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Location: Toronto, Ontario, Canada

I've been online since 1971 and I like to smoothe the way for everyone else. Among other things I co-founded Sympatico, the world's first easy-to-use Internet service (and Canada's largest).

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Wednesday, June 07, 2006

Web 2.0 and the corporate market

Traditionally, new technology has been expensive. When it first becomes available to the public, it’s purchased only by those who stand to get so much benefit from it that spending the high price is justified. For instance, cellphones were originally used by people like real-estate agents who were highly mobile but still needed to be reachable by phone in order to make that $500,000 sale. As time goes on, the state of the art improves, making it possible to lower the price. So once the early adopters have all bought, the price is dropped in order to sell to the next tier of customers. Because each tier is bigger than the last, volumes go up and economies of scale also reduce the cost per unit. Eventually children start carrying cellphones. If a technology is applicable to both business and consumer use, initial sales are to business, and consumers buy later after the price has come down and the products have become largely idiotproof.

All familiar stuff, right?

Well, that’s not how it is in the world of Web 2.0.

The tools are cheap to begin with, and often free, and tend to be aimed at consumers — not surprisingly, because Web 2.0 is about individual empowerment, not about supporting command-and-control style corporate processes. I’ve heard people talk about selling Web 2.0 stuff to the corporate world and charging a lot of money that they’re not charging to consumers, but I don’t think they understand the corporate market today. Companies do not want to pay any more than consumers. And they like free just as much as everyone else does. There are some limited exceptions, e.g. a company may pay extra for a robust version of a tool, say something that’s hosted at a high-availability facility and has 24-hour support. Or they might pay for a copy to install on their own servers, behind their firewall. But they’ll only pay a reasonable premium for these things. If the premium is too high, they’ll just use the consumer version. Even if the consumer version has a usage limit, a corporate user may not be that much more likely to exceed it than anyone else, because the user is still just one person.

I guess this post continues a semi-theme in this blog: it’s not that easy to make a living from Web 2.0.

Hat tip to Toronto Wiki Tuesdays, a monthly event hosted by Sunir Shah and Martin Cleaver, for giving me a forum last night to articulate the above point.


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