The Relevance of Market Share

by Da'Von B.

To simply cut to the chase, companies operate on profit, profit is what will help a company continue with their operations. If you have very little market share but making substantial profits, that’s what is relevant to your company’s future, if you have substantial market share and you make very little to no profit, that doesn’t bolster your company’s future.

It’s clear that many tech sites out there are too simple minded, too narrow minded, or doing the relevant research or developing an understanding of the mechanics of market versus profit is just not something they’re willing to do, this comes up in articles from Mashable, Bloomberg, even the NYTimes amongst many others. There is a difference between the two and having a high market share with little to no profits isn’t a positive thing to boast about.

(T)he primary problem with using market share as a measure of business health is it provides no insight into the profitability of the product being sold – Bill Shamblin (Techpinions.com)

Gruber linked to a story on techpinions that offers substantial insight into what exactly market share means and how pathetically narrow minded many of these tech sites out there are with regard to measuring a company’s performance primarily based on market share. The best part of this piece is what Gruber highlighted;

Scoring by market share alone and ignoring profit is like saying that a baseball team won because it had more hits when the other team scored more runs. Scoring by market share alone and ignoring profit is like saying that a football team won because it gained more yards when the other team scored more points. Scoring by market share alone and ignoring profit is like saying that a hockey team won because it had more shots on goal when the other team had more goals.

Market share without context is not only useless, it is worse than useless because it is likely to be misinterpreted.

All of this must be read in-depth, because many readers for some sad and unknown reason fall under the assumption that these tech sites must be right when it comes to a company’s performance based on how much market share they have with complete disregard to the profit a company makes.

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