Maybe Abby made 50 and Ben earned 0.

But I just want to give you the gist of what's happening.

We are assuming a very simple world, were the is no taxes, we have no debt, we have no intrest or things

So they both deserve at least a price to earnings of 10.

So let me write this down.

So a plus b have to be equal to 50.

Profitable.

One of the viewers pointed out not incorrectly that one definition of return on asset so this whole video's going to be on return on asset that one definition of return on asset, and if you look it up on some of the finance sites or even some finance textbooks, they'll tell you it's net income over total assets.

So this is trailing 12 months.

Do we go for lots of users and then say if we get 10 million people the revenues will come?

And we add back the interest, at least in this example, we get to an operating profit number.

Invest financial assistance, but also management assistance.

So something very interesting is happening.

And we can eyeball it right here.

Sometimes we're profitable. Sometimes we're not.

So just to summarize for a Google search, each had its own value proposition, but most importantly each had its own revenue stream, and one segment cannot exist without the other that is, if you had users but you had no revenue, you'd be out of business over time.

Because when someone says earnings, are those the earnings last year?

And what's left over for the equity?

The earnings I just said, this is actually what happened to the company.

So let's look at them over the course of one year.

So notice.

Everything on this line would be a valid combination of

They're paying 400 the next month

You don't know.

And let's say that it's 2008 earnings.

Where they start to diverge is below that line.

Abby earned 10 more than Ben.

And why don't you like them as much?

So the price would be 100.

Another type of revenue model is licensing.

The reason why you are willing to pay a higher Price to

So let me switch colors just to ease the monotony.

And they were male and female 18 30 and they were casual fans.

Have you seen the latest figures, children?

It's just 10 because one, this is a nice round number.

In multi sided markets the company, your startup, typically cares about acquiring a massive amount of users and then figuring out how to monetize those users next.

Because to some degree, rental is kind of the earnings on a home.

We talked about the potential ways to charge

And the first one is that this whole idea about revenue stream, Steve, I get it.

So it has a Price to Earnings of 50.

You're making 10 , and that's just to connect the dots.

What does that tell us?

It's just a faster way of saying

Company A made 1 per share. 1 of EPS.

So now we add an interesting line.