4 ms·

I don't understand what you are trying to say here? Zero and near zero are effectively the same.

by vmg1 6y ago

sumtechguy 6y ago
if the cost was 0 geocities would still be running.
Jtsummers 6y ago
No, they aren't. "Zero" is zero, it means no cost. "Near zero" means some cost. Some cost, in aggregate, can easily become a major cost. Ever wonder why manufacturers of physical goods choose the component that's 1 penny less? Because that one penny can translate into millions in savings over the lifetime of a product. "Near zero" could translate into millions in costs over the lifetime of a product versus "zero".
- dasil003 6y ago
  The discussion is around financial and market dynamics for different types of companies. Quibbling over the definition of zero vs near-zero is completely side-stepping the argument. The point is, for Google search variable costs are immaterial. This is not the case for any business that needs deals in physical inventory or human-provided services (which was the majority of businesses pre-Internet). Does Google incur some marginal infra costs from increased traffic or growth of the web? Yes. If you project out infinite growth does it become a "major cost"? No, the limit of profit over variable cost approaches zero.
  - bryanrasmussen 6y ago
    >The point is, for Google search variable costs are immaterial..... >No, the limit of profit over variable cost approaches zero Ok well Google is an example, but the argument is about Internet companies not just Google, but ok Let's take Google and use that to go back to the more general level. aside from any other arguments - is it possible that variable cost approaches zero because Google is a monopoly with a high profit margin. If the profit were to decrease a lot from each transaction then they would be at a position where variable cost becomes more relevant. That is to say Google's special place has nothing to do with it being a magical internet company but rather its being in a seller's market that they dominate. If it were suddenly to no longer be in a seller's market or to have to do stuff like save data longer to get value from it, or to earn much less per search because advertisers didn't want to pay, or to find that there are side effects from having too much traffic that ends up decreasing ability to serve relevant data because of signal to noise ratio thus causing a loss of profit etc. etc. we would end up with the cost to Google of a transaction being much closer to what they earn from that transaction. In the last scenario I put up there, which I believe could actually be a problem if you project out infinite growth (search growth) does it become a "major cost", yes, in such a scenario too much traffic decreases the value of all traffic. In fact too much traffic decreasing the value of all traffic is a well known feature of Internet companies, because internet companies actually use physical devices (just wanted to point that out, since there seems to be this special thing about Internet companies not having physical inventory) to serve their customers or users (depending on which we're talking about here) and this is why DDOS is a thing and why even natural spikes in usage can be problematic. So in fact, I would actually say about just about any online company there is - if you project out infinite growth ( of traffic ) does it become a major cost? Um probably, and depending on how that a growth is structured it might in fact be a crippling cost.
    - dasil003 6y ago
      Ben Thompson explicitly states that he is not talking about all Internet companies, and that is one of his beefs with Tim Wu's critique—that it is reducing his actual argument to a caricature. To your point, yes I agree that this hinges on the specifics of Google's business. If, for example, their advertising business was made illegal in its current form it would completely change the economics.

I don't understand what you are trying to say here? Zero and near zero are effectively the same.

by vmg1 6y ago

I don't understand what you are trying to say here? Zero and near zero are effectively the same.

sumtechguy 6y ago

if the cost was 0 geocities would still be running.

Jtsummers 6y ago

No, they aren't. "Zero" is zero, it means no cost. "Near zero" means some cost. Some cost, in aggregate, can easily become a major cost. Ever wonder why manufacturers of physical goods choose the component that's 1 penny less? Because that one penny can translate into millions in savings over the lifetime of a product. "Near zero" could translate into millions in costs over the lifetime of a product versus "zero".

dasil003 6y ago
The discussion is around financial and market dynamics for different types of companies. Quibbling over the definition of zero vs near-zero is completely side-stepping the argument. The point is, for Google search variable costs are immaterial. This is not the case for any business that needs deals in physical inventory or human-provided services (which was the majority of businesses pre-Internet). Does Google incur some marginal infra costs from increased traffic or growth of the web? Yes. If you project out infinite growth does it become a "major cost"? No, the limit of profit over variable cost approaches zero.
- bryanrasmussen 6y ago
  >The point is, for Google search variable costs are immaterial..... >No, the limit of profit over variable cost approaches zero Ok well Google is an example, but the argument is about Internet companies not just Google, but ok Let's take Google and use that to go back to the more general level. aside from any other arguments - is it possible that variable cost approaches zero because Google is a monopoly with a high profit margin. If the profit were to decrease a lot from each transaction then they would be at a position where variable cost becomes more relevant. That is to say Google's special place has nothing to do with it being a magical internet company but rather its being in a seller's market that they dominate. If it were suddenly to no longer be in a seller's market or to have to do stuff like save data longer to get value from it, or to earn much less per search because advertisers didn't want to pay, or to find that there are side effects from having too much traffic that ends up decreasing ability to serve relevant data because of signal to noise ratio thus causing a loss of profit etc. etc. we would end up with the cost to Google of a transaction being much closer to what they earn from that transaction. In the last scenario I put up there, which I believe could actually be a problem if you project out infinite growth (search growth) does it become a "major cost", yes, in such a scenario too much traffic decreases the value of all traffic. In fact too much traffic decreasing the value of all traffic is a well known feature of Internet companies, because internet companies actually use physical devices (just wanted to point that out, since there seems to be this special thing about Internet companies not having physical inventory) to serve their customers or users (depending on which we're talking about here) and this is why DDOS is a thing and why even natural spikes in usage can be problematic. So in fact, I would actually say about just about any online company there is - if you project out infinite growth ( of traffic ) does it become a major cost? Um probably, and depending on how that a growth is structured it might in fact be a crippling cost.
  - dasil003 6y ago
    Ben Thompson explicitly states that he is not talking about all Internet companies, and that is one of his beefs with Tim Wu's critique—that it is reducing his actual argument to a caricature. To your point, yes I agree that this hinges on the specifics of Google's business. If, for example, their advertising business was made illegal in its current form it would completely change the economics.