Of Bitcoin and EBITDA and Micropayments, oh my!

 

EBITDA? Micropayments? Bitcoin? What?

EBITDA [i] is simply the Earnings that a company has Before Interest, Taxes, Depreciation, Amortization. It is in essence a true representation of a company’s earnings power. How much money did the company make if we only include the products of the company and not any extraneous factors?

The SEC doesn’t recognize EBITDA as an official metric, so in this case we’ll use “net income” as a substitute. So, in Amazon’s case for the 3 months ending 2013/12/31 net income was $510 million on Gross Sales of $25,587 million. If we assume that they pay the industry standard 2% of their sales for merchant services, or in other words, the ability to actually take credit cards, then a 100% conversion of Amazon’s sales to BTC will save them, $25,587*.02=$511 Million. That is money that goes directly to the bottom line. [ii]

In other words: If Amazon fully converted to Bitcoin they would DOUBLE their profits. I wonder what that would do to the stock price …

 

Micropayments[iii] are simply small payments. Currently it isn’t profitable to have micropayments. The merchant processors charge not just a % fee, but also a transaction fee, which in some cases might run up to $1 or more PER transaction. But Bitcoin doesn’t have that problem. Sending very small amounts of money, while sometimes slow, is essentially, free.

This opens up an HUGE amount of business models that were until now unprofitable. As Max Keiser tweeted about a month ago: “Netfllix is thinking about going BTC.”[iv] This is because it’s unprofitable for Netflix to sell you a movie for a $1. It costs them more than that to process the transaction. But in BTC? EASY. And Netflix is just one example of where micropayments make sense. How about weekly news articles? Can you say “Chicago Sun-Times?”[v]

So for all of those who worry about Bitcoin adoption, or who wonder if my future visions of the utility of Bitcoin are a far away dream I show you REAL utility. TODAY. NOW.