I have a few friends that work or have worked at Unity. This is purely anecdotal but from what I've heard it sounds like the place is fairly dysfunctional at this point. A lot of the dysfunction that exists now wasn't there even 3-4 years ago.
And don't forget Amazon. They aren't venture backed but they have access to capital at cheaper rates than most countries due to their position as a stock market darling. They use ultra-cheap money and a willingness to run negative margins which they refer to "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon does.
Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville. The Quidsi board convened to discuss the possibility of letting the Amazon deal expire and then resuming negotiations with Wal-Mart. But by then, Bezos’s Khrushchev-like willingness to use the thermonuclear option had had its intended effect. The Quidsi executives stuck with Amazon, largely out of fear. The deal was announced Nov. 8, 2010."
Quidsi founder Marc Lore sold his next company, Jet.com, to Walmart for $3.3 billion [1]. Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation, so hardly any pity from me.
To add, Lore's current startup is a premium food delivery service called Wondery that raised $350 million at at $3.5bn valuation last year [2], and it's not profitable too. None of Lore's companies have ever turned profits but he's made enough money to buy the Minnesota Timberwolves...he's the perfect example of venture predation, lol
Being a business owner with actual profits from technology by selling a useful product, I can never understand the bizarre emergent properties of our current financial system that lets folks like Marc Lore to exist.
> Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation
I don't know about the books in this specific case, but losing money doesn't mean you're into venture predation. You could very well be losing money but also have sound unit-cost to price.
> You could very well be losing money but also have sound unit-cost to price.
If you have that and still loose money then you are doing other things that get you ahead of your competition that need to sustain their operation with those prices. Either way you use somebody's money to cheat your competition.
> Either way you use somebody's money to cheat your competition.
That's the principle of investment.
The difference between using money to improve productivity, or make the product more appealing to the consumer, or whatnot, and price-dumping, is that investing is supposed to generate long-term returns, which can benefit the company or consumers. Price dumping, on the other hand, doesn't generate future returns. It generates costs that the consumer will have to repay later.
In the first situation, consumers may benefit from that competition. In the second situation, they inevitably end up losing.
Amazon isn't unique in this case. Your example is a bit of cherry picking. These tactics are common in retail (demonstrated by the fact that WMT, AMZ, and COST are the top 3 retailers in the world).
> access to capital at cheaper rates than most countries due to their position as a stock market darling
Last I recall, AMZ uses an internal WACC of 8-9%. That's really only marginally "cheaper" cost of capital than most other mega-cap firms, it's not really a big advantage.
Its cost of capital advantage mostly comes from its access to cheap short-term credit in its retail cash cycle, not the equity market (like you suggest).
> "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon does.
Costco regularly runs negative or break-even margins in its merchandising. Its language for this is "reinvesting in value" or "reinvesting in price". It can do this, similar to Amazon, because of their membership business.
Walmart also regularly runs break-evens/negative margins in select merchandising lines depending on geography and competition.
> Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville.
How is this not a serious anti-competitive monopolistic practice? Did the Dept of Justice get involved?
It wouldn’t result in a monopoly or near monopoly in any real sense, and it’s also hard to say it would meaningfully result in a restraint of trade. It’s also hard to say the consumer would be hurt by free diapers, at least in any concrete way, and if he didn’t add in ‘and raise the prices later when you’re dead’, it also wouldn’t be an easy thing to provide it wouldn’t just be wasting money out of spite. Which is purely legal.
Is it a strong arm/shitty tactic? Sure. Welcome to the real world.
It's anti-competitive but extremely American/capitalist. The whole premise of our economy is to leverage wealth and advantage to build more wealth and advantage until you're the wealthiest and most advantaged. That Bezos continued to do this is part for the course.
If we want true competition, we need a merit-based society instead of a wealth-based one.
I dunno. Bezos is pretty good at managing a company. A lot of people chose to bet on Jeff Bezos. He delivered phenomenal results for decades. I’m not seeing the societal failure.
The societal failure is the 1.5 million Amazon employees who work horrid conditions for not enough pay to support a family, housing, or healthcare. For the engineers who work at corporate and are underpaid due to salary collusion between tech companies. And the million other net-negatives for society that Amazon and every other billion dollar company has inflicted upon the planet.
Ultimately billionaires (capitalists) are profiting unfairly off the labor of others. This is obviously an unpopular opinion on a website promoting VC.
There's a nugget of an interesting concept here. I would like to know more, but I would also like to know more from the folks downvoting you as to why they disagree.
Could you please expand on your thought? I know some recent conversation has been had about the potential that open source models have to "win" against Big Tech, so I'd love to know how your thought accounts for that as well.
It seems obvious, they are burning through Microsoft's money for now (it was said these chatbots cost way more to run than they make profit) to capture the market and be able to get thick margins later.
> it was said these chatbots cost way more to run than they make profit
Well if it's running on Azure and using massively overpriced Nvidia data center GPUs I can't imagine anything else would be possible. Then again it's not like there any incentive for OpenAI to increase efficiency as long they get 'free' Azure credits (and it's not like the real cost for MS is anything close to what they are supposedly investing into OpenAI. IRRC that 10 billion was mainly not in actual money)
They have money because of AWS, which is a fantastic product in an extremely competitive market, competing against players who lose money like GCP and Azure.
Amazon.com as a store makes next to nothing as profit.
Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less.
They basically run amazon.com for no profit and consumers get fantastic deals and cheaper products and more reliable service than ever before.
How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive.
> Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less.
They are probably generally paying less but Amazon isn't the surefire low-cost provider on the internet the way they used to be. I don't expect the trend of them raising prices to reverse as they gain market power.
> How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive.
It's not "ripping off" it's just charging customers the actual cost of the service they are getting.
No, my concern was the claim that something happened to the diaper companies is false.
Some middleman website might have lost out on being able to sell for more money to Walmart, but that was their choice to not to pursue a deal with Walmart.
I am guessing what they were probably concerned about was guaranteeing themselves cashing out at least at Amazon’s offer because if Walmart found out Amazon was backing out of the deal, then Walmart would have had the power to push the price down.
Either way, diapers.com was going to lose to Amazon/Walmart/Target/Costco in the long run, so if they were getting a high valuation simply for being a popular website as online shopping was ramping up, then their best move was to sell while the iron was hot.
> consumers get fantastic deals and cheaper products and more reliable service than ever before.
This hasn't been true for many years IME, and will almost certainly get worse over time. Companies like Amazon don't fight tooth and nail to monopolize industries because they want to be nice to people, they do it because it results in power they can use to increase profits over the long term. Less competition means that they can ratchet up prices for customers and squeeze sellers/suppliers more. There are only a handful of general stories online these days, largely due to Amazon's actions.
I have never ever seen an example where Amazon has ratcheted up prices on any product after getting x market share. In fact, I've seen the opposite. Looking at camelcamelcamel price history, many diaper products on Amazon are trending down since 2018-2019 (max price history). Surprising given inflation.
It's too easy to enter the diaper (or whatever) retail market that such a tactic makes no sense.
How on earth do GCP and Azure lose money when they (just like AWS) are ridiculously expensive? Like frequently >3x the competition for VMs and for bandwidth egress, I’ve sometimes seen 10x, or charging for things that competitors don’t.
Except Amazon has the the diaper production locked up, and we're back where Amazon temporarily sells them for 2 bucks while you try and get your diaper factory off the ground.
The latency between the observation of a market opportunity, and actually realizing lower prices at the consumer level, is significant. Millions of people would be charged monopolistic prices for the year it would take.
This also assumes Amazon doesn’t buy any competitor early on, such as happened with Warby Parker.
