Re: How do they expect to be profitable next year?
This whole losing money hand over fist thing bemuses me as well. I remember how much Amazon lost before finally turning a profit and I wonder how many investors went bankrupt or never made their money back, let alone a profit.
There are several things to consider but the main thing driving these platforms is the expectation of growth leading to monopoly or at least dominance of the market. Then, there is the financial engineering to consider: Amazon expressly pursued a growth instead of profits strategy, which many investors liked. Profits incur taxes and dividends in turn, at least in the US, incur higher taxes than share sales so many were happy to not to receive dividends and just see the share price rising. Nevertheless, it took a long time before initial investors saw a return on their investment. AWS and the other digital investments have redressed the balance somewhat. Though, while Prime fits in the strategy as guaranteeing long-term cashflow through long-term subscription, it's difficult to fit AWS into this model.
Higher share prices also mean that a company has a lower cost of capital than companies who borrow from banks. This is really skewing some markets as investors consider their bets "too big to fail": Tesla is being given far easier terms by investors than its competitors. If the money was coming from banks rather than from the capital markets, foreclosure would have had to happen long ago.