I think the Craigslist example is spurious. The ability of Craigslist to fill a need, that is allowing people to aggregate an audience around a single event (e.g. “selling a dog house”), at an extremely low cost is a function of the technology and how it has driven the cost out of the system.

The ability to aggregate the audience around traditional classified ads is in decline, not because Craig drives a Prius, but because the ability to deliver an audience to the seller of the doghouse has dramatically reduced. There is a cost however to deliver that service, mostly labor, infrastructure and bandwidth services, so the statement that they are not interested in profits is not strictly true. If the truly want Craigslist to survive they need to make a profit in order to maintain and invest in the company. This is a truism. The alternative is to continue to raise capital, but then your motivations of the owners get skewed towards profits.

The same too goes for MySQL, a quasi volunteer, shared cost model. (I say shared source because many of the programmers are paid by corporations to work on the project). MySQL has simply been able to dramatically reduce the cost of delivering a database to the market, so it has a removed an amazing amount of cost out of the system and delivered to a new broader audience. SAP then looks towards a vendor that is able to deliver the functionality required for their product. Their motivation is in the ability to use the low cost delivery model of MySQL for there own benefit. This is not bad competition, simply smart competition.

An example of bad competition where a competitor will maximize short term behavior over long term benefit. Short-term behavior is continually under pricing products in order to buy market share with out a strategy for returning to the market equilibrium. This drives down market expectations makes it difficult to return profitable market equilibrium. These are classic characteristics of poor business judgment. Fortunately these companies are short lived and usually die on the vine, to be replaced by companies with long-term profitability goals.

Markets always return to equilibrium over time, then if it is a new equilibrium then that is good too.

hi tom, this is well understood by econ/marketing profs at business school. you're only as good as your competitors - if they drop the margins on your products, they can get you to commodity status faster. the other points you mention are what happens when you have complementary products in your value chain - it's also a known strategy principle that you should commoditize the rest of your chain, ie. your vertical competitors (but not your own place in the chain, which is determined by your immediate horizontal competitors) in order to seize maximum margin, especially if those complementary goods are obstacles to adoption. it's why oracle, etc would commoditize middleware to sell databases, and why apps guys would want to commoditize databases in order to sell apps, and services guys wnat to commoditize everything to sell services, etc, etc

Not pursuing short-term profits in order to gain short-term market share and long-term larger profits is'nt bad competition. Its good strategy. And not pursuing profits at all, short or long term, is'nt bad competition either. Its the not-for-profit model. There's surely a place for that model because there are employees, employers and consumers who have valid reasons to get organized and participate in that alternative model. I'm also sure the for-profit players have enough financial resource to compete with a not-for-profit competitor. If they lack the creativity, or market audience, or additional value offered at a premium, well, then they need to address their own competitiveness.

There is a flip-side interpretation. That is not that the new players are "bad competitors" but that the cost structures of the old players are overly expensive and obsolete in a globalized economy which uses the Internet.

That is what Chinese and Indian outsourcing are doing to US manufacturing. And that is what Skype and VoIP are doing to the telcos. Inevitably, this means that the old cost structure must be destroyed, and a new cost structure which more accurately reflects real costs must be built. Delaying the process with protective regulations will simply make the old players irrelevant.

It's an interesting subject. Because if you think abut it, Silicon Valley has several thousand "bad competitors" straining to be let loose on the world. The innovation that startups are trying to develop has to be hugely disruptive and ideally, offer ten times the benefit for one-tenth the cost. There is no way a competitor could respond quickly enougth to such a challenger--they couldn't downsize quickly enough...

And that is where everything is heading, the commoditisation of everything; except you get a bit of defensive rear-guard action from the Telcos that is delaying things a bit in that sector...

PS - Regarding Craigslist, it's an excellent service that provides a lot of benefit to each community. But classified ads used to be one key revenue stream that used to pay for professional journalism. In a way, the newspapers were using classified ad revenues to subsidise the Front End -- the journalism ,which is of considerable benefit to each community. Personally, I think that Craigslist shuld build the Front End out and become even more useful, but that's just me :-)

We've launched a web application similar to Craigslist, but it specifically targets the NY area. www.nyposting.com focuses on the NY online community, and allows users to preview posts before actually clicking on them, and to respond to user postings through an online form rather than having to open a seperate e-mail client. NY Posting also includes new categories for college students. People are saying "nyposting.com is the Craigslist of NY."

How is Ny Posting doing? Are you able to support yourself? What community servies do you offer in competiton to Craigslist? Is this a viable busineess model?
Sorry to pepper you but inquiring minds want to know... :-)

NY Posting.com at http://www.nyposting.com is doing just great (Hopefully, we'll get investors in the future to lend us a hand). Many users are thankful for the free service we're providing, and they're getting good responses to their posts. CL will soon start to charge for the housing section, and so many users are disappointed. NY Posting focuses on the NY area...thus, NY, like SF, will have something to be proud of. Hope this answers the above.

I use Cox cable internet, Cox's media empire printed classifieds is one of their big revenue drivers. Guess what? If you try to access Craigslist over Cox Cable internet... its nearly impossible! It appears that they throttle access to craigslist - as a matter of fact there have been a zillion complaints but hey, who can blame Cox? They're trying to stop the opening cap in their money dam! Maybe you should investigate this tip further. Cheers

It depends how you measure competition. Is it by value or is it in the fringy margin after cost.

Robert Scoble creates value/s. These are real assets and as tangible as, for example, the reputation of a CEO. You can sell that kind of value on the NYSE for greenbacks.

Our problem is we still count using greebacks instead of fingers. Which is the metaphor?

The big problem is that we can't put intangibles on the ballance sheet. If we did the ROI of most organisations would be pathetic.

The real value is in relationships and non of the economists dare put that into their thinking.
It will have to come ... but not just yet huh!