This mornings NY Times had an article concerning Skype. EBay bought Skype around 2 years ago for 2 plus billion bucks. It currently has 220 million users and it brings in 90 million in gross revenue. EBay is now taking a huge write off and admits that it way overpaid for Skype.
Over the years my accountant has often asked me, “Why don’t you just lower your pricing, and go for the volume”? I always answered that lowering of prices is a game that nobody can win for there is always somebody who will do it cheaper”. Instead the game that I play is quality. Try to do it better and more uniquely than my competition. This allows me to charge a premium and maybe stay in business.
Companies love to play the volume game. Having one million customers is more addictive that having 100,000 clients. Salespeople love being able to offer discounts but what are the costs? The landscape of commerce is filled with the corpses of companies that got hooked on the volume game.
Getty Images is the latest volume addict. It somehow believes that selling 10 images for $49.00 is going to make them more money than selling 2 images for $600.00. Oh, they believe that they are going to sell a lot more than 10 but to make their numbers work the increase in volume that they would need is a number that exist only in dreamland.
Luckily for Getty, its suppliers and its investors yelled stop before they drank to much volume flavored cool-aid. Can the same be said for the rest of us?
Sincerely,
Zave Smith
www.zavesmith.com
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