When You Create Value It Doesn't Mean You Have To Capture Every Bit Of That Value

from the share-the-value dept

As I discussed in my Hacking Society post, one of the things I'm thinking a lot about these days is how to measure value that isn't directly monetized. There's a related aspect to all of this, as well: recognizing that when you create value, you don't have to monetize all of it directly yourself. Historically, in economics, they've talked about things like "externalities" and "spillovers" when discussing parts of the economic value chain that can't be controlled or monetized directly. However, it seems like a growing number of economists are realizing that this undersells what's happening. Externalities and spillovers often feel like a small thing -- a tangential bit tossed off to the side. But when you're dealing with information and digital goods, it's important to recognize that these things can be a major part of the market, and may not be controllable at all. And that may be a good thing.

In the discussion we had about Craigslist, one of the points was that while Craigslist itself only "captures" a small part of the value it's unleashed, that's not necessarily bad. First, it's good because much of that value to go out to the users of Craigslist themselves. That's why they appreciate and use Craigslist in the first place. If Craigslist tried to capture all of that value itself, people would stop using Craigslist. Now some may argue it becomes a different situation when you have third parties monetizing some of that value, but I disagree. When you look at the most successful companies in the world, they're often platforms -- they create value and capture some of it, but also allow much of that value to be monetized by others.

Look at Microsoft, Apple, Google and Facebook. All of them created a massive amount of value -- and all have become phenomenally successful companies -- but all of them did so by also letting others monetize large portions of the value they created. It's how you build a more long-lasting ecosystem from which you can continue to profit from over time. If you seek to capture all of the value yourself, you don't last very long.

I got to thinking about this more, after hearing the CEO of The Economist (who, one would hope, would understand these economic concepts) complaining about Flipboard capturing some of the value The Economist creates, and declaring it a "competitor" to The Economist's own digital and app ambitions.
“But you’re heading down a route we’ve seen before – giving the opportunity to extract value to somebody else in an area that should be our own – so Flipboard is problematic.
Of course, that ignores the fact that Flipboard -- an aggregator app -- provides its own value as well. People don't use Flipboard just because it includes content from The Economist. They use it because of the overall experience and the fact that it aggregates content from lots of different sources in one place. As much as The Economist, or any publication, might like to "own" the reader, that's not necessarily what the reader wants. Letting others "extract" some of that "value" can actually be a really good thing. Flipboard provides a useful service for The Economist in not only experimenting with new ways to aggregate and present content -- from which The Economist can learn -- but also in potentially expanding The Economist's audience as well, feeding much greater value back into that ecosystem.

Yes, companies need to look at the overall market and see where it is they can extract value -- but you have to wonder about those who claim eminent domain over certain parts of the marketplace. Letting others extract some (and perhaps lots) of that value can have tremendous benefits for those who do so.

Reader Comments

Subscribe: RSS

View by: Time | Thread


  1. icon
    Suzanne Lainson (profile), 29 Apr 2012 @ 10:45am

    Here/s an interesting piece on value

    This pointing to a bubble mentality in Silicon Valley again. I lived through and wrote about the first dotcom bubble and crash so I have been skeptical about this round of hype as well.

    Disruptions: Start-Ups Keep Revenue at Zero to Cash In on Acquisition - NYTimes.com: "When small start-ups I’ve spoken with do make money, they often find it difficult to recruit additional investment because most venture capitalists — and often the entrepreneurs they finance — are not interested in building viable long-term businesses. Rather, they’re interested in pumping up enough hype and valuation to find a quick exit through an acquisition at an eye-popping premium."

Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Use markdown for basic formatting. HTML is no longer supported.
  Save me a cookie
Follow Techdirt
Techdirt Gear
Shop Now: Techdirt Logo Gear
Advertisement
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Advertisement
Report this ad  |  Hide Techdirt ads
Recent Stories
Advertisement
Report this ad  |  Hide Techdirt ads

Close

Email This

This feature is only available to registered users. Register or sign in to use it.