Now when investing it's a different matter, but the point stands, and so the after b) the only real option is actually c) liquidation
Economies of scale works on average cost, more specifically long run average cost, while it contributes to the MC going down, MC is more affected by fixed vs variable costs in the short term and more importantly it increases at a certain point when you reach the maximum capacity of your current infrastructure.
As for marginal revenue of the startup:
- Fixed rate = MR falls with increasing users.
- CPM = MR falls as the more the pageviews you get, the better a price advertisers will demand from you.
- Per click = MR remains relatively stationary but as with CPM, at some point demand and supply kicks in and when you supply more clicks than advertisers want (for a certain price), they will pay less /per click/.
To get increasing MR in advertising would require changing the rate of 'more likely to buy' users relative to users in general. On the internet it's the other way around, more users == less likely to buy, and with things like Adblock becoming more and more mainstream, it hinders it even more.
When marginal cost is greater than marginal revenue a startup can either a) find more vc funding to raise marginal revenue, or b) cut expenses to lower marginal cost.
Startups will press a) until the button breaks leaving b) the only option.