Margin Pressure

Finance a la shmoop... what is contribution margin, well, shmoop has spent a fortune

building the oh so fine content you digest and then mostly for free and you [Girl watching Shmoop videos]

could pay us if you wanted to..For years we've made no operating profit choosing

instead to roll any excess cash we found in our cigar boxes into building more

content so while our operating margins ie the cost of running the entire

business paying our writers, our clowns, our rent, our cloud storage facilities the [Clown bouncing on the spot]

office jester we have on retainer permanently to entertain the writers

have been low or nearly zero our contribution margins are really high

that is our cost of serving another thousand pages which you view hungrily

clicking on our ads thank you very much that cost to us is well something less [Person holding half a penny]

than a penny but we sell it to advertisers for a thousand page views

and about three bucks a unit there thousand pages for three bucks what a

deal so the contribution margin of that additional n plus one unit of our

product a thousand page views is extremely high like $2.99 divided by

three dollars or well over 99% contribution margin those are

our contribution margins here at Shmoop, very very high and not all companies [Man discussing contribution margins]

have such high contribution margins our sister company robot-date-eat-pray-

love which manufactures emotionally deep robots designed to take the place of [Emotional robot walking with a woman]

well you know special friends well they sell their robots for 15 grand each

but their cost of building that robots really high like 12 grand each no matter

how many robots they make so RDEPL carries a contribution margin of just 15

minus 12 or 3 grand / 15 grand or about 20 percent sorry all these numbers may

sound a bit tedious but if you're on a date with the robot they make for some

scintillating conversation [Girl sitting with robot on a date]