, 5 tweets, 2 min read Read on Twitter
Always my favorite chart in the S-1, in this case from Pinterest. Note the gross margin in a user generated content business where the suppliers have no pricing power. A famous Zen master once said: "Find enlightenment in low COGS via UGC marketplaces."
Spotify is the other side of the pricing power coin from Pinterest:

"Spotify’s cost of revenue, consisting primarily of royalty payments to record companies, amounted to $2.8 billion or roughly 75 percent of the company’s revenue." google.com/amp/s/www.stat…
Spotify must increase its wholesale transfer pricing power in music via: (1) a better deal with labels, (2) becoming a label itself or (3) sell stuff other than music (e.g., podcasts) with better gross margins. The third choice is more within its contol and attractive to a buyer.
"There is a huge difference between companies with high gross margins and those with lower gross margins." Bill Gurley

“In the startup world, low gross margin almost always equals death." Mark Suster

google.com/amp/s/25iq.com…
There are two things in business that matter. You can learn this in two minutes: high gross margins and cash flow. The other financial metrics you can forget. With high gross margins you can grow the company as fast as the market will allow.” Don Valentine
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