Bigger profits
In any business the profit is calculated by –
Margin on each sale * total number of sales.
So for profits to be high, either the margin on each sale should be high or the total number of sales should be high.
Take for example a wholesaler. A wholesaler’s margin is very less but his quantity of sale is very high. On the other hand take a retailer, a retailer has a huge margin on every sale. This ensures that even if he sells a small quantity, his profits are large.
Generally intangible products like software tend to have less margin and more quantity while tangible products tend to have more margin and less quantity.
Google is in the business of selling ads. Google has millions of advertisers. However its margin on each advertisement is very small. On the other hand, Apple is in the business of selling consumer products. It has a $400 margin on each product it sells. So even if it does not sell as many as ads as Google, its profits are way above Google.
