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I think there's another angle to this... And that's social. Digital does have a lower overhead (less cost per user gained) than physical. But Web 2.0 products
by dbreunig 19y ago
I think there's another angle to this... And that's social.
Digital does have a lower overhead (less cost per user gained) than physical. But Web 2.0 products are part product, part community. Their value is largely derived from the bustling community that uses the product. FB would be worth nothing with no subscribers, both from a consumer and investment perspective. Remember how FriendFeed became suddenly awesome when the closed beta ended? The value for myself (and others) is the relationships that form. If payment is a barrier to usage, the growth stagnates and users don't get the best experience.
- davidw 19y agoRight - you're thinking of "network effects" or "positive network externalities".
- dbreunig 19y agoWhy say friends when you can say "positive network externalities?"
- davidw 19y agoBecause it encompasses a broader meaning. eBay isn't about friends at all, really, but has strong network effects: buyers go there because there are lots of sellers, and sellers go there because there are lots of buyers. I'd highly recommend the 'Information Rules' book I linked to elsewhere (via my site:-) to anyone interested in this stuff. Most of it is pretty intuitive, but it's nice to have it all grouped together and explained.
- dbreunig 19y agoThat was a joke. :)
- davidw 19y agoAh... well, truth be told, I think that economics does tend to weighty jargon for concepts that are, if not completely obvious, not exactly earth shattering. Still, they are useful to give labels to those concepts.
- dbreunig 19y agoI think we're on the same page, but... They're useful labels until you have to explain them to someone else. If you need to explain the words you're using to explain a concept or idea, it's probably a detriment to your argument. Using jargon to explain new concepts is taking the easy way out. Figuring out how to communicate complex ideas with plain, straight-forward language? That's the name of the game.