Coinbase CEO admits they are not profitable in a reddit thread asking why anyone would use Coinbase

Now that Coinbase has about 50% higher fees than Circle, is there any reason to use Coinbase?

"Coinbase CEO here. I wanted to take the opportunity to address this. Circle is a really well done product and I have nothing but good things to say about them. So lets start with that.

Second, most companies in the digital currency space are not profitable right now. Coinbase is not, and I would venture to guess that there are few others out there who are. In the short term this is totally fine. This is why we raised venture capital (and many great tech companies are not profitable until later in their cycle). But it is also not sustainable forever. We've invested many millions of dollars in building a foundational piece of infrastructure for the digital currency industry (secure, trusted exchange). Our investors did not do this to subsidize the digital currency industry out of generosity, they did it to help jump start the industry (and hopefully make a return).

The industry needs rock solid infrastructure to enable people to convert their local currency into and out of digital currency. To build this well costs money. We spend a lot of money on things like security audits, compliance, understanding the laws of each country where we operate, obtaining regulatory licenses around the world, great engineering, and many more mundane areas like lunches for employees (there is a competitive market to hire the best people out there).

Coinbase is not trying to make a quick flip and sell to a bigger company. We are playing for the long term. We are planning to grow revenues from this initial service we've built, continues scaling it around the world, and then invest that money in new projects that will help the world move to an open financial system. This will take 10+ years. Customers have shown an incredible willingness to pay for the service we've created because there is demand for it, and they recognize that this will help digital currency be more successful.

The beautiful thing about free markets is that if someone can do what we're doing cheaper or better then this creates competition in the market. We should be subject to this as well. But it's important not to confuse companies operating at a loss in the short term with what a sustainable business looks like.

Finally, I don't have full information on this but my impression as an outsider is that Circle is moving away from bitcoin (their homepage doesn't mention it at all) and they are building something like Venmo on a more global scale, with primarily fiat currencies. This is just my impression as an outsider and could be incorrect. Coinbase is committed to supporting the exchange of bitcoin (and other digital currencies) as our primary business, and we'd like to help 100M+ people over the coming years do this.

If you imagine getting into digital currency as a one time thing (and then you operate in a crypto-to-crypto world after that), then the difference between 1% or 1.49% is negligible, especially when the volatility of digital currency is still high, and your gain/loss over just a week or two could make this fee seem insignificant. In other cases where people immediately cash out to their local currency (such as in our merchant tools) we offer different pricing.

Hopefully this helps share some perspective on the subject."

source: https://www.reddit.com/r/Bitcoin/comments/4wh0cz/now_that_coinbase_has_about_50_higher_fees_than/