How do these tech companies continue operating at a loss every year? Net loss for these companies reach hundreds of millions yet they are still operating till this day
In: Economics
Rapidly growing companies need to spend lots of money to build up to a scale that can be profitable. Investors have poured billions into Uber, for example, giving it the money it needs to built up. The money is spent on driver bonuses to attract new drivers to the platform, discounts to riders to compel people to install the app and try the service out, incorporate it into their daily lives. And for Uber specfically, there was a TON spent lobbying and litigating to be allowed to operate. Traditionally, taxi services were heavily regulated and driver numbers limited and Uber broke those rules pretty much everywhere. It has had to spend millions getting laws changed and fighting lawsuits. But once those are settled and it can operate legally in the major markets it wants to, when it has a large enough network of drivers and passengers in those markets, it can drastically pull back on the spending and see profitable revenue.
Similarly, Amazon “lost money” for 20 years, but spending 2 decades building out a logistic system and dozens of data centers that now set them apart from the competition mean they can reap the profit rewards from here on out.
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