Also software often has higher gross margins, so the net profit per employee theoretically could be higher than a company with higher revenue per employee.
Well, I agree in theory, but I only chose industries where the major expense is people. So if revenue/employee is lower, either pay/employee is lower or margins are.
I suppose a third possibility is that software compensation may have a larger equity component, which would allow software employees to take similar overall comp at lower revenue/employee levels.
Advertising and Media firms frequently have very high outside expenses, so that they appear to have much higher revenue than they really do. It's not just actors, it's all of the other contractors that are used to produce an ad or a show. So the real revenue is just their markup on outside costs. Plus much Ad firm revenue is from media buying - the real cost of a TV campaign is not in producing a spot but in buying placement, and the ad firm only sees a relatively small markup on the cost of placement.
Then you have the issue of conflating consumer software firms - Twitter, Facebook... who capture minimal revenue while they try to build out their userbase and network effects - with enterprise software firms who can and will charge their day 1 customers large amounts of money.
This exercise would be interesting if it were conducted by someone with a strong understanding of the structure and strategic choices of the software industry and how to compare firms with inherently different gross and net margins.
ghein- I think a comparison of margin/profitability metrics would be interesting as well. If you find any data on that, please post.
This analysis is geared less at understanding profitability/valuation metrics and more at operational and modeling decisions around growth, like headcount needed to support revenues in high growth companies.
Comments
Also software often has higher gross margins, so the net profit per employee theoretically could be higher than a company with higher revenue per employee.
Well, I agree in theory, but I only chose industries where the major expense is people. So if revenue/employee is lower, either pay/employee is lower or margins are.
I suppose a third possibility is that software compensation may have a larger equity component, which would allow software employees to take similar overall comp at lower revenue/employee levels.
You actually didn't choose comparables.
Advertising and Media firms frequently have very high outside expenses, so that they appear to have much higher revenue than they really do. It's not just actors, it's all of the other contractors that are used to produce an ad or a show. So the real revenue is just their markup on outside costs. Plus much Ad firm revenue is from media buying - the real cost of a TV campaign is not in producing a spot but in buying placement, and the ad firm only sees a relatively small markup on the cost of placement.
Then you have the issue of conflating consumer software firms - Twitter, Facebook... who capture minimal revenue while they try to build out their userbase and network effects - with enterprise software firms who can and will charge their day 1 customers large amounts of money.
This exercise would be interesting if it were conducted by someone with a strong understanding of the structure and strategic choices of the software industry and how to compare firms with inherently different gross and net margins.
ghein- I think a comparison of margin/profitability metrics would be interesting as well. If you find any data on that, please post.
This analysis is geared less at understanding profitability/valuation metrics and more at operational and modeling decisions around growth, like headcount needed to support revenues in high growth companies.
Fair enough, thanks.