Web businesses will succeed based upon their competitive advantage in acquisition of the finite resource of attention.
The quantitative measure of this will be the cost per bit, where the cost is the acquisition cost per user divided by the amount of time and therefore the number of potential transmittable ‘bits’ the users’ attention is captured for.
Traditional economics is based upon the notion of scarcity. But this scarcity tends to be relevant only in the production, not the consumption of things.
This is because the cost per unit of consumable energy, or more generally, information – the bits consumed per bit delivered is usually very high.
As an example, the number of bits of information in the atoms that make up a book is much higher than the atoms that store the book in digital form on a computer.
Because of this, the cost of duplicating a computer file is much less than a scribe written bible or even a printed book – so much so that scarcity seems to disappear and the cost of distributing things like a song goes to zero.
Because the supply side was so choked, the symmetry in the scarcity of both production and consumption was invisible. But it exists , there are a finite number of people on earth and a finite number of hours that people can spend listening to songs.
As the scarcity of production drops the scarcity of consumption – the attention scarcity becomes the limiting factor.
The competitive advantage for the manufacturing industries of the Industrial Revolution was in economies of scale in production. For internet companies, competitive advantage is in capturing people’s attention.