Switching Costs…

Om Malik has a nice guest post by Robert Young on how as power shifts to the community from the corporation, switching costs do not disappear. Instead, people create their own switching costs.

Inherent Truths and Value of Community

As the power shifts increasingly towards community, the corporation loses its grip on the traditional means of control. Yet, by letting go of control, the corporation creates an environment where the community willingly creates its own switching costs. Such changing market behavior, which is structural and permanent for any industry being usurped by the Internet, must be met with a corresponding shift in corporate mindset.

Posted on September 16, 2005, in Uncategorized. Bookmark the permalink. 3 Comments.

  1. While Web 2.0 has shifted towards a community oriented model, the monetization model remains the same. Companies like Google, Yahoo, eBay and so on are providing platforms that community users modify for their individual needs. However, with the exception of eBay, most of them monetize their offerings using Web 1.0 business models i.e. advertising. It will be interesting to see how many users will be willing to pay for a Web 2.0 platform. (For example, the ratio of paid to free members on LJ and Flickr).
    As far as corporate paradigm shifts go, the bozos wearing the suits don’t get it. The builders of the platforms get it first, and they continue to face an uphill battle convincing the men in black to reboot their business models.

    • Very good point about Monetizing. Sometime ago, I wanted to know whether paid accounts paid for LJ’s bills. ๐Ÿ™‚ Looked up, and turned out LJ made $2.5 million thru paid accounts. Might have changed now, but clearly, the ratio of paid to free members on LJ is far too small yet.

      However, I do think that people are becoming more agreeable to pay for stuff. Like I bought an LJ subscription for 6 months just like that. Quite a few people seem to be willing to pay for the extra features on Flickr. But yes, for the moment, like you say, advertising continues to be the main monetizing option.

      About the corporates, maybe it is still not time for them to tinker with their business models, when even the platform builders still bank on advertising as their revenue model. I think there’s still a lot of hype. And in some cases, adoption to Web 2.0 will actually hit their models negatively, – VoIP for instance. So, one can’t probably blame the suits too much ๐Ÿ™‚

      In a few more years, I guess.

      • W.r.t VoIP, I mean telcos resistance to it, not businesses adopting it.

        Also think, organizations will have to change more significantly to live with Web 2.0. It’s like that Charles Handy book called “The elephant and the flea”. Web 2.0 is good for the flea, not so much for the elephant.

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