Sunday, October 6, 2019

Software Is The Best Deal

Most software is a crazy good deal for the consumer. The reason is because duplicating and distributing software is nearly free. Why is this important? If it can be duplicated and distributed for free then it can reach more people. And if it can reach more people, then the price can be lower because the the maker can make up a decent profit on volume.

Most of the cost is upfront to build the product but after that most of the profit will go to the bottom line. Since software can scale wide to a large number of users, the prices can get low, maybe even almost free. The price gets spread around more and more customers. It also gets better because these economics also justify making it better; more people to get value from added feature or improved graphic. 

Now you add in competition to drive costs down and that's where we are at with some large enterprises selling their product for free to consumers because they have scale due to that nature of software and they can make money based on that scale whether it be ads or becoming a platform for others to target their users. Just this month 4 or 5 discount brokerages will start to offer $0 commission trading to stop the bleeding of Robinhood taking all their customers. They can make good enough money just on the interest of deposits alone.

This is starting to be true for non-digital goods and services as well. Maybe we'll one day see movie theaters with free movies but making money on concessions. The improving of technology and distribution, the ability to scale is a great deal for consumers.