The power of sharing in business

"Ignore basic economic principles at your own risk. Technology changes. Economic laws do not." Carl Shapiro and Hal R. Varian in Information Rules

Agenda Why should I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share?

Why should I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share?

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share?

Wikipedia: The free encyclopedia

Wikipedia Approximately 55 million visitors per month

Google: Free search engine

Google Approximately 130 million visitors per month

Facebook: Free social networking

Facebook Approximately 33 million visitors per month

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share?

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get when I share?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get when I share?

Microeconomics of traditional goods (the past) You pay and receive a good Price Quantity Supply Demand P1 Q1

You pay and receive a good

Microeconomics of traditional goods (the past) Observations: Price = P1 (Price > 0) Quantity = Q1 Benefits of the Consumer = Green area Benefits of the Producer = Yellow area T ypical for physical goods Price Quantity Supply Demand P1 Q1

Observations:

Price = P1

(Price > 0)

Quantity = Q1

Benefits of the

Consumer = Green area

Benefits of the

Producer = Yellow area

T ypical for physical goods

Microeconomics of traditional goods (examples) www.dell.com www.travelocity.com www. jcpenney .com

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share with this strategy?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share with this strategy?

Microeconomics of shared goods (the present) You receive a free good in internet, such as free search engine service, free calls from PC to PC, free social networking, etc. Price Quantity Demand P2 Q2

Microeconomics of shared goods (the present) Observations : Price = P2 (P2 = 0) Quantity = Q2 Benefits of the Consumer = Green area Benefits of the Producer = 0 Typical for digital goods Price Quantity Demand P2 Q2

Observations :

Price = P2

(P2 = 0)

Quantity = Q2

Benefits of the

Consumer = Green area

Benefits of the

Producer = 0

Typical for digital

goods

Microeconomics of shared goods (examples) www.wikipedia.org www.google.com www.skype.com

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share with this strategy?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share with this strategy?

Microeconomics of incentives (the future) You receive an incentive in a social currency such as ringtones, music, videos, minutes of calling, text messaging, SMS, etc. for using or buying a good, mainly advertising Price Quantity Demand P3 Q3 0

Microeconomics of incentives (the future) Observations : Price = P3 (P3 < 0) Quantity = Q3 Benefits of the Consumer = Green area Benefits of the Producer = 0 Will be typical in the mobile world Price Quantity Demand P3 Q3 0

Observations :

Price = P3

(P3 < 0)

Quantity = Q3

Benefits of the

Consumer = Green area

Benefits of the

Producer = 0

Will be typical in the

mobile world

Microeconomics of incentives (examples) search.live.com/cashback www.virginmobileusa.com/stuff/sugarmama.do Incentives is a new business model. This model will be used widely in the mobile world. Free ringtones, music, videos, minutes of calling, text messaging, SMS, etc. for watching advertising www.yourexample.com

Microeconomics 101 conclusions Microeconomic of traditional goods (web 1.0) Price = P1 (P1 > 0) Quantity = Q1 Shared b enefits between consumers and producers Typical in the physical world Microeconomic of s hared goods (web 2.0) Price = P2 (P2 = 0) Quantity = Q2 (Q2 > Q1) Consumer gets all the benefits Typical in the internet world Microeconomic of incentives (web 3.0?) Price = P3 (P3 < 0) Quantity = Q3 (Q3 > Q2 > Q1) Consumer gets all the benefits Will be typical in the mobile world

Microeconomic of traditional goods

(web 1.0)

Price = P1

(P1 > 0)

Quantity = Q1

Shared b enefits between consumers and producers

Typical in the physical world

Microeconomic of s hared goods

(web 2.0)

Price = P2

(P2 = 0)

Quantity = Q2

(Q2 > Q1)

Consumer gets all the benefits

Typical in the internet

world

Microeconomic of incentives

(web 3.0?)

Price = P3

(P3 < 0)

Quantity = Q3

(Q3 > Q2 > Q1)

Consumer gets all the benefits

Will be typical in the

mobile world

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share?

Public and private goods theory Definition: “ In economics, a public good is a good that is non-rivalry and non-excludable ” Non-rivalry The consumption of one good by one individual does not reduce its availability for others consumption. Non-excludability. No one can be effectively excluded from consumption of one good.

Definition:

“ In economics, a public good is a good that is non-rivalry and non-excludable ”

Non-rivalry

The consumption of one good by one individual does not reduce its availability for others consumption.

Non-excludability.

No one can be effectively excluded from consumption of one good.

Rivalry Non-rivalry goods Goods never run out (not scarce) Examples: The fact that one use a search engine does not reduce its availability The fact that one watch an online video does not reduce its availability Rivalry goods Goods can run out (scarce) Examples: The fact of installing a software in a computer with a license key prevents to installing in an other computer (artificial rivalry) The sales of theatre tickets online is a signal of rivalry

Non-rivalry goods

Goods never run out (not scarce)

Examples:

The fact that one use a search engine does not reduce its availability

The fact that one watch an online video does not reduce its availability

Rivalry goods

Goods can run out (scarce)

Examples:

The fact of installing a software in a computer with a license key prevents to installing in an other computer (artificial rivalry)

The sales of theatre tickets online is a signal of rivalry

Excludability Non-excludability Difficult control of distribution or consumption Examples: The fact that one can use a search engine does not prevent other to use it The fact that one watch a video does not prevent other to watch it Excludability Easy control of distribution or consumption Examples The fact of installing a software in a computer with a license key prevents to installing in an other computer The fact of accessing a website with password is a signal of excludability

Non-excludability

Difficult control of distribution or consumption

Examples:

The fact that one can use a search engine does not prevent other to use it

The fact that one watch a video does not prevent other to watch it

Excludability

Easy control of distribution or consumption

Examples

The fact of installing a software in a computer with a license key prevents to installing in an other computer

The fact of accessing a website with password is a signal of excludability

Public and private goods theory Public goods Collective goods Non-rivalrous Common goods / (Common-pool resources) Private goods Rivalrous Non-excludable Excludable Type of goods

Public and private goods theory Private goods They are scarce and the producer can control their distribution and consumption Almost any physical good In internet: password protected services

Private goods

They are scarce and the producer can control their distribution and consumption

Almost any physical good

In internet: password protected services

Private goods (examples) www.dell.com www.travelocity.com www. jcpenney .com

Public and private goods theory Common goods / (Common-pool resources) They are scarce and control of distribution and consumption are difficult Examples: Hosting data transfer Disk space

Common goods / (Common-pool resources)

They are scarce and control of distribution and consumption are difficult

Examples:

Hosting data transfer

Disk space

Public and private goods theory Collective goods Also know as artificially scarce goods , they are goods that can be scarce or not and distribution is controlled Examples: Copyrighted goods DRM goods Patents Commercial software “ Walled garden” communities or social networks

Collective goods

Also know as artificially scarce goods , they are goods that can be scarce or not and distribution is controlled

Examples:

Copyrighted goods

DRM goods

Patents

Commercial software

“ Walled garden” communities or social networks

Collective goods (examples) iTunes Store www.aol.com www.diamondlounge.com

Public and private goods theory Public goods They are not scarce and the producer can not control the distribution or consumption Examples: Information in general Digital goods Wikipedia Google Yooutube MySpace Facebook Etc.

Public goods

They are not scarce and the producer can not control the distribution or consumption

Examples:

Information in general

Digital goods

Wikipedia

Google

Yooutube

MySpace

Facebook

Etc.

Public goods Examples www.facebook.com www.wikipedia.org www.google.com

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share?

So what the bleep can I share? Share something valuable for a large group Share when you can not control distribution Share when there is not scarcity problems Turn private goods into public goods (if apply) Make collective goods public goods (if apply) Share when your business model is not clear Share information Always share digital goods (no physical ones) Make flexible your copyright (use creative commons)

Share something valuable for a large group

Share when you can not control distribution

Share when there is not scarcity problems

Turn private goods into public goods (if apply)

Make collective goods public goods (if apply)

Share when your business model is not clear

Share information

Always share digital goods (no physical ones)

Make flexible your copyright (use creative commons)

In the hyper connected world free riders are welcomed!!!

Agenda Why would I care about sharing in business? Microeconomics 101 Microeconomics of traditional goods (the past) Microeconomics of shared goods (the present) Microeconomics of incentives (the future) Public and private goods theory So what the bleep can I share? How many potential clients can I get if I share?

Why would I care about sharing in business?

Microeconomics 101

Microeconomics of traditional goods (the past)

Microeconomics of shared goods (the present)

Microeconomics of incentives (the future)

Public and private goods theory

So what the bleep can I share?

How many potential clients can I get if I share?

How many potential clients can I get if I share? Wikipedia 55 million visitors average Britannica 2.5 million visitors average

Wikipedia 55 million visitors average

Britannica 2.5 million visitors average

Yahoo 130 million visitors average AOL 60 million visitors average How many potential clients can I get if I share?

Yahoo 130 million visitors average

AOL 60 million visitors average

MySpace 33 million visitors average aSmallWorld 50 thousand visitors average (a social networking site for rich people) How many potential clients can I get if I share?

MySpace 33 million visitors average

aSmallWorld 50 thousand visitors average

(a social networking site for rich people)

Coming soon: What to sell in the hyper connected world

Still need more help?

Marcelo Honores Economist, Master in E-Business, 15 years experience in IT “ The billion business model” consultant [email_address] (511) 9924-22131 The Billion Business Model saga