“Cheap” is a poor proxy for value: the new business models…—SaaS [software as a service] in particular—are not well suited to traditional GAAP [generally accepted accounting principles] accounting. Here’s why: if distribution costs are zero, the optimal strategy is to gain as many customers for your software product, as quickly as possible. In digital businesses, there are increasing advantages to scale, and many of these companies operate in winner-take-all or winner-take-most markets. The name of the game is thus to build, grow, then monetize.
