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Friday, April 01, 2005
Peerflix - Network FX 2.0
Was recently thinking that if you trade DVD's on Peerflix, you are actually using an implicit price mechanism. Which conveys a huge amount of information about your expectations and preferences (ie, your taste in movies, how it's evolved, etc).
Which is an incredibly powerful way to build network FX - in fact, what this model is transforming dot com 1.0's network externality to direct gains to trade.
That's pretty amazing for at least a couple of reasons. First, because it will create absolutely massive switching costs (as you learn about your buddies'/community's trading tastes; as the market grows and liquidity increases). Second, because there are a vast number of ways to (really) monetize this market. For example, because so much information about consumption preferences is pooled and exchanged, access to the Peerflix market is gonna be worth an absolute fortune to marketers. Or you could use dynamic pricing to nonlinearly share in the gains from trade (versus the current $1 flat fee).
The other candidate, of course, that is creating the same kind of platform for 2.0 network FX is Zopa. Imagine lending/borrowing in the context of the paragraph above.
I think this is gonna be explosive stuff, and I am gonna do quite a bit of reading this wknd to trawl the econ lit for insight about network FX 2.0.
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