Internet Economics

1
Internet Economics

• Traditional Reach and Richness tradeoff ?
• Flexibility of the web Retial, Advertising,
  Customer Service etc.
• The Long Tail
• Half google searches are unique
• Half amazon orders are out of the top 130,000
  books

2
Cost Structures

• Fixed versus Variable Costs
• Fixed costs are sunk
• Not considered for future decisions
• Variable costs are minimal zero
• zero distribution costs
• Zero copy costs
• Perfect copes
• Versioning and product differentiation

3
Installed Base

• Lock-in
• Switching Costs
• Life-time value of the customer

4
Network Effects

• Increasing returns Metcalfes Law
• Learning Curve issues, average costs
• First mover advantage
• Tipping point
• Winner takes all

5
Standards

• Proprietary Standards
• Open Standards, single company
• Open Standards, consortium
• WINTEL
• TCP/IP
• QWERTY
• Railway Gauge