But these companies bring in so much money! Yes, they do. But, that comes with a couple of caveats. Think about a company like Groupon -- one of the red ones up there -- for example. The massive marketing costs cancel out all those daily deals it brings in -- so much so that it tried to hide that high business expense during its IPO filing. Though it's not unusual for start-ups to prioritize growth over profitability, it's not clear that Groupon's business strategy will lead its high revenue to ever cover those marketing costs, as Slate's Matt Yglesis pointed out a few months ago. He wrote:
These costs aren’t one-time investments—they’re constant expenses in a never-ending struggle. There’s nothing wrong with being a business with high marketing costs, but if you’re in a marketing-intensive industry then you need revenues high enough to cover your costs. Groupon doesn’t have that, and lurking beneath its various accounting woes is the dubious underlying theory that they’ll never need them.
In this social media bubble, Groupon's not the only one with dubious business practices, either. Even King Facebook, which turns a profit, might not have advertisers convinced for too much longer.
But, what about other companies -- they still bring in big bucks? Well, yes, this number serves one benchmark of viability. But these were also more mature than younger companies by the time they IPO'd. Due to market instability, many of these companies pushed back their public debuts, giving them more time to grow their revenues. With companies already at these higher revenue numbers, it also means they will see less growth after an IPO. For what it's worth, the company with the smallest revenue Zillow had the smallest loss of all the companies on the list, and has since become profitable.
Okay, but this is still different than the dot-com bust. Yes, it is. It's selfish. As the numbers show, back then, companies had to show profits over revenue. That means companies during the dot com bust were less spend-happy than the ones today, as The Next Web's Alex Wilhelm notes. "When you imagine the late ’90s, parsimony is hardly the first word to come to mind," he writes. These numbers fit the selfish social media bubble narrative, with these hot startups spending all their money on company expenses rather than turning profits for investors.