All revenues are not created equal, by Bill Gurley in 2011 - still quite relevant today.

Bill nailed back then, in very simple words, what most investors only realized over the past 2 years

h/t @clueless_1337 https://abovethecrowd.com/2011/05/24/all-revenue-is-not-created-equal-the-keys-to-the-10x-revenue-club/

On gross margins: This may seem super-basic but there is a huge difference between companies with high gross margins and those with lower gross margins. Using the DCF framework, you cannot generate much cash from a revenue stream that is saddled with large, variable costs.

Marginal profitability: Companies increasing profit margins while they grow carry high multiples, as future periods will have higher earnings due to the cumulative effect of increased profitability.

Basically incrementals. Also makes human capital-heavy businesses tough to scale

Major partner dependencies: Investors don't like companies too dependent on partners because the company is exposed to issues out of the control of management. No one wants a partner policy or algorithm change to have unpredicted negative impacts.

ex: Demand dependence on Google

On organic demand vs heavy marketing spend

For a period of time, Jeff Bezos was a heavy investor in marketing, but after a while he retrenched. “About three years ago we stopped doing television advertising. We did a 15-month-long test of TV advertising. “More and more money

will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.”

This should not be read as a blanket condemnation of all marketing programs, but rather a

simple point that if there are two businesses that are otherwise identical, if one requires substantial marketing and one does not, investors will pay a higher valuation of the one with organic customers.

other factors helping to get richer valuations:

lower capex intensity since it requires lower constant funding, optionality, network effects, recurring revenues, switching costs

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