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Information as a Commodity. Competitive Strategies for Network Economies January 15, 2002 Amy Dix. Outline. Information. The Value of Information The Role of Technology Costs Associated with Information The “Experience” Inter-Relationships . What is Information?. “in-for-ma-tion”

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information as a commodity

Information as a Commodity

Competitive Strategies for Network Economies

January 15, 2002

Amy Dix

outline
Outline

Information

  • The Value of Information
  • The Role of Technology
  • Costs Associated with Information
  • The “Experience”
  • Inter-Relationships
what is information
What is Information?
  • “in-for-ma-tion”
  • noun
  • knowledge derived from study, experience, or instruction.
  • knowledge of specific events or situations that has been gathered or received by communication; intelligence or news.
  • anything that can be digitized, encoded as a
  • stream of bits
information has value
Information has Value
  • People are willing to pay for information
  • Consumers differ greatly in how they value

particular information goods

  • Information is costly to create and assemble
the importance of technology
The Importance of Technology

Technology:

The infrastructure that makes it possible to store, search, retrieve, copy, filter, manipulate, view, transmit, and receive information

the cost of producing information
The Cost of Producing Information
  • Costly to produce, but cheap to reproduce
  • i.e. high fixed costs but low marginal costs

You must price your information goods according to consumer value, not according to your production cost.

marginal cost storage1
Marginal Cost: Storage
  • The Hamiltonian Path Problem

The Future: DNA Computing

  • Cost
  • Storage
information is an experience good
Information is an “Experience Good”
  • Is Marketing Important?
  • Experience through Branding and Reputation
generating value profit from an experience good
Generating Value & Profit from an “Experience Good”

When do you give away your information (let people know what you have to offer) and when do you charge (to recover costs)

Does creating value always generate a profit?

Why didn’t the Internet Annihilate Newspapers?

slide11

Generating Value & Profit from an “Experience Good”

2001: “restructuring aimed at proving that newspaper Web publishing can be financially successful”

  • Syndicating Products
  • Selling access to archives
  • Charging for an early look at the classifieds
  • Searchable job databases
pay attention
Pay Attention!

“A wealth of information creates a poverty of attention.”

how much did you remember
How much did you remember?
  • How many links were on the page?

>80

  • What companies were represented on the page?

MSN

ESPN

Columbia House

Visa

Classmates.com

  • What Headlines do you remember?
slide17

Effective and/or Annoying?

Westfield, New Jersey, May 3, 2001:How People Use ™ the Internet 2001 -- a new report from Statistical Research, Inc. (SRI) -- shows that pop-up Internet advertisements are 50% more likely to be noticed than banner ads, but also that they are 100% more likely to be considered intrusive.

Nearly half (49%) of active Internet users "agreed strongly" that pop-up ads get noticed (versus 33% for banner ads); but 62% felt strongly that pop-ups interfere with their reading or use of a Web page (compared to 31% for banners).

systems competition
“Systems Competition”

Competitors

vs.

Collaborators

vs.

Complementors

summary
Summary
  • Price your information goods according to consumer value, not according to your production cost
  • Even Finance majors should take a Marketing class
  • Beware Information Overload!
  • “Know thy Enemy”
  • – but also Explore Partners and Complementors!
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