Salesman of the irrational | Hacker News Reader

Salesman of the irrational

economist.com

22 pointslatif12 comments

Mr. Biver says “People want exclusivity, so you must always keep the customer hungry and frustrated.”

I agree when it comes to tangible goods (Think Apple, Nintendo Wii early on), but I don't believe I have ever seen this work for virtual products.

Agree? Disagree?

You must have missed this report on Facebook:

http://lsvp.wordpress.com/2008/09/02/facebook-selling-digita...

No, no, no... definitely not virtual goods in the sense that you linked to... that is a whole other beast and I have been in complete awe at how much the virtual goods market has grown (first starting in the Eastern hemisphere).

Virtual goods such as web apps and services. Blogging apps, productivity apps, etc.

That's a very interesting observation. What do you mean by virtual products, "media"? Many people cultivate a taste for obscure food, music, movies, and literature. Surely some of the appeal of these obscure bands or movies has to do with the exclusive feeling one gets by belonging to the minority of people that know about them. There's also a need to always search out new and different things to stay ahead of the majority when the obscure is "discovered" and becomes mainstream. Undoubtedly the market for art (paintings sculptures) provides an example of a virtual good that can fetch a huge price at auctions. Although by the time rich people "discover" an artist and start bidding millions for their work, all of the true artistic innovators have moved on to something different. So it actually appears that there is a transition - knowledge provides the exclusitivity in virtual goods for the artists while money and the ability to sustain bidding wars provides the exclusivity for those who don't have knowledge. There is a cyclical behavior also - every harvest a very tiny minority of obscure virtual goods are randomly chosen for mainstream success - their prices are amplified by bidding wars among non-artists, while all other members of their crop are left for dead.

I was talking more of virtual apps such as blogging apps, productivity apps, etc.

But you make a fantastic point.

I just don't see this working for virtual products such as this, but it undoubtedly works with tangible goods.

I guess if an art collector buys an "original" instead of a print there is a feeling that they actually "own" the painting - even though in terms of viewing a print is equivalent and possibly more durable than the original.

How can you restrict duplication so that someone could "own" a virtual good?

DRM seems a little bit silly for things like music or movies or images because "using" a DRM protected object requires removing the protection just enough to copy it (despite the efforts of hardware DRM) but perhaps virtual goods like a house in a virtual world could be sold in a form where a copy cannot be substituted for the original. Is this possible? One can imagine a virtual house that contains the cryptographic serial numbers of all of the virtual bricks used to build it. The virtual world then only has to enforce a conservation of virtual matter...

I'm sure you could give productivity apps a feeling of exclusivity by tightly restricting membership based on some exclusive criteria e.g. wealth, edu background, zip code, etc. niche products aren't a bad thing if the niche is very rich

Also wasn't this the idea behind that 20k iphone app that displays a picture of a red gem on your phone?

This kind of exclusivity in luxury goods is mostly about signalling social status and group membership, AFAICT. It's much harder to flamboyantly show off a virtual good, except in a virtual setting, which in turn is susceptible to gaming and cheating of all sorts, not to mention somewhat nerdy.

It's much harder to flamboyantly show off a virtual good, except in a virtual setting

While it doesn't take a degree from Harvard to ostentatiously flaunt virtual goods, I have noted that they sure seem to do it well. (I often tell people that I have two pieces of paper which cost $140,000 but, of course, it didn't cost $140,000 for the paper. It cost $140,000 to be able to say I have the paper.)

When gmail was launched it used exclusivity to vastly improve its desirability. I'm 100% certain exclusivity can be used to sell virtual goods. You just have to figure out how to harness it.

I disagree. I would argue that the MMO industry (World of Warcraft, et al.) essentially makes its living selling scare virtual goods. The game is a marketing adventure for the scare virtual goods. Customers are elated when they manage to get an artificially scarce good and happily pay for the chance to obtain them.

I wonder how the cost of lost sales during the good times balances with profits from more consistent demand during the bad times.

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