"When it comes to Internet stocks, investors seem to be rewarding revenue growth a great deal more than profitability, and have been doing so correctly for some time. Of course, when a company has achieved what seems to be critical mass, earnings are merely frosting on the cake, and hence are paid for as such. Otherwise, revenue growth is more greatly rewarded than earnings growth."
I think Rimer is talking about the phenomenon of increasing returns in tech. Basically sacrificing profits in the short term to gain enough market share (critical mass) that profits can flow later.
Because in the next few paragraphs he mentions "getting big fast" to increase barriers to entry and switching costs due to integration stickiness.
"When it comes to Internet stocks, investors seem to be rewarding revenue growth a great deal more than profitability, and have been doing so correctly for some time. Of course, when a company has achieved what seems to be critical mass, earnings are merely frosting on the cake, and hence are paid for as such. Otherwise, revenue growth is more greatly rewarded than earnings growth."
I think Rimer is talking about the phenomenon of increasing returns in tech. Basically sacrificing profits in the short term to gain enough market share (critical mass) that profits can flow later.
Because in the next few paragraphs he mentions "getting big fast" to increase barriers to entry and switching costs due to integration stickiness.