As it says, "If there is one truism in the technology market, it is that premium pricing just doesn’t last." It definitely has one aspect of a Truism [1] -

As it says, "If there is one truism in the technology market, it is that premium pricing just doesn’t last." It definitely has one aspect of a Truism [1] - no-one really looks at the underlying assumptions. The biggest assumption in much of the tech industry is that you're aiming for mass market - the consumer tech brands like Facebook particularly have that assumption - other people follow sometimes without understanding the implications. If that's your focus, and you have limited differentiation your pricing has to reflect that over time replacements will come in and undercut you. That's the GoPro example he's using, where the parameters of his comparison are the "components of the hardware camera". What he's missed is that Apple and plenty of others (think every car brand) have shown that brand and real differentiation can prevent new entrants from being able to provide an equivalent that is good enough. The point is that the customer has to believe that product A and product B are comparable - and that the parameters may not just be the bits or atoms. For example GoPro's brand speaks to "action sports" and being active, they have software and communities that people want to be in. It's perceived as something that 'active people' use and has brand cachet. So the 'replacement' has to capture all that value, not just the hardware costs. Frankly, they've absolutely eaten the lunch of much bigger hardware companies who have far more economies of scale. The AWS example is even less clear cut. Since Amazon is a retailer we can assume their strategy is mass take-up, and we know that their general pricing strategy is for people to "believe" they are cheapest. But, we also know that Amazon practises differentiation, we've seen that with Kindle and Amazon Prime. If you look at the AWS services you can see they are aiming to provide a highly differentiated service aside from "simple" IaaS. We also know that as a retailer Amazon uses extremely sophisticated pricing strategies. At this point I would think that Amazon is continuing to drive down the cost of basic IaaS due to economies of scale which makes it very difficult for competitors to get started, while keeping the cost up of 'value-added' services which provide differentiated service and make the whole service a lot more sticky. They will probably do Amazon Prime like things with their whole portfolio over time. There are plenty of businesses where the strategy of being cheapest is right, but it's not the only approach. [1] http://en.wikipedia.org/wiki/Truism http://en.wikipedia.org/wiki/Truism