It’s all about low transaction, marketing and distribution costs. This excellent article explains the common denominators in the successful business models of Amazon, eBay and Netflix. All of these businesses exploit network-enabled low costs to mine huge and previously inaccessible market sectors amalgamating numerous tiny niches. There’s nothing really new here, but the article is worth reading because it explains so clearly what’s going on. It also reminds that current online retailers are essentially 1990s web-economy dreams made flesh. IOW, it wasn’t a bubble; today’s retail and marketing survivors arose from a combination of good ideas that were left over after the shakeout, and new business models built on the hard-won knowledge gained in what many people now deride as speculative failures.
(via Tim Oren)
UPDATE: What also strikes me here is the difference between Amazon et al‘s business models, in which most of the value is contributed by participants on the margins of the network, and the (unsuccessful) business models which software makers and others were promoting until recently, in which value flowed outward from the servers of some “service provider” or other. Of course David Isenberg said this years ago.