Rating: 
Summary: The rules are the same
Review: "Information Rules" is a hand book for economic layman to understand emerging Internet economy, to help reader to apply feasible strategies into network business. As author mentioned in the beginning of this book, this book is seeking models, concepts, and analysis, which will provide reader with a deeper understanding of the fundamental principles in today's high-tech industries, and enable reader to craft winning strategies for tomorrow's network economy.Technology changes, economic laws do not. This is the thesis of this book. Shapiro & Varian do a great job of explaining how the fundamental principles of economics are still relevant, even in the new network economy. On the other hand, the technology increases the pace of economic game and requires greater speed and agility to keep playing. Thus, it's necessary to adopt new strategies based on fundamental economic principles. Shapiro & Varian develop this thesis into ten chapters: The Information Economy, Pricing Information, Versioning Information, Rights Management, Recognizing Lock-In, Managing Lock-In, Networks and Positive Feedback, Cooperation and Compatibility, Waging a Standards War, and Information Policy. Specific strategies are suggested in each chapter. At the end of each chapter, "lessons" are summarized to for readers to outline the main ideas efficiently. Following are some feature points and strategies this book has reached to enable myself to the network economy. Point 1: Information is costly to produce but inexpensive to reproduce.
The competition between Britannica Encyclopedia and Microsoft's Funk & Wagnalls brings reader into this topic. The cost change of information products is coming up with the shifting of pricing models and corresponding versions of a product to create both the maximum revenue opportunities and establish the largest number of members of the product's network of users.
Strategy: Personalize your product and your prices
There are three ways to pricing information: personalized pricing, group pricing and versioning. Let's analogize those strategies to the modern fashion industry, a fashion designer can tailor dresses specifically for the need of one customer (personalized pricing) or a group of customer (group pricing). At the same time, he/she also designs different styles (different versions of your products) which are hanged in the window of shopping center. This allows customers to select the styles (versions) that best meets their needs and enables you to pick up as wide a base of customers as possible. There are variety of dimensions along which you can version your products: delay, user interface, convenience, image resolution, speed of operation, flexibility of use, capability, features and functions, comprehensiveness, annoyance, support.
Point 2: Switching costs and lock-in
The total cost of switching = cost the customer bears + costs the new supplier bears. In companies' stance, products that can achieve "lock-in" will benefit from the "switching costs" that preclude customers from switching-over to competing solutions. The more successful you are at getting customers more locked-in to your products, the more successful you will be in keeping customers at peak prices.
Strategy:
1.Invest to build an installed base. 2.Cultivate influential buyers and buyers with high switching costs. 3.Get your customers to invest in your technology, thereby raising their own switching costs. 4.Sell complementary products and access to your installed base Point 3: Positive feedback
The value of your product to new users depends on the total number of other users there are (externalities). As the base of users grows, more and more users add in. In information economy, the companies that have been propelled forward by positive feedback will become the biggest winners. So, it is the ultimate metric of success that each company pursues.
Strategy:
There are four generic strategies in network markets for igniting positive feedback, Controlled Migration (Windows 98), Performance Play (Iomega Zip), Open Migration (fax machines), Discontinuity (records to CDs). Point 4: Standardization
The key assets in winning standards battle are: 1. Control of an installed base, 2. Intellectual property rights, 3. Ability to innovate, 4. First mover advantages, 5. Manufacturing abilities, 6. Presence in complimentary products, and 7. Brand name and reputation. Preemption and expectations management are two basic marketplace tactics that companies will need to employ. Point 5: Intellectual property
Given the low cost of reproduction and quick, cheap and invisible distribution, protecting and managing intellectual property are more difficult. Although authors believe that the technological advance offer new opportunities which are far outweigh this rights problem, the solutions recommended here are relatively weak and difficult to carry out.
Strategy:
Take advantage of the lower distribution costs by promoting your products more effectively. Such as giving away free samples to sell the content, selling complementary products, choosing the terms and conditions that maximize the value of your property. Besides those core points and strategies the book reaches, examples which integrate those points make whole book more readable. Authors use examples not only happened recently, but also 100 years ago. Such as interconnection battles were already existed in 1900 when local telephone companies were interconnected with Bell to provide long-distance service. 100 years later, browsers are interconnected with operating systems. History provided a pretty good guide for evaluating network-centric business.
However, almost all of these cases involve the very large firms: e.g. Microsoft, IBM, AT&T, which have strategic planning, high capitalization, and access to best consultants. But the very essence of the new information economy today is entrepreneurship, like Napster, Visi-calc, etc, with good ideas and lucky chance.
The most contradictive part in this book is chapter 6. Authors offer both sellers and buyers alternative strategies on how to manage Lock-in. No matter how effective those strategies are, the dilemma here is that if both sellers and buyers adopt the alternative strategies this book recommends, who will be the winners ultimately?
This book was published four years ago. The network economy has changed a lot since then. From the beginning of 2001, most Internet companies experienced the toughest time. As a reader of this book, a question comes to my mind constantly: are those information rules still applicable in today's network economy? According the thesis of this book, the answer should be yes. It's time to test the models of this book.
Rating: 
Summary: Economics for the networked world, a must read.
Review: Information rules is a brilliant books that gives a framework to think about software and other information goods. Before reading this book, if I were given a software and asked if it will be successful, I would have evaluated its features, compared them to competitors, checked where it added value etc. Now I ask myself, can this product get customer lock-in ? how will it break the lock-in existing products have ? what is the cost of switching from this product to another? are there network effects? Shapiro and Varian point out that since the marginal cost of producing information goods is zero, manufacturers of these products will not make any economic profit, unless they can lock-in their customer through network effects or very high switching costs. They then give several case studies to explain this concepts, as well as the strategies that customers and manufacturers should employ in the network economy. There is also an excellent discussion of the standard setting process and the strategies different players must employ based on their place in the industry. I strongly recommend this book for everyone who plans to work in the information economy. It is a totally excellent book, an eye-opener.
Rating: 
Summary: Really?
Review: The book starts by proclaiming that neo-classical economics is adequate for explaining the information economy. This claim is not backed up in the book. First, textbook neo-clasical equilibrium theory contains neither money nor 'information'. Second, the book merely discusses qualitatively and nonsystematically ideas like positive feedback and increasing returns that were better presented by Brian Arthur. Third, even asymmetric information is not discussed (Ackerlof and Stiglitz are not even mentioned). Fourth (or zeroth), there is not a single empirical graph in the entire book, and nothing of modern ideas of network theory. So I would say that the book is more or less on the same level as Kelly's (pre-bubble-bust) "New Rules for the New Economy". All of these books implicitly hype the unregulated free market, in the face of both qualitative and empirical evidence that unregulated markets are not only unstable but are detrimental to human health and well-being.
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Summary: The Best Among Analysis of Network Economy
Review: It was astounded by what descriped in the opening of the book: at first, the events seem to be at the current, but then they were happened at the last turn of century! It is still the best anlaysis of network economy among 5 books that I read about, though 2 of which are also from Harvard. This book just touches the heart of network economy, and it gives me a lot to further analyze the continuous economics events happening in the globe.
Rating:
Summary: Fascinating
Review: I read this for an information-age econ class I'm taking, and I really liked it. The authors refute the idea that traditional economic rules don't apply to the age of computers, information trading and cyber sales. They make a convincing case that it's all the same econ, just a new application, and I learned a great deal from it about both the traditional models and the economics of selling information. I really recommend it for anyone. It's very readable, accessible and cogent.
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Summary: Keep this Network Economy strategic guide close to your hand
Review: You will have to come back to it many times to improve continually your understanding and practices in the network economy... Invest money and time in "Information Economy, a Strategic guide to the Network Economy" is a real good investment as it gives you guide lines to understand deeply the emerging Network Economy but also how to deal strategically with the main encountered issues: pricing, versioning, rights management, lock-in approaches, and information policy. Even if Carl Shapiro and Hal R Varian are saying that: "Technology changes, Economics laws do not" their careful analysis on networks and positive feedback is conducting them to write "Strategy in network markets is distinct from strategy in markets for information content, not to mention traditional industrial markets". In network markets positive feedback based on Metcalfe's Law - the value of a network goes up as the square of the number of users - makes the strong grow stronger ... and the weak grow weaker. To maximize your return you need to find the balance between openness and control, compatibility and performance and to be ready to build alliances, to battle for standardization on your own or with partners... "It is not enough to have the best product, you have to convince customers that you will win" is a crucial idea to apply in the network economy to ignite a positive feedback and reach the critical mass necessary to fuel explosive growth. The authors are presenting, through real-life examples including the Microsoft Netscape browser battle , a complete battlefield with maps of strategies and tactics to win and stay in the network economy. Keep this guide close to your hand, as it will become your better source of knowledge to be at the forefront of the New Economy. Personally I plan to re-read this book on regular basis to make sure to extract all the richness the authors have put in.
Rating:
Summary: A great book for any Internet entrepreneur, or worker
Review: If you work in the field of the internet, this book is for you! It will provide you with great economic ideas and overall with improve your internet strategies. If you work on the internet and run a web site, or are involved in technology, read this book!
Rating:
Summary: Information Rules: The Blueprint of the Internet Economy
Review: Information Rules is Carl Shapiro and Hal Varian's blueprint for success and survival in today's highly dynamic and competitive Internet economy. They posit that while technology changes, the laws of economics do not. To support such a claim, they walk us through the effects that the stable principles of economics have had on many of the technological breakthroughs of the past century (automobile, telephone, VCRs, CDs, the Web, etc.). They stress that much can be learned from success stories as well as failures from the past. The first few chapters discuss targeting, versioning, price differentiation, etc. The middle chapters focus on lock-in and how to recognize and manage it. The later chapters are dedicated to standards and the standardization process including all the legalities involved. While book is very business oriented and targeting to players in the information economy, it also speaks to a larger audience in no nonsense terms. This point is illustrated with the fact that Shapiro and Varian discuss lock-in from both an information producer and consumer perspective. The real world examples and case studies, which range from the government's antitrust case against Microsoft to Microsoft and Netscape's browser battle to digital phones, Iomega's Zip drives and PDAs, serve to disambiguate and complement the theoretic commentary. Thus, instead of merely discussing the dry laws of economics, they complement such theories with sound and practical historical examples. In addition, supply and demand style graphs, tables, highlighted annotations, and end-of-chapter lesson summary lists, do an excellent job of stressing important concepts. This is not one of those block digram business books! Being a computer science student studying recommender systems and personalization, Shapiro and Varian were able to maintain my attention by presenting a coherent survey of the landscape of new and innovative technology as well as their issues, controversies, and evolving standards. Thus, the most striking contribution this book made to me was an introduction to important economic principals via examples that were close to home. I learned about product and price differentiation, lock-in, positive and negative feedback and network externalities as well as what each mean to the information world. The book is a quick and enjoyable read. Shapiro and Varian's recommendations are grounded in history and each of their track records in this field speaks for itself. Currently they are both tenured professors at UC Berkeley. By the end of the book, their message is clear. They painted and instilled a picture in my mind of what technical, governmental, and economic issues players in the information economy must face. [...]Enjoy!
Rating:
Summary: Made you stop and think
Review: This volume though quite dry in many places, did make the reader stop and think about the science of The Information Economy, Pricing Information, Versioning Information, Rights Management, Recognizing Lock-In, Managing Lock-In, Networks and Positive Feedback, Cooperation and Compatibility, Waging a Standards War, and Information Policy. The more I read, the more I was fascinated by how the authors had analyzed the current Internet and Software phenomenon using traditional methodologies. I have recommended this volume to several of my software manufacturing clients. The book would have been an even more useful tool if the authors would have been able to cite some real world examples from smaller, more entrepreneurial enterprises.
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Summary: Need a Table of Contents?
Review: This is an excellent book, but the Table of Contents is lousy. For those of us who live and breath this stuff and use the book as a reference, you can print out a detailed Table of Contents at their website.
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