People often underestimate the power of brand.... here are two examples of how brand can take commodity products and turn them into winners:
iPod Shuffle = product from 1999 = 58% flash marketshare
"My Google" = product from 1996 = Buzz all over the blogsphere
Any questions?
Thursday, May 19, 2005
Sunday, May 01, 2005
Infinite storage... the lock-in game
One of the few areas of interest to me that I can write freely about is the webmail space. I have posted a lot about Gmail, Yahoo!, MSN, and the competition for consumer inboxes. I haven't had a chance to write since Google announced the always growing storage capacity for Gmail. I have seen a lot written about this but I have not seen anyone write about what I consider to be THE critical aspect.. switching costs.
In the long run, the marginal cost per GB of storage for someone like Google rounds to zero. Yet, the value of an email consumer certainly doesn't round to zero over time, in theory, it actually grows as advertisers are willing to spend more and more on adwords. Google doesn't need you to actually click on ads from within Gmail to make money off Gmail, they simply need you to EITHER click on these ads or perform additional searches with Google because you have a gmail account. Additional searches means incremental advertising inventory to be monetized. So if you were Google and you knew over the long run that your marginal cost for storage rounded to zero but that consumers with Gmail accounts were likely to search more on Google, what would you do? You would try and lock-in existing consumers and new consumers by raising switching costs.
With a GB or two of email, photos, videos on my Gmail account how likely am I now to ditch Gmail and move to another service? Not gonna happen! Google architected for this dynamic (or they were lucky and fell into it) by telling consumers to never trash email... just "archive it". This is all about raising switching costs and creating consumer lock-in. Now Google has taken certain steps, like enabling POP email access, that lower switching costs, but ask the AVERAGE consumer what POP access is and they will look at you like you are crazy. Yet, the average consumer knows they don't want to move thousands of emails to a new service.
With Yahoo! and Hotmail all raising storage capacity I don't expect too many consumers switching services if they have over 100 MB of email in an account... that is unless one of these competitors gets smart and builds what I asked them to a while back... an application whose sole purpose is to remove email account switching costs. This application would extract all your contacts, load them into your new account, email all these contacts with your new email address, extract all your email with organizational metadata and load them into your new account.
In the long run, the marginal cost per GB of storage for someone like Google rounds to zero. Yet, the value of an email consumer certainly doesn't round to zero over time, in theory, it actually grows as advertisers are willing to spend more and more on adwords. Google doesn't need you to actually click on ads from within Gmail to make money off Gmail, they simply need you to EITHER click on these ads or perform additional searches with Google because you have a gmail account. Additional searches means incremental advertising inventory to be monetized. So if you were Google and you knew over the long run that your marginal cost for storage rounded to zero but that consumers with Gmail accounts were likely to search more on Google, what would you do? You would try and lock-in existing consumers and new consumers by raising switching costs.
With a GB or two of email, photos, videos on my Gmail account how likely am I now to ditch Gmail and move to another service? Not gonna happen! Google architected for this dynamic (or they were lucky and fell into it) by telling consumers to never trash email... just "archive it". This is all about raising switching costs and creating consumer lock-in. Now Google has taken certain steps, like enabling POP email access, that lower switching costs, but ask the AVERAGE consumer what POP access is and they will look at you like you are crazy. Yet, the average consumer knows they don't want to move thousands of emails to a new service.
With Yahoo! and Hotmail all raising storage capacity I don't expect too many consumers switching services if they have over 100 MB of email in an account... that is unless one of these competitors gets smart and builds what I asked them to a while back... an application whose sole purpose is to remove email account switching costs. This application would extract all your contacts, load them into your new account, email all these contacts with your new email address, extract all your email with organizational metadata and load them into your new account.
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