and it’s metrics enough to sell it to someone to hold the bag”.

Ironically I think the large numbers involved are basically part of that PR game - they act as proof that the business is worth it and attract attention and bagholder interest.

The crypto economy worked like that too - the NFT wash trading, the signal metrics used to sell the idea that there is value where there is none.

Probably something something wework too.

> The crypto dynamics have shifted the expectations so far to cheap, quick moment they most VCs, especially the a16z kind are more about “Can I juice this business and it’s metrics enough to sell it to someone to hold the bag”.

This strategy existed long before "crypto"

And crypto is just tulips 2.0.

> Get VC funding, run at a loss and burn through money but gain a monopoly market share, and once you've done that you can raise your prices

Google, YouTube's owner, isn't a VC. YouTube was its best when it was burning VCs' cash.

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