Desire creates profit?

With LVMH becoming one of the world’s ten most valuable companies, we get another data point that luxury conglomerates are Europe’s equivalent to the US’ big technology companies. LVMH founder and CEO Bernard Arnault was interviewed by the Wall Street Journal about the acquisition of Tiffany’s and was quoted:

Instead of thinking about profitability, Mr. Arnault urges his executives to think about desirability. “When you create desire, profits are a consequence,” he said.


I think there are similarities between how desirability leads to profits for luxury goods companies and how engagement should lead to profits for digital consumer products. But there are big differences, not least from the fact that luxury goods are paid when the product is purchased and before usage. The only big tech company with that dynamic is Apple.

Others are mostly monetized indirectly with advertising (which is an operationally completely different business to become great at than building a highly engaging product) or have delayed monetization with freemium or free-to-play (which is somewhat aligned with engagement for a paying users, but not entirely).

The fact that engagement doesn’t equal profit can be seen in that many consumer services have significant usage and engagement (Spotify, Snap, Pinterest, Twitter and many more), but that only a few have converted engagement into significant profits (Google, Meta).

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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