I don't think that's how it's presented. It's running at a loss now to grow and be profitable later. That could be by driving out your competition, or it could be like facebook, where a gazillion dollars went in before the ad money came online. The story they tell themselves it the latter.

The ecosystem it creates, however, doesn't matter whether it's the former or latter. It drives out competition because VC's can make up the difference in a lack of profit.