Richness and Reach – Implications for the Internet Entrepreneur
The concept of richness and reach as illustrated by Evans and Wurster in “Blown to Bits” (1999) has been a major contribution to our understanding of Internet business strategy.
This is the argument in a nutshell:
The economics of information and the economics of physical things differ fundamentally from each other. When a tangible good is sold, the seller does not own it anymore. When an idea, software or a research paper is sold, the seller still possesses it and could possibly sell it once more.
Information can be replicated without any noteworthy cost and can be distributed over the Internet at a very low cost. Other than information, tangible goods are location-based and many times wear out.
In the traditional economics of things products are subject to a universal law – the trade-off between richness and reach. Because information is imbedded in products in a physical mode of delivery, companies can choose to have a very “rich” product or to have a lot of “reach”, i.e. have a wide audience either in terms of geographical reach or breadth of customer target groups. The meaning of “richness” can vary depending on the context; for example a scientific research publication or a highly sophisticated stereo are rich in information. The scientific research paper has a very small audience in a given location while the sophisticated stereo will be very specific and expensive. Hence their “reach” is low.
Along comes the Internet. The more the bundle of tangible product and information becomes dissolvable, the more obsolete becomes the trade-off between richness and reach. A good corporate Internet strategy will hence add both richness and reach to the existing business strategy at the same time.
For digital or fully digitizable products the trade-off between richness and reach does not exist. We can add as much richness as we want and still have global reach. A very “rich” business can be described as a very specific one. In fact, for new web site business on the Internet it is necessary to be very “rich”, i.e. to be very “niche”.
The more specific the theme or topic of a web site, the more targeted will be the visitors that come to the web site from the search engines. On the one hand it will be easier to be on top of the search engines with very “rich” niche content, on the other hand – whatever the revenue model of the web site may be – the conversion rate will be higher as traffic will be targeted. Because “reach” is given on the Internet and only subject to the limitation of language, we have to truly excel in “richness” in our online businesses.