Exactly. They have a huge VC war chest, and they deliberately set out to lose money on every sale for years, just to gain market share, in the hopes that their competitors will go out of business before they run out of money.
Of course, the competitors also mostly have huge VC war chests, so an arms race develops..
Yes, I think we're in an advertising bubble. All these companies that would never have existed under normal conditions managed to raise tons of funding and acquire millions of users through advertising.
The intense competition between tech startups (who are all desperately racing to secure a monopoly in their respective industries) has increased the demand for advertising space and therefore driven up cost per click.
Of course, the competitors also mostly have huge VC war chests, so an arms race develops..