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Marketing has significant economies of scale, a nationwide marketing campaign tends to cost a lot less per customer acquired than a local one. It's very possib
by ig1 15y ago
Marketing has significant economies of scale, a nationwide marketing campaign tends to cost a lot less per customer acquired than a local one.
It's very possible to own the national local market, good examples of this are Craigslist and (historical college-period) Facebook.
- jerf 15y agoMost people badly misunderstand economies of scale. It doesn't mean that things just keep getting cheaper and cheaper and cheaper the bigger you get. Generally you get the most per thing benefit at the bottom, and as you scale up the gain levels off. A company may make 50 million things a year but not actually get any significant per thing savings over what they could get at 1 million things per year. Sure, there are marketing economies of scale. But they don't scale indefinitely, and by the time you're advertising to a state or at most a region of this country, you've captured them all, or as close to all as makes no difference. I don't see a huge win for Groupon here. Craigslist owns its market at this point solely because nobody will beat its price, and as for Facebook's permanent dominance (because that's the topic at hand, not a transient dominance, Groupon already has that but they won't be profitably unless they can continue that dominance for quite a while), call me again in three years, OK? Let's see where G+, Facebook, and probably at least one other competitor by then stand.
- ig1 15y agoI disagree on both accounts, even in manufacturing scaling has it's limits. Being able to mass produce can't infinitely reduce costs, sooner of later you'll hit a barrier (cost of natural or human resource) which can't be reduced. Secondly no-one has permanent dominance in anything, how many market leaders from 100 years ago are still leaders today ? - it's purely a case of how long you can hold dominance for.