Eli5: How can businesses like AWS and Visa that are largely based around data centers get more efficient/profitable as they grow? Meaning that every new user makes the company’s costs smaller while feeding into profits

Question

Eli5: How can businesses like AWS and Visa that are largely based around data centers get more efficient/profitable as they grow? Meaning that every new user makes the company’s costs smaller while feeding into profits

In: Economics

Answer 1

You’re thinking it incorrectly… the fixed costs are building the data center, marketing to land new customers, etc. the marginal cost to add a new customer is negligible. How much of their data center’s processing is a new merchant account using? .00001%? Amazon builds an entire datacenter filled with servers, then finds the customers to pay for their use so there is no real additional cost to adding a new customer.