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That's the market for you.

If we are lucky, things will get less expensive and quality will go up for both products.

The problem is that there'a an explicit floor to the price: it can't be less than what the service pays to subcontract the request, or the service will lose money on the transaction.

The little margins present will be eaten away. (Unless subsidized by venture capital like all the other startups with similar models)

If there are multiple players in the market such that you can't make a profit then you leave the market as will others until either a) the market stabilizes (or a clear brand winner emerges) b) disappears because it's fundamentally unprofitable.

I'm pretty sure b) is already the case (Magic said they break even on transactions, which means they are losing money due to cost of human capital)

I don't think that means it's fundamentally unprofitable. It's a pretty standard strategy to grow the market by subsidizing early adopters. They can try to raise prices over time or benefit from economics of scale. Perhaps, for example, when they get to a certain size, they'll have enough clout to get discounts on the various services they utilize.

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