3 ms·

I don't think you are understanding. Of course there are big costs in acquiring more product to sell. The question is: Do you have to pay those costs for each c

I don't think you are understanding. Of course there are big costs in acquiring more product to sell. The question is: Do you have to pay those costs for each customer, or can you pay them once and amortize the cost over many sales? For example, Adobe Photoshop probably costs a lot to design. It has really high fixed costs, because you need to hire good developers and implement a bunch of advanced operations. However, once Adobe pays the fixed costs, the marginal cost of Photoshop is pretty minimal: packaging, printing a DVD, maybe some marketing. It still costs a lot because the fixed costs are so high, and there's not much competition. Conversely, a plumber has relatively low fixed costs: a truck, some tools, and some training. But plumbers also cost a lot, and this is because they have really high marginal costs: they have to spend an hour at the house of each and every customer. So I agree with you, there may be high costs in acquiring email addresses to sell. My point is that they are in no way marginal costs.

001sky 14y ago
The costs are marginal at the point of periodicity. example: reseller> pays adobe every month/quarter example: adobe> pays versioning costs every 24 months Provided you shrink the window of analysis, you can say "already paid for inventory, just amortizing it". But in that case, you don't have unlimited supply, you just have whatever you paid for. In the case of adobe, despite having "unlimited copies" of CS5, they would (eventually) run out of supply of salable product if they did not version into CS6. So while its trivially true they could make unlimited copies of CS5, its not a great idea to perceive this as unlimited supply. The supply that matters is the part people are willing to pay for--this is the marginal information content-- not the marginal bit content of what is delivered. In some ways I don't think we're disagreeing, just focusing on different elements of the analysis. My larger point was exactly that -- keep in mind the broader elements that are considered as relevant by CxO. THe CEO of adobe makes decisions, for examople, about how often to incur the marginal cost of versioning the next Creative Suite, how rapidly and how much to budget, etc. COO of facebook looks at the marginal cost of data centers for the next 200 million users, etc, in part because s/he is looking at timeframes and scales which are not the same at the level of a project team, etc.

001sky 14y ago

The costs are marginal at the point of periodicity. example: reseller> pays adobe every month/quarter example: adobe> pays versioning costs every 24 months Provided you shrink the window of analysis, you can say "already paid for inventory, just amortizing it". But in that case, you don't have unlimited supply, you just have whatever you paid for. In the case of adobe, despite having "unlimited copies" of CS5, they would (eventually) run out of supply of salable product if they did not version into CS6. So while its trivially true they could make unlimited copies of CS5, its not a great idea to perceive this as unlimited supply. The supply that matters is the part people are willing to pay for--this is the marginal information content-- not the marginal bit content of what is delivered. In some ways I don't think we're disagreeing, just focusing on different elements of the analysis. My larger point was exactly that -- keep in mind the broader elements that are considered as relevant by CxO. THe CEO of adobe makes decisions, for examople, about how often to incur the marginal cost of versioning the next Creative Suite, how rapidly and how much to budget, etc. COO of facebook looks at the marginal cost of data centers for the next 200 million users, etc, in part because s/he is looking at timeframes and scales which are not the same at the level of a project team, etc.