Before I get into this topic, I have to gripe (again…sigh) about the trend in creating overblown or hyperbolic blog post titles… This article from Mashable (a great blog, and despite the title an interesting article) discusses the strange nature of much of online economics.
With the premise that economics is based upon some fundamental principles (scarcity being one of them); the online world is presented as exhibiting some contrary ideas: the economics of plenty.
Of course, this isn’t as radically new as you might expect, especially if you consider the nature of online commerce (since the mid 90’s) in that there have been innumerable start up who still exist giving lots of stuff away (YouTube is one of many big examples).
OF course, there are some arguments which could be presented stating that this is not a steady state form of variant economics, but rather a longer term form of marketing to gain market share…coupled with a rapidly transforming marketplace…
What do you think?
Why the End of Scarcity Will Change the Economics of Everything
http://mashable.com/2011/04/28/scarcity-economics
Apple triggered much debate when it recently announced it would begin enforcing policies that add a 30% toll to any content — Kindle books, newspaper subscriptions — sold through an app on an Apple device. Apple essentially restrained publishers’ access to Apple’s customers — a huge market within the Apple ecosystem.
With this move, the company –- typically known for anticipating and even causing seismic shifts in the business world -– demonstrates that it is fundamentally unprepared for one of the biggest transformations we are about to experience: The end of scarcity.
Our day-to-day experience teaches us that scarcity is real. All modern business practices are built on this assumption. Some businesses depend upon it entirely. For example, high-end auction houses and low-end infomercials both remind you through various cues that if you don’t buy it now, you may not be able to ever buy it again.
But what happens if the economics of scarcity are exchanged for the economics of plenty? For those industries that provide information or experience as a primary good, scarcity is rapidly evaporating. The media business is undergoing a similar change with the rise of citizen journalists, bloggers, and YouTube performers — all of which circumvent the traditional systems that once dictated production norms and processes. Most of these companies have sought to restore order by reinstating scarcity rather than celebrating its passing. It’s not a good sign of things to come.
Watch closely as entities of previously impossible scale become commonplace –- companies like Facebook, Google, and even Twitter. These companies scaled up so quickly precisely because they are not bound by scarcity. There is no meaningful limit to how many people can benefit from Facebook, and so it acquires more customers without aggressively marketing its services. Similarly, any new initiative that Google offers the world can reach hundreds of millions of people within a few days at modest incremental cost.
