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Hyperinflation and Internet business model - Flash comment 1

Being a gold bug, I do not totally rule out the possibility of hyperinflation even in advanced economies like US. Ok, that is the worse of the worst case scenario. Financial doom. So, keeping this in mind let me question how internet's business model will function if such inflation occurs. Even a very high level of inflation, should help us set our thoughts in order.

Inflation

Inflation in simple layman's terms is the increase in prices. This increase is usually due to the increase in the input costs that manufacturer or service provider passes it on to the customer.

Internet business models

These business models are pretty static by this I mean, their revenue models are not fluid enough to charge more. The main reason behind this is the easy substitution. An entire website can be substituted by a simple click. So, the business models that make the customers sticky and give enough reasons for the customers to use the website or its services at a 'premium' rates would survive.

To take a guess, the adsense revenues many not keep track, unless advertisers increase their outgo’s. The content creators on the other hand have steady and increasing costs, putting these creators on the loss-making mode.

The ISPs are in trouble. Their business model is similar to Hotel industry in traditional economy, fixed assets and substitutable. The fancy services are all off or will become free, perhaps fed by advertorial revenues, but may still struggle to survive.

Behavior

Like in all inflation periods, customers will spend only on the necessities. So, if a particular site or publication is not essential to her survival in the 'internet' age, then customer will promptly rationalize his expenditures.

Saviors

One of the saving grace of the internet is it is still reaches a tiny percentage of population. By increasing the coverage the internet portals can survive for a longer period.

Conclusion

It’s interesting to juxtaposition inflation and the internet business models to see how these models can withstand the increased prices and customer frugality.

-End of part 1-

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