[dsukhin]

I've considered this question a number of ways. The fact that capital holders are gatekeepers to innovation is unequivocally worse for federated innovation, but it has created an interesting class of companies which may never need to turn a profit yet still have a positive (and growing) net present value.

Take Wikipedia for example. They lose money running a high traffic service (edit: see below reply for clarification), but it's plain to see they hold a huge asset in terms of goodwill, usage, knowledge base, and their contribution to research and knowledge growth. Despite its operating losses, its capital value (which may be in the form of social capital) is huge and will likely remain well financed into the foreseeable future.

The fact that the service is free is not relevant: a startup offering an invaluable service that is based on years of user research, development and testing has developed an asset which helps other companies and companies pay what they think it is worth (or at the beginning a subsidized rate to take a risk to try it). Operating losses at most start ups are from continued R&D; but if they were to just declare the product as "done" and have a sufficient moat/network, they could rent seek on the asset for years - yet in many cases that's not what is best for anyone (company, clients or shareholders) - we continue to want them to innovate for the good of the product and there will be stakeholders that would rather finance this research in perpetuity to grow the underlying asset and thus the value of the product and company.

Inductively, that's a company with negative NOL but positive NPV. In the physical world this might be the same as an apartment complex that's expanding (forever). They may currently collect $1M in rent, but they are spending $2M on new construction. The new construction may bring in $5M over its 30 year lifespan but it will never be enough to outpace the immediate outlay of continued construction cost. As long as the time value of money is correctly attributed, this isn't a new idea - just one that's been pulled to an extreme.

[relaxing]

Wikipedia does not lose money in any sense. Its revenue exceeds expenses, and net assets increase year over year. And in any case, the Wikimedia foundation is organized as a nonprofit.

[AndrewDucker]

A) Wikipedia is a non-profit.

B) Wikipedia makes money. https://en.wikipedia.org/wiki/Wikipedia:Fundraising_statisti...

[dsukhin]

Yes, they get enough donations to cover their costs, just like Uber has enough VC cash and loans to continue its operations. It's non profit tax status is not strictly relevant to the fact that you typically need at least as much as money as it takes to run your entity rather than less. In my opinion, this doesn't change the spirit of the point that Wikipedia doesn't make money from its free, high-traffic service but rather from favorable financing for its goodwill and assets similar to a not profitable startup.

[xtracto]

>Yes, they get enough donations to cover their costs, just like Uber has enough VC cash and loans to continue its operations

VC Cash and donations are a finite resource constrained by their stock pool and their leverage.

Donations dont have these limitations.

[starfallg]

Non-profits rely on donations as a revenue source. As opposed to investment, nothing is given in return. Not sure how you can compare that with VC cash or even loans.

[Retric]

Wikipedia is profitable. The foundation funds other projects from it.

[Supermancho]

> The Wikimedia Foundation relies on public contributions and grants to fund its mission.

The wiki (https://en.wikipedia.org/wiki/Wikimedia_Foundation) tagline suggests the underlying truth. Wikipedia gets ~half of its revenue from the investment-based endowment managed by the Tides Foundation. The leveraged capital is largely at the charity of large organizations (like google, amazon, etc) who have donated to that endowment over time, plus the remnants of their initial investment portfolio afaict.

Wikipedia would inevitably scale back in size without the continued charity of individuals and organizations around the world.

[Retric]

Being able to toss up a banner requesting donations on the 10th most visited website in the world is extremely valuable.

The Wikimedia foundation brought in US$104.5 million (2018) and only spent US$81.4 million (2018) even as their funding many projects independent from Wikipedia.

In the end donations are just revenue.

[QuantumGood]

"Profitable" ads may sell products or services, or as in Wikipedia's case, solicit donations that make up half its revenue.