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Abundance
In the physical world scarcity is what leads to value.
In the digital world abundance is what leads to value.
There is no such thing as scarcity in digital goods. They can be
replicated instantly and as many times as you want without losing
quality.
This has led many who grew up in the world where scarcity was the
measure of value to conclude that digitatization equals value deflation.
But I believe the exact opposite happens. You must embrace what digital
offers. The ability to rapidly replicate is the way to create value in
the digital world.
Take the case of the Jonas Brothers, a band of three brothers based in New Jersey. Their record label, Columbia Records, spent a bunch of money recording
a series of music videos based on their single Mandy. They spent more money buying traffic to the Jonas Brothers website to showcase
the video. The result was very little traffic.
Then in a stroke of brilliance, Columbia Records put the video in an embeddable
player on the Jonas Brother's myspace page. Within weeks the video had
replicated all over myspace. The result was a huge amount of traffic
and increased sales of the song Mandy on iTunes. Masive viral replication drove sales. Abundance at work.
Two weeks ago my daughter Emily became a bat mitzvah. Like most proud
parents we threw a party for her. At her sister's party two years before we had a
photographer who shot the event and made the photos available via a
password protected website. The photos were watermarked. If you wanted
prints, you paid him for them.
We hired the same photographer at Emily's party, but we also put up a
photobooth where the people who came to the party could take their own
photos. The photobooth pictures were all black and white. But these
photos were available the night of the party on a totally open website
where anyone could take them and do whatever they wanted with them.
The next day the photos from the photobooth had replicated all over the
web, to flickr, to photobucket, to typepad and blogger and, most of all,
to myspace. Three weeks later many of Emily's friends still have photos
from the photobooth as their profile photo on myspace.
And the guy who put together the photobooth has gotten a ton of new
business from the people who came to our party and from the people who
saw the photos on the web. I even got a request to use the photos in an
advertising campaign.
Contrast that with the photos that were taken by the hired
photographer. They are locked behind the password protected site and
few if anyone will buy them other than our family.
I could go on and on aboiut this. But this is a blog post and I am writing it on my new blackberry 8700g and my thumb hurts.
My point is not that scarcity doesn't matter anymore. Scarcity will remain the source of value in analog goods like oil and water.
But when something goes digital, the value creation exercise is about creating abundance, not scarcity.
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Listed below are links to weblogs that reference Abundance:
» La création de valeur par l'abondance from Martin Pilote
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» Creating value in the digital age from An Online Marketing Guide
A great little post from Fred Wilson, a venture capitalist, on how value is created in the digital age. I recommend you read it and then apply the thinking to your business, to your [Read More]
Tracked on May 22, 2006 6:35:34 AM
Posted May 20, 2006 in Venture Capital and TechnologyComments
Great screen on the new crackberry. Makes internet surfing almost fun.
Do you like it?
Posted by: howard Lindzon | May 20, 2006 5:06:19 PM
Given your technology expertise, I'm curious to know your opinion on the new blackberry. Hopefully you'll post on that soon.
Posted by: Matt L | May 20, 2006 5:33:34 PM
I differ, albeit slightly, on how you use the term "scarcity". We are wildly spoiled here in the West. Essentially any/all consumer goods we ever want are available in "abundance." While some folks may not have the means to acquire the goods and services they want, all such goods and services are available, in abundance.
So "scarcity" in our culture is, at best, a marketing strategy, a stage-managed holding back of goods which could otherwise easily be flooded into the marketplace, which creates the appearance of scarcity to stimulate demand (e.g. haute couture, hot new cars, etc.) I suppose occasionally we do experiuence true scarcity, but typically only because the manufacturer bumbled production, e.g. the latest Playstation.
So, arguably, your point is not that digital media make things more "abundant" -- they are already totally abundant -- but perhaps rather that digital media eliminates most or all costs and issues associated with distribution. Whether or not that argues for a radical rethink of property law, well, I leave that for another day. ;)
Posted by: steve | May 20, 2006 6:06:32 PM
Not buying, at least not with this data.
The examples are a variation on "premiums" - giving away one thing to sell another. Take the example of the band - the video was distributed freely while the track was held back. The former is mainly useful in destination situations, while the latter is for downloading and playing on the ipod. In the details, this marketing strategy is innovative, but it fits in the aforementioned age-old category. If they just freely sent around all their songs on MP3, that would be a better example of "abundance" of the good, but poor business.
Can't speak to the photobooth guy's economics, since you don't share how he makes money, so that might be a better example of your point.
The notion that value is created through abundance is potentially revolutionary - but has little evidence to support it. We've heard about "post-scarcity society" before, and while I take steve's point above, in real terms it has yet to come to pass.
Posted by: Ray | May 20, 2006 7:44:21 PM
Columbia Records getting a clue? Now that's news.
Posted by: Mike Abundo | May 20, 2006 9:40:57 PM
Brilliant post. In terms of post-scarcity society stuff, I have been looking at female sexuality as a model of what a post-scarcity world might look like. That is, it is relatively easy for girls to go out and pick up a guy, but there is obviously still some sort of pecking order. A girl I talked to about this was telling me something about "quality, not quantity"... I still have no idea what she was talking about! :-)
Also, congrats to your daughter.
Posted by: Alex Krupp | May 21, 2006 1:38:21 AM
"The ability to rapidly replicate is the way to create value in the digital world."
But what of thge value of what is being replicated?
I'm not sold. How can art have value if there's no effort on either side?
Posted by: jackson | May 21, 2006 1:00:49 PM
Did you do this post by emailing your mobile TypePad email address or did you browse the web, go to TypePad site, and post? Mobblogging seems to work well except you can select a category for your post...
Posted by: Ben Casnocha | May 21, 2006 3:37:21 PM
The ability to rapidly replicate is the way to create value in the digital world.
Sounds like it's time to invest in spam and computer viruses.
All you have really done is explained why a demand curve slopes downward.
Posted by: Rob | May 22, 2006 1:38:54 PM
In an abundant/digital world, sustainable value is created by contributing to the commons in a way that benefits both the commons and the contributor.
That is not the same as pure replication. Unadulterated replication for replication's sake leads to various scourges: spam, link farms, general infosmog/datacancer. Unfettered replication actually can reduce value by making discovery and transaction costs higher.
Agalmics is an interesting word/concept that tries to capture the ideas and attributes of non-scarce value creation. I posted about it here: http://gordon.blogsmith.com/2006/04/11/agalmics-renaming-web-2-0-to-get-out-of-the-tech-ghetto/
Posted by: Gordon Gould | May 22, 2006 2:57:29 PM
I could not agree more, Fred. Which is why I...
1. Let people download my cartoons off my blog for free IN HIGH RESOLUTION. So they can make their own posters, computer desktops etc.
2. Let people upload the high-res images onto CafePress.com, if they want to make themselves a t-shirt or something [at cost, with no markup or profit to myself].
3. Instead of hanging my original "cartoons drawn on the back of business cards" in art galleries and convincing yuppies to buy them, I just hand them out at blogger dinners for free. Just give them out to anyone who wants one.
Why do I do this? Well, it's the basic economics of karma. Your goodwill from gettting a free piece of artwork is worth far more to me than you giving me $10 profit on a t-shirt.
Like your buddy with the photobooth, he gave something away, and good things came back to him. In spades. I have found the same thing happening to me, all the time.
More info on my cartoon policy here: http://www.gapingvoid.com/Moveable_Type/archives/002670.html
Anyway, Rock on.
Posted by: hugh macleod | Jun 19, 2006 11:10:39 AM
Thank you for this post! I am a professional photographer. I've decided to change my print pricing for guests to "at cost" to encourage people to share photos. :)
Posted by: marysledd | Jan 15, 2008 11:38:06 AM
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