In this post ‘Negative marginal cost‘, Seth Godin highlights that non only digital allows to produce at zero marginal costs, but that when network effects are added, marginal cost can actually be negative.
Negative marginal cost means that it costs more to produce less, or that it costs more to have less people connected and contributing. The network effect being exponential creates situations where the value generated by one additional user actually benefits the community by its presence.
As Seth Godin writes, “Moving from expensive to cheap to free to “it’s a bonus to add one more person” changes our economy and our culture forever.” Zero marginal cost was already the internet revolution; negative marginal cost is the social network revolution.
While this explains the exponential development and success of social networks, it is still useful to remember that internet uses a lot of resources and energy, and I am still not sure whether the marginal cost would remain effectively negative when we add those in – that’s actually quite an interesting research topic.
We always underestimate network effects like we underestimate exponential growth, and they indeed create an advantage to add users. We are just at the beginning of the network revolution!
