The second internet bubble

During the past years, consumers become used to many things to get for free: news, stock quotes, music, e-mail to high-speed Internet sites. Today, the dotcom doesn't make the news anymore with free offers, it's focuses now on mass layoffs and the announcement that they will ask money for their services. " The above sentence is from the magazine The Economist in April 2001, but it's just as well applicable to the situation today. During the dotcom boom many companies hoped to gain market share by giving away things for free. But that was not done with the dotcom crash as a result. Other companies tried different business models and asked their customers for money, but few succeeded in that purpose. But in 2004, when Google went to the stock trade, the term Web 2.0 was introduced, a new Internet bubble was created. Buried business models rised from the grave. Money would be made through Google Ads, small contextual ads that were placed next to text and Google quickly became a near-monopoly. New Internet stars light up the firmament: MySpace, YouTube, Facebook and Twitter today. And again, there was offered a 'free lunch'. Free services were offered to a large mass, with the hope for a next stage to earn money from Google Ads, a model that so far only ... Google had worked. And just as in 2001, it brings us once again into the reality. The number of companies that live on Google Ads is much smaller than was first hoped, Silicon Valley didn't escaped to mass redundancies. Services such as MySpace and YouTube succeeded in time to find shelter in large companies (News Corporation and Google) and put the profitability problem neatly placed there. But how those services, like Twitter and Facebook, will be able to make enough money needed to continue, it still remains unclear. The free model has become a vicious circle: more and more companies find themselves increasingly required to offer free services to even slightly compete with existing services. Because Internet services are anyway cheap, more and more companies offer free services.The question how money will be earned is put further forward. The bottom line is however simple: companies that make no money cannot survive and the Google Ads are fun and nice, but not enough. Free news and other services were a charming idea. But the lesson of two Internet bubbles is that eventually someone somewhere will have to pay the price.

'De afgelopen jaren zijn consumenten gewend geraakt om allerlei zaken gratis te krijgen: nieuws, beurskoersen, muziek, e-mail, tot snelle internettoegang toe. Vandaag halen de dotcoms het nieuws niet meer met gratis aanbiedingen, wel met massa-ontslagen en met de aankondiging dat ze geld zullen vragen voor hun diensten.' Bovenstaande zin komt uit het magazine The Economist van april 2001, maar hij is net zo goed van toepassing op de situatie vandaag. Tijdens de dotcom boom hoopten vele bedrijven marktaandeel te winnen door zaken gratis weg te geven in de hoop er in een tweede fase geld aan te kunnen verdienen via advertenties. Maar dat gebeurde niet, met de dotcom crash als gevolg. Andere bedrijven probeerden andere businessmodellen uit en vroegen hun klanten om geld, maar weinigen slaagden in dat opzet. Maar in 2004, toen Google naar de beurs trok en de term Web 2.0 zijn intrede deed, werd een nieuwe internetbubbel gecreëerd. Begraven businessmodellen verrezen uit het graf. Geld zou gemaakt worden dankzij de Google Ads, kleine contextuele advertenties die naast teksten werden geplaatst en waarop Google al snel een bijna-monopolie wist te verkrijgen. Nieuwe internetsterren lichtten op aan het firmament: MySpace, YouTube, Facebook en vandaag Twitter. En ook nu was er opnieuw een ‘free lunch'. Gratis diensten werden aangeboden om een grote massa te bereiken, met de hoop om in een volgend stadium geld te verdienen aan Google Ads, een model dat tot dan toe enkel voor ... Google had gewerkt. En net als in 2001 belanden we ook nu opnieuw in de realiteit. Het aantal bedrijven dat leeft van Google Ads is veel kleiner dan eerst werd verhoopt; Silicon Valley ontsnapt opnieuw niet aan massa-ontslagen. Diensten als MySpace en YouTube slaagden er op tijd in onderdak te vinden bij grote bedrijven (News Corporation en Google) en legden het winstgevendheidprobleem netjes daar neer. Maar hoe deze diensten, net als Twitter en Facebook trouwens, er in zullen slagen om genoeg geld te maken om overeind te blijven, blijft tot vandaag onduidelijk. Het gratis model is ondertussen een vicieuze cirkel geworden: steeds meer bedrijven zien zich verplicht steeds meer diensten gratis aan te bieden om nog enigszins te kunnen concurreren met bestaande diensten. Omdat internetdiensten sowieso goedkoop zijn, bieden ook steeds meer bedrijven gratis diensten aan en wordt de vraag hoe ooit geld zal kunnen worden verdiend almaar verder vooruitgeschoven. Wie start met het idee om snel geld te gaan verdienen, komt gewoon niet aan de bak. Maar de bottom line is nochtans eenvoudig: bedrijven die geen geld verdienen kunnen niet overleven en de Google Ads zijn leuk en aardig, maar onvoldoende. Gratis nieuws en andere diensten vormden een bekoorlijk idee. Maar de les van twee internetbubbels is dat ergens iemand uiteindelijk de rekening zal moeten gaan betalen.


Pricing can be difficult

Finding right balance can make or break business. Consider type of product; calculate your costs ''How much should I charge?'' It's one of the first questions most small business owners ask. It's not an easy one to answer. Setting a pricing strategy depends on many factors — among them, the type of product or service offered, costs to provide it, expected profit, customer's location and the ''going rate'' for your industry. Finding the right balance among these factors is more art than science. Pricing too low can cut into your profits, while overpricing can hurt your business. Large companies can afford marketing staffs that spend a great deal of time trying to get the ''right'' price. A small business doesn't have that luxury. A common error is pricing too low to attract customers. While special deals can work in some cases to get a relationship started, going low is not always the best path. Low prices can draw customers interested only in price. They are likely to abandon you the moment they find something even lower. The low-price strategy can be a fatal game. Raising prices after you have established a low base is often difficult, if not impossible. Low prices designed to attract customers can be even more precarious for service businesses. You have only so many hours to sell. Your business can't make it up in volume like a retailer, who still profits from lower prices if volume is high enough. Competing only on price is not a sustainable business model. It must be combined with other products or services to yield adequate profits. Quality and service are other distinguishing factors. Pricing is an ongoing process, so test your pricing periodically. You might need to adapt to changing conditions. Competitor prices, your own costs, customer perceptions and your profit expectations can all change. Or you might want to simply test different pricing levels to see what works best for your business. Research the norms for your industry, including price ranges across your market area. You might want to charge more or less, depending on your product or service. Make sure you use timely and accurate information to calculate your costs for labor, supplies and direct and indirect overhead for every product or service you offer. ''Guesstimates'' are not good enough and might cost you far more than the time of your research. Also take into account seasonality that might cause short-term cost or increase fluctuations.

Scrunch the pack, pump up the price

Calcutta, March 22: Soap, detergent, chocolate and biscuit makers are quietly jacking up prices — in a way that the consumer won’t catch on easily. They are crumpling pack sizes while retaining the maximum retail prices. The change in the packet size is so subtle that customers at supermarkets and neighbourhood groceries won’t realise that the prices of their favourite soap or brand of biscuits have risen by anywhere between 5 per cent and 50 per cent. The price hike gambit may be achieved through clever deception but it isn’t illegal since the new packs carry the revised weight. Only those consumers who buy products like hawks — read the fine print on the packs and remember the old pack size — will be able to tell how much the prices have risen as a result of the grammage tweak. Just a month ago, a consumer could get a 500 gm pack of Ariel detergent powder for Rs 74. Now, for the same price, the consumer will get just 425 grams — which amounts to a price markup of almost 18 per cent! All the leading fast-moving consumer goods (FMCG) makers — Hindustan Unilever, Procter & Gamble, Henkel and Britannia — have jumped on board to adopt this legitimate strategy and hope the consumer doesn’t catch on. Hindustan Lever marked up the price of its popular detergent brand Wheel by over 66 per cent. Slowdown strategy It’s the ideal strategy for a slowdown: in the boom-boom years, these companies simply raised prices and brand-conscious consumers paid without much demur. However, the price increase this time round seems a little odd as it comes at a time when industrial growth has shrunk in the two consecutive months of December and January. In January (the latest month for which the figures are available), industrial output contracted 0.5 per cent over the same month last year. A fall in industrial output is indicative of weakening demand. Normally, companies don’t raise prices when demand falters. But FMCG companies haven’t seen slackness in demand — one of the few industrial segments that reported robust growth in the first six months of this financial year. The surge in farm incomes this year – especially after the Rs 70,000-crore loan writeoff last June — has underpinned growth in consumer durables this year. Back in September, the consumer durables segment reported growth of 14.65 per cent. But it then stumbled to report negative growth rates in October, November and December. In January, growth was back at 2.5 per cent. Companies play coy Most of the FMCG companies aren’t talking about the new strategy to raise prices. Spokespersons for Hindustan Lever, Dabur and Henkel refused to comment on the price strategy. Biscuit and chocolate makers such as Britannia, Parle and Cadbury were equally evasive. However, Procter & Gamble, the world’s largest producer of consumer products, was more forthcoming. “The principle for pricing is that we do what is right for the consumer. We will continue to make sure that our propositions remain competitive based on the prevalent economic condition and yet continue to delight our consumers,” said a P&G spokesperson for its Indian operations in an email reply. “There have been occasions where we have raised prices but any such decision is always made keeping strictly in mind the overall value we are offering to the consumer,” he said. “Grammage adjustment is not a route that companies often take. If one company starts the process, the others follow pretty soon,” said a spokesperson for cigarettes-to-hotel conglomerate ITC. Consumers livid “We did not notice the change in the pack size,” said one housewife. “I caught on only when the detergent powder ran out sooner than I had expected.” Local retailers say they weren’t informed of the change in pack sizes either — a trend that started in January. “We came to know about the change only when some consumers pointed it out to us,” said one local retailer. Consumer activists are, however, split on whether or not this is a devious tactic. Mala Banerjee, president of the Federation of Consumer Associations (West Bengal), said the companies were in the clear if they mentioned the prices and the weight on the packs. “As consumers, we need to check before buying,” she added. However, Arun Saxena, president of the International Consumer Rights Protection Council (ICRPC), believes that the infirmities in the laws make it easy for manufacturers to hoodwink consumers. “There are no laws that require the companies to disclose the change in the products’ price per weight. They are not required to disclose the old weight when they make a change,” he said. Saxena believes that the government should formulate a law that makes it mandatory for companies to declare the unit weight of a product along with the price for the pack. This will make it easier for consumers to detect a change in pack sizes and weight. .


As recession hits IT, HP tries variable pricing on services

In an effort to make its outsourcing and IT services more affordable in a , Hewlett-Packard Co. is changing its services pricing to a model that's akin to ordering a customized laptop. In an effort to make its outsourcing and IT services more affordable in a , Hewlett-Packard Co. is changing its services pricing to a model that's akin to ordering a customized laptop. The new approach may have its broadest impact on how HP prices the application support services offered by its Electronic Data Systems unit. last August, said that users now will be able to specify different application service levels based on the importance of individual apps. For instance, a company could set high service levels for that require a rapid support response, such as order processing, while others that aren't as central to business operations could be designated for lower levels of service - with HP's pricing varying accordingly. The change isn't a price cut, according to HP officials. But the variable pricing could reduce overall application support costs by as much as 40% for customers, said Jeff Womack, vice president of product marketing at EDS. Womack said EDS is also 'unbundling' its IT infrastructure services, which include support of servers and storage devices, so they can be aimed at smaller companies - for instance, businesses with as few as 100 servers to support. HP thinks the new approach will enable EDS to go after a broader customer base, beyond the that it has focused on until now. John Madden, an analyst at consulting firm's Ovum's office in Boston, said that HP is trying to be proactive in response to the . 'If you have customers that are hurting financially,' Madden said, 'do you pound them over and over again with the same terms?' But he added that HP also may be looking at the competitive challenges that outsourcing and IT services vendors like EDS face from services, which typically are based on variable pricing. In addition to the new pricing options, HP is changing the way it for customers, also to give them more choices. Data centers typically are built to one of four reliability levels, as defined by Uptime Institute Inc. in Santa Fe, N.M. Tier 1 is the lowest level and Tier 4 the highest, with redundant systems and the least potential for downtime. HP now will offer customers the ability to set up data centers with different tier levels, a move that could reduce building costs by as much as 25%, said , vice president and general manager of the company's HP Critical Facilities unit. That's the new name for what was , a data center design firm that HP acquired early last year. The design process will incorporate a 'building block' approach, with variable levels of redundancy and fault-tolerance, Gross said. He added that users will be able to adjust the amount of space given to the different tiers as business needs change.


NY newspaper ‘Newsday’ to begin charging for online news

New York newspaper Newsday plans to begin charging online readers for access to its content, rejecting a trend toward free online newspaper content. The move, which comes as the newspaper industry is mired in financial turmoil, was announced Thursday during a conference call in which Cablevision, the newspaper's owner, also announced it would write down the value of its $650 million acquisition of the newspaper by $402 million. "Our goal was, and is, to use our electronic network assets and subscriber relationships to transform the way news is distributed," said Tom Rutledge, Cablevision's chief operating officer, according to a Reuters report on the call. "We plan to end distribution of free Web content and to make our news gathering capabilities service our customers." Rutledge did not elaborate on the company's online subscription plans, but Newsday publisher Timothy Knight hinted that the move could be used in a bundling arrangement to cross-promote content on the newspaper site and in Cablevision's television programming. "We are in the process of transforming Newsday's Web site into an enhanced, locally focused cable service that we believe will become an important benefit for Newsday and Cablevision customers," Knight said in a statement. "More particulars will be forthcoming over the next few months." Such a plan would go against the trend of newspapers abandoning the pay-for-content model. Among the country's largest newspapers, only The Wall Street Journal has managed to continue charging online subscription fees. The New York Times abandoned a two-year experiment with the Web-subscription model in 2007, suggesting that the company's projections for subscriber revenue were small compared with advertising sales.


Pricing in Road Transport: a multi-disciplinary perspective.

Pricing in Road Transport: a multi-disciplinary perspective. Edited by Erik Verhoef, VU University Amsterdam, Michiel Bliemer, Delft University of Technology, Linda Steg, University of Groningen and Bert van Wee, Delft University of Technology, The Netherlands

Transport pricing is high on the political agenda throughout the world, but as the authors illustrate, governments seeking to implement this often face challenging questions and significant barriers. The associated policy and research questions cannot always be addressed adequately from a mono-disciplinary perspective. This book shows how a multi-disciplinary approach may lead to new types of analysis and insights, contributing to a better understanding of the intricacies of transport pricing and eventually to a potentially more effective and acceptable design of such policies. The study addresses important policy and research themes such as the possible motives for introducing road transport pricing and potential conflicts between these motives, behavioural responses to transport pricing for households and firms, the modelling of transport pricing, and the acceptability of pricing. Contents: Part I: Behavioural Responses to Road Pricing Part II: Modelling Effects of Transport Pricing Part III: Acceptability of Different Road Pricing Policies Part IV: Past and Future of Road Pricing Index Contributors: M. Bell, M. Bliemer, P. Bovy, T. de Jong, S. Fujii, T. Gärling, D. Hensher, C. Jakobsson, D. Joksimovic, P. Loukopoulos, C. Nash, S. Puckett, J. Rouwendal, G. Santos, G. Schuitema, L. Steg, T. Tillema, B. Ubbels, D. van Amelsfort, J. van Ommeren, B. van Wee, E. Verhoef, M. Wichiensin



Belgacom combines fixed and mobile for 35 euro / month

Belgacom will offer evening and weekends calls both fixed and mobile calls for free. That informs the historical telecom operator in a press release. This will be a European premiere. Happy Time One, is a combined subscription of fixed and mobile phone, which offers the customer during evenings and weekends, free calls to all fixed and mobile numbers in Belgium. The subscription costs 35 euros per month, giving the possibility linking up to four additional mobile subscriptions which each cost ten euros. The number of minutes that can be called free of charge is limited to 200 hours.

Belgacom brengt een aanbod op de markt waarmee 's avonds en in het weekend zowel vast als mobiel gratis gebeld kan worden. Dat meldt de historische telecomoperator in een persbericht. Het zou om een Europese primeur gaan. Happy Time One, dat volgende week op de markt komt, is een gecombineerd abonnement voor vast en mobiel bellen, waarmee de klant 's avonds en tijdens het weekend, gratis kan bellen naar alle vaste en mobiele nummers in België. Het abonnement kost 35 euro per maand, met de mogelijkheid om er tot vier bijkomende mobiele abonnementen aan te koppelen die telkens tien euro kosten. Het aantal minuten dat gratis gebeld kan worden is wel beperkt tot 200 uur.