I hope nobody seeks out slimebeast for investment advice

Pikmin said: I hope nobody seeks out slimebeast for investment advice

 Indeed.

bdbdbd said: TheRealMafoo said: I am not a business guy, but I havm a few friends own some companies, and they are very concerned about revenue (in some cases, more than profit). Selling 100,000 things that make you $10 each is far better than selling 10,000 things that make you $100 each. I am not sure why. Maybe a business guy could chime in and explain it.   I'm not a businessguy myself, but i do understand the reason. Your friends are concerned about revenue, because it shows the value of your market. Without market, no profit. If you have high revenue, but low profit, you can increase your profit by cutting down costs. High sales volume, compared to low volume, cuts costs per unit sold. Production usually gets cheaper as volume grows, as well as logistics. Also, in your example, the cheaper product has larger market, which means that demand doesn't jump up and down that much, as it does with expensive low volume products. Think it this way, that your truck/van can take 10 units of the item you're selling. Since you have to pay for the driver and you have to pay the diesel, one truckload increases costs by 100€. So, it would increase the price by 10€/unit, or eat away your profit by 10€/unit. Then you have another product, which you can fit 100 units to one truckload, costs are the same, so the price increases by 1€/unit. And the same goes for retail, low volume equals higher costs/slower returns for their investments etc. Although your question was purely hypothetical (the two products would have to be completely different, when the competition aspect would be different too), the whole process is a little too complicated to explain (atleast for me in english), but the generalisations i made should work as an example.

Aah first good reasoning I've seen. +10.

I definitely see the value in that from the businesses perspective...but I'm curious if you see any value in discussing revenue for VGC users considering we lack the rest of the information that a strategists would use to monitor the things you pointed out.

I think what I'm saying is that I definitely agree revenue isn't a throwaway number from an internal businesses standpoint in terms of monitoring your strategic position in the market. I'm just not seeing what it has to do with the discussions about "Which console will [game] come out on?", "Will the Wii/PS3/360 get more 3rd Party Support this generation?", etc....

edit:

@therealmafoo,

I actually made a very similar example in my OP =P  So, yes, I agree lol =) 

I work for a company that has annual revenues in excess of 80 billion (US$), you probably won't have ever heard of the name though. I prefer to look at market capitalzation as an indicator as it shows a companies true worth.

Profit may be the important number for the short-term. But revenue has a couple of advantages:

1) You can measure it easily and compare it. Profit is a very complicated number, depends on taxes, loan repayments, legal tricks to avoid taxes etc. Profit of big companies can be more or less meaningless in many cases and it oscillates bigtime.

2) In many cases revenue is the important number because it gives you an idea about the size of the firm in a marketplace. If a company makes 100billion in revenue and looses 100000$ it still will be worth much more than a company making one million, who makes 100000$. Why? The big company could reduce costs for the next year for example by 1% of revenue and it would make 1 billion profit. The small company would need to get 1000 times bigger to just have as much revenue.

So revenue=size of a company, potential for future profit

And because of that its at least as important as profit.

Sqrl said:   Clearly in some situations revenue is the only number we are given, particularly with MS who loves revenue because well...frankly profit isn't nearly as positive for them as it is for other companies.

"For the three months to March 31, Microsoft reported a 10.9 per cent drop in net income to $4.3bn, factoring in the EU's anti-trust fine of $1.42bn, on revenue that grew less than one percentage point to $14.45bn."

 

Can you name many other companies that made 4.3 billion in net income for the first 3 months of this year, and 4.7 billion for the 3months before that?  Maybe if you are Exxon, i don't think many other companies pull in that kind of money.

Griffin said: Sqrl said:   Clearly in some situations revenue is the only number we are given, particularly with MS who loves revenue because well...frankly profit isn't nearly as positive for them as it is for other companies.   "For the three months to March 31, Microsoft reported a 10.9 per cent drop in net income to $4.3bn, factoring in the EU's anti-trust fine of $1.42bn, on revenue that grew less than one percentage point to $14.45bn."   Can you name many other companies that made 4.3 billion in net income for the first 3 months of this year, and 4.7 billion for the 3months before that? Maybe if you are Exxon, i don't think many other companies pull in that kind of money.

I'm not sure what your point is. You quoted me as saying sometimes we are only given revenue info and then cited a quote that talked about revenue.

Also why are you asking me to cite a company with larger revenue?  

The dotcom bubble has proven the contrary. For a time Aol was worth as much as TimeWarner. Revenue (in combination with profit) is much more reliable.

Kyros said: Did I miss something that was special about revenue? Profit may be the important number for the short-term. But revenue has a couple of advantages: 1) You can measure it easily and compare it. Profit is a very complicated number, depends on taxes, loan repayments, legal tricks to avoid taxes etc. Profit of big companies can be more or less meaningless in many cases and it oscillates bigtime. 2) In many cases revenue is the important number because it gives you an idea about the size of the firm in a marketplace. If a company makes 100billion in revenue and looses 100000$ it still will be worth much more than a company making one million, who makes 100000$. Why? The big company could reduce costs for the next year for example by 1% of revenue and it would make 1 billion profit. The small company would need to get 1000 times bigger to just have as much revenue. So revenue=size of a company, potential for future profit And because of that its at least as important as profit.

 Again I agree with a lot of this, but do you think this is of value to gaming nerds like us talking about possible releases and 3rd party support?  It seems like it is far more useful to the folks who actually make decisions for the company.

 

Ultimately a game that makes large profit will likely see a sequel and a team that releases games to high profits will likely get a green-light on more projects. Where as a game that just breaks even will probably languish in the anals of gaming history as a "one of", and similarly a dev team known for making games that just break even ...well they likely all get fired or broken up.

I get that a company with larger revenue has more potential for profit...but its the actual profit that matters still..not the potential profit. Potential profit is about as useful as wishful thinking ultimately. 

A large revenue company can also have large expenses and lose money very quickly as well as the opposite.