Information as a Commodity

1. Information as a Commodity Competitive Strategies for Network Economies January 15, 2002 Amy Dix

2. Outline Information • The Value of Information • The Role of Technology • Costs Associated with Information • The “Experience” • Inter-Relationships

3. 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

4. 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

5. The Importance of Technology Technology: The infrastructure that makes it possible to store, search, retrieve, copy, filter, manipulate, view, transmit, and receive information

6. 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.

7. Marginal Cost: Storage

8. Marginal Cost: Storage • The Hamiltonian Path Problem The Future: DNA Computing • Cost • Storage

9. Information is an “Experience Good” • Is Marketing Important? • Experience through Branding and Reputation

10. 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?

11. 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

12. Pay Attention! “A wealth of information creates a poverty of attention.”

13. MSN Home Page

14. 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?

15. MSN Home Page

17. 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).

18. “Systems Competition” Competitors vs. Collaborators vs. Complementors

19. 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!