The past articles written about the company have mentioned that the diapers are indeed low margin items, but they try to cross-sell products that have higher margins (products like baby oil or soap).
Since the box to send the diapers is already huge, the incremental cost of shipping these adjacent products is quite low (usually they can just throw them in the diaper box).
So apparently, Quidsi (the real name) is at break even*, has raised 80 million in equity since 2006 (plus the founders own injections), and this year will sell 270m while spending 30m on advertising.
At first I thought that they may not have been worth the 500m, but I'm rethinking that now.
I'm wondering how much money they have burned until today (the other articles implied it was a lot)