I remember learning that all of the profits from video rentals came from late fees. This means that Blockbuster was never in the business of helping you watch movies. They were in the business of hoping you would forget to return your VHS cartridge. It was a predatory model, and I was not sorry to see them go.
Many companies earn money in ways that are invisible to their users. Often a visible business builds a trusted brand and attracts customers, while a hidden one generates profits. In many cases, the hidden business earns so much more than the visible one that it really is the company.
Hidden businesses take many forms, but most of them are disguised ad agencies, banks, or real estate businesses.
Hidden Ad Agencies
A business that knows you want to buy something has a choice: it can sell you the item you want, or it can charge someone else for the privilege of showing it to you first.
Social media platforms pioneered hidden ad models. Meta opens its annual report by declaring its mission to build the future of human connection. They offer users a place to make new friends, keep up with existing ones, and see media curated to your interests. Financially, however, Meta users’ attention and data are inventory. As the saying goes, if you are not the customer, you are the product. Advertising produces more than all of Meta’s profits. Google’s ad share is falling as cloud services grow, but in 2025 it was almost $300 billion of the company’s $400 billion in revenue. The same goes for Reddit (94% ad revenue) and Snap (89%). At their core, these are ad agencies.
Retailers have copied this model. Social platforms sell your attention; retailers sell your purchasing intentions. We think of Amazon as a retailer, but selling stuff is a notoriously low-margin business. Advertising is not. Amazon’s ad revenue jumped to $68.6 billion in 2025. Although the company does not disclose profits from this revenue, they almost certainly exceed the $34 billion Amazon made in retail. This helps explain why ads now enshitify your Amazon search results.1
Home delivery companies also operate hidden ad agencies. Grocery delivery is a demanding, low-margin business. But customers often become loyal and can be monetized with ads. In 2025, Instacart’s ad revenue was $1 billion, which effectively accounted for its entire cash flow. Uber and DoorDash may look like logistics companies, but like retailers and social media companies, they are ad agencies at their core.
Hidden Banks
Like ad agencies, retailers and delivery apps convert your attention into advertising dollars. But airlines, hotels, and coffee shops convert your payments into an unregulated bank. They monetize your payments and credit and issue currency that they control.
Airlines are the most glaring example. American Express paid Delta $8.2 billion in 2025 for originating Amex travel cards—a figure that dwarfed the airline’s $5.8 billion operating profit. When analysts stripped loyalty revenue out of airlines’ 2024 results, the operating margins for Delta, United, American, and Southwest all turned negative. European carriers, hindered by EU caps on credit card interchange fees, actually have to make money flying airplanes. American carriers do not. They mint currency (miles), sell it wholesale to Wall Street, and let merchant fees subsidize the unprofitable business of aviation.2
Hotels and coffee shops want in on this game. For example, Starbucks operates a massive unregulated bank. Customers pre-loaded $4.3 billion onto Starbucks cards in a single recent quarter. They effectively loaned the company $2 billion interest-free. Better yet, customers lose their gift cards (a term the industry touchingly calls “breakage”). Add the interest on the float to money gained from lost gift cards and Starbucks quietly pockets roughly $300 million a year for doing nothing. It’s a bank with no FDIC insurance costs that makes money when a customer defaults by losing their gift card.
Marriott’s co-branded card fees rose over 8% to $716 million in 2025. It expects these fees to grow about 35% this year by charging card issuers more. Marriott franchisees want in: 51 owners of 990 hotels wrote to corporate leadership in March demanding a share. They know that renting rooms is hard work. Collecting fees from affiliate cards is much easier.
Even a fading retailer like Macy’s makes more money from branded credit cards than from selling clothes. Their credit card revenue ($669 million) eclipses their net income ($642 million) – meaning that Macy’s is no longer just a retailer. It is a hidden bank.3
Hidden Real Estate Companies
You don’t need digital data or a branded credit card to run a hidden business. Sometimes, the most lucrative asset is the ground the customer is standing on.
Fast Food. In the 1950s, McDonald’s CFO openly admitted the company was in the real estate, not the hamburger business. It remains true today. McDonald’s owns the land under most of its restaurants and collects more in rent than in hamburger royalties from its franchisees. Because the lease and franchise come as a package, McDonald’s locks in captive tenants who cannot switch landlords. Jack in the Box and Wendy’s follow the same model.
Casinos. Similarly, when Caesars was forced to split its physical properties from its casino operations, the market revealed that the buildings themselves were far more valuable than the gambling business.
The Tail Wagging the Dog
It is tempting to argue that these hidden businesses are a net positive for consumers. After all, Amazon’s ad revenue helps subsidize Prime shipping, and airline credit cards keep flight routes open that might otherwise close.
But hidden businesses operate largely without the regulations that govern traditional industries. Starbucks takes deposits without deposit insurance. Retail media networks operate without the disclosure norms of traditional advertising. Airlines issue currency and devalue it whenever they like (credit Pete Buttigieg for using the DOT to investigate this).
More importantly, a fast-growing hidden business inevitably degrades the visible one. Delta will adjust its cabins and routes not to serve passengers, but to sell more Amex cards. Amazon will worsen its search experience and enshittify its site to cram in more sponsored listings. Eventually, the hidden business steers the visible one. And much like Blockbuster hoping you forget to return your VCR tape, today’s hidden businesses aren’t designed to help; they are designed to exploit.
ICYMI
Hispanic voters once again transform the electoral map – this time by abandoning Trump. Gonna be a joyous midterm.
Drug drones have become a very big problem at the US southern border.
The Chinese economy is heading for its worst year since 1991.
Libertarians have proposed or built utopian colonies in Próspera (Honduras), Liberland (Serbia/Croatia), Nevis (Caribbean), Greenland, and on the open ocean. Now Uruguay.
Facing Trump’s funding cuts, 48 top US researchers move to Canada.
At Walmart, global advertising grew 46% in 2026. Ads and membership fees produced about a third of fourth-quarter operating income.
Delta’s operating margin fell from 10.5% to -2.5%. United went from 8.9% to -1.9%, American from 4.8% to -8.3%, Alaska from 4.9% to -11.4%, and Southwest from 1.2% to -19.9%. When airlines pledged these programs as loan collateral in 2020, a Financial Times analysis valued Delta’s at about $26 billion against a $20 billion market value. American’s was $24 billion vs. $6.6 billion; United’s was $20 billion vs. $10.5 billion.
Other examples include automakers that make more money financing cars than building them. Ford Credit produced about 38% of Ford’s profit, almost as much as the car business did. GM Financial earned about 22% of GM’s profits. It likes the banking business so much that it recently won approval for an industrial bank that will take deposits.