The Value of Free

Recently I was reading about Web 2.0 Business models, an article Web 2.0 Business Models breaks down the business models used in web 2.0 to two kinds, namely technical as in Skype and Network effect as in MySpace. I find it quite interesting that there is no mention of the tried and tested retailing model. This model exists and this Christmas many people will be grateful for the existence of it. I wouldn’t bracket internet retail ( etailing ) as either a network effect based business model or a technology based business model, Amazon customers are loyal because Amazon offers better service at a lower price than its competitors, there is no tie in owing to network effect the tie in is pure and simple service. So I would say there is a third category “good old fashioned business” or E-business where I would mostly place Amazon.com.

Some of the areas of improved service are things like search inside the book or the Amazon market place where the same book maybe found in used form and purchased there. So there is a strong initiative for Amazon to keep on innovating and offering these innovations as the exposed guts of its technology enabling people to further innovate on top of that

Check out Amazon improves Web Services

It’s interesting to note that Ken Yarmosh ended by saying

“If Google, Amazon, or Craigslist, would charge even a nominal fee for access to their data, they would make a killing.”

The ECS Service amongst other Amazon web services are offered free of charge, so there is exceptional value being offered free of charge

For further in formation on Web services check out AWS 

Don

Comments

[Ken Yarmosh]

The focus on my analysis was on Web 2.0 products and services - technical apps, communities, and the like.

There is no doubt of a hustling and bustling online retail business but grouping Amazon (the retailer) into this analysis would be like comparing apples to oranges. In Amazon's case, it leverages the Internet to sell products like books, software, CDs, etc. There is a powerful network effect (and first mover advantage) here but you are selling direct to consumers. Not sure what sort of analysis is needed to understand the business model in this case.

In relation to that latter (and larger) point about free AWS, I completley agree. I wrote my piece prior to the Alexa Web Search Platform announcement but I was pleased by it, because I think there is a great opportunity for Amazon to monetize its data, as I mentioned in the quote you highlighted.

Good thoughts.