Fred’s blog post today is about how new and powerful HTML5 apps are emerging, giving the new Kindle Cloud Reader as an example. The Cloud Reader is also an example of something else: if you tax a system too much people will find ways to work around it. This is highly relevant to anyone running or starting a marketplace. You can’t be greedy! (Sorry, Gordon).
I had written a while back – in the context of eBook pricing – how Apple’s take rate of 30% was significantly too high. The Kindle Cloud Reader demonstrates just that. Instead of collecting say 10%, Apple will now be collecting nothing for books sold via Cloud Reader. I believe that the sustainable take rate for marketplaces will be somewhere in the 5-15% range but not above.
I have run into a number of people recently starting new marketplaces and have provided them all the same advice. Launch from Day 1 with the longterm sustainable pricing even if that means that you will have less in initial revenues. The reason is that you will be more disruptive, grow faster and be more sustainable by not opening the door for people to try to circumvent your marketplace.
On a related note, I continue to believe that this will ultimately turn out to be Google’s biggest weakness. Search can be thought of as a marketplace and Google is currently keeping close to 100% of the revenues that marketplace generates. There is no way that’s sustainable in the longrun.
