Dot Com Bubble Scarface: The Scarcity economy
A lot of people read Seth Godin’s blog – it ranks under 10k in technorati. If you don’t read it – here’s a repost from 2003 that should convince you to bookmark it and buy the books. The post on the scarcity economy is so absolutely right-on. Look at the evolution of social net sites… Sites are getting more segmented, more vertical, more exclusive. It turns out that monitization isn’t from 1 billion users, it’s from 1 million paid subscribers.
The business model hasn’t changed. Today Fax machines are $50 because someone 20 years ago was willing to pay $5000. If you “soft-fax” it’s free.
The same model will apply to internet services. Everything eventually becomes a commodity – if successful.
Tags: seth-godin, monitization
Mitch, generally speaking you are correct most successful consumer products suffer from the trickledown effect, where the initial price is very high and then it quickly drops off (xbox, ipod, computers, …). The exception to this is some enterprise and luxury goods where the price can actually increase with success.
Hey Ian – sure – luxury status consumer goods may increase in price… but enterprise? Can Microsoft justify outrageous CRM prices in the face of Salesforce?
Can Nortel demand primo money for a Meridian PBX in the face of VoIP?
Cisco gets into the low end market via Linksys… New Apple products are introduced at high prices but gradually decline. Thankfully. I’m waiting for my new iMac… only 1799!! (BTW – cool! – It just left China yesterday, and arrived in Alaska today. By tomorrow it will be in Memphis heading towards Ottawa – then Renfrew!) I think I spent over $2000. on an SE way back…. (2nd BTW – That China thing does bother me!)
Price can only increase if no other viable alternatives are available. That’s the danger with tech investments – an alternative is just another code stream away!
Meanwhile – having moved from “woodsmoke” wakefield to Natural Gas Civilization (NGC) – yeah, prices for energy go up!!! And that’s not luxury! Taxes go up too!
Hey Mitch,
i believe enterprise pricing can increase depending where you are in the life cycle. The product lifecycle being essentially; Introduction, Growth, Maturity and Decline. Trickledown applies to the first three stages. In the forth stage Decline you can actually get trickle up or an increase in price when the laggards refuse to let go of old technology. This allows vendors to raise prices, I know I have personally do just this with a vintage product line that I managed. the trick is to keep the price increase below the switching threshold. the switching threshold is where the customer finally migrates to newer products.
I belive there are other instances of price increases earlier in the life cycle for enterprise products but can’t think of an example off the top of my head.
Certainly COBOL experts can command any price for maintainning those old government legacy systems!
Interestingly enought I also found that Future Shop and Best Buy were charging premiums on “out of box” computers that had XP installed.
The premium being the same price as a new Vista machine for an floor model with an older processor, less memory and smaller drives.
Who says laggards aren’t worth something.
With the horrid experience my parents (70yo) had with Vista – I too would pay a premium for XP…. Oddly the reason people never went to Apple is of the few hundred dollar premium… Like Alec Saunders hinted at this morning – save yourselves the aggravation. Vista is KILLING Microsoft!
BTW my new iMac from the Apple store was finally shipped and left Shanghai China – flew to Alaska – is heading to Memphis and by Friday will be in lovely Renfrew Ontario Canada!! Unlike Vista it will be loaded only with software that works. Nothing will expire… the disk space is free of any crap! I will not have to rebuild my computer every few months. Everything works.
I DO have an issue with the China thing… gasp…. maybe another time.