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The Economy of Digital Ideas

What makes an online business successful? What works or doesn’t? As we might be going through another Internet bubble, these questions are becoming more relevant and harder to answer. Most of the publishing companies have yet to figure out a model that works. We just saw a few days ago the launch of The Daily News, the first tablet newspaper. While it is hard to predict its future, the media is evolving and adapting to this new market.

If we follow the basic demand and supply principles of microeconomics, we might get some directions. The web has created abundant supply of information. Every time that a user is entering the web, a publisher is also joining.  As a result, news corporations have lost market power. The abundance of online publishers has brought information price down to free level.

In this free digital world, what are people willing to pay for? They are probably more likely to pay for scarce resources such a personal interactions, which cannot be substitute online. For instance, publishers are more likely to monetize through speaker events and consulting gigs. Music bands through live concerts. Product software firms through direct support… 

The new economy of digital ideas has made direct interactions more relevant and meaningful. Virtual communities are never going to fully substitute personal interactions.  On the contrary, online communities are likely to increase the value of direct interactions, which have become a scarce resource. As a result, I think that businesses that better manage to integrate online content with direct interactions are more likely to thrive in this new economy.

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