When I bought this book I really expected it was addressed to a very specific professional area, like Computer Scientists or Economists, or even MBA students. I was completly wrong. In fact, this well-written book clarifies many thinks about the important value of information, concepts, relationshipments and additionally rich samples. Consequently, we start to have a better comprehention about several business involved with "Information" (I mean: nowadays, everything, every commercial and non-commercion relationshipment). It is 100% recommmended, no matter what is your work or your dedicated area of studying. Information really rules...

Information Rules: a strategic guide to the network economy (MONGI SIMELANE)
As a student majoring in MIS (Management Information Systems) I highly recommend that Information Rules: a strategic guide to the network economy by Carl Shapiro and Hal Varian is a good investment which, in my opinion is timeless. Timeless to the extent that it is exploring the culture of this new emerging phase in information technology and firms that are involved within it. At first I was quite sceptical to whether or not the trends and fore-seen issues with the growing technology age would be relevant and of course there were things mentioned that I didn't agree with, but for the most part most of what was written was relevant.
One aspect of the book which I particularly enjoyed were the recommendations for business strategies which firm could adopt. Product differentiation, consumer satisfaction (which leads to consumer loyalty), networking (which could be compared to blogs or viral marketing nowadays) and finally the support and convenience of the product/service, is what we see around us that make a clear distinction between the companies that are successful and those that are not. So therefore many firms that are well known today use some of these strategies in order to not only improve consumer satisfaction but to also gain new consumers in the process.
This just makes it seem as if this book's authors have done a lot of research in order to develop future trends and study aspects of the economy that may indeed change. So from the beginning of the first chapter Carl Shapiro and Hal Varian captivated my curiosity by mentioning the fact that this trend of the world getting "smaller: is one that was noted during the industrial revolutions, the emerging in infrastructure of electricity and telephone networks. This was all a growing trend that seems to have no end.
I highly enjoyed this book, a bit difficult to read at times but it is definitely a good buy.

This is an absolute classic, and 10 years after publication still has relevant and critical information in each chapter. Perhaps a more up-to-date monograph for many topics would be Judo Strategy. However, the topics like Pricing, Standards Wars, Managing Lock-In are so relevant. Put this book together with The Innovator's Dilemma, Judo Strategy, and a few other tomes is enough to arm the new software entrepreneur. On the downside, the book is a little naive at times about the hardcore business and competitiveness of software, which is probably due to the authors being academics. An excellent strategy book, readable, and definitely specific to software.

This book is the basis for so much that we already know - or should know. Re-reading it this year (2008) after so long was a shock to my senses. It showed me how on target the economic principles expressed between the covers were.

Of course, that is one of the points of the book: old economic principles still hold in "new" economies. The strategies of the most successful firms today can be held up against the principles of this book as a standard - and they will be in synch.

If you've never read it, I highly recommend it - especially if you are in or planning to enter the tech economy. Do not be fooled by some of the "dated" material, since some time has obviously passed since its first publication. There are comments about technological developments held in suspense for the authors at that time - the outcome of which we are already well aware. For example, the authors make much of Netscape's stardom of that time. Now, of course, it is a different story. Regardless, such examples do not diminish the fundamental economics lesson in this book.

The arrival of the Internet and the information explosion it created has made it possible for inventors and entrepreneurs to build a business from scratch to worldwide marketing capability in a very few years. The authors of this book take the position that all too often we are deluded into thinking certain and tried and true economic principles have been abolished by this new Internet economy. They argue their position without jargon and with examples taken from the real world.

While old pricing ratios and old pricing strategies may not apply in the information age, new pricing ratios and new strategies have taken their place. Information goods can be costly to produce but cheap to reproduce. For example, a copy of a 100 million dollar movie on videotape costs a few cents to make. So pricing cannot follow, say, a 20% markup rule when the unit cost is essentially zero; "you must price your information goods according to customer value, not according to your production cost."

Several chapters cover pricing strategies and how to maintain control when some "view the Internet as one giant out-of-control copying machine." These strategies involve methods for differing your product from your competitors, avoiding sky-high initial pricing that encourages competition, and customizing. Interestingly, they note the "one-to-one marketing" strategy was "first described by economist A.C. Pigou in 1920."

Sometimes literally giving a product away works. The book describes how the former school teacher (Sheryl Leach) that created Barney gave free videos to day care centers and others located near the stores selling the Barney tapes. A note inside told parents where the stores were. It worked magnificently and Barney is now one of today¹s icons.

The development of digital watermarks has provided one tool for controlling piracy of your web presented material.

An important information age problem is recognizing and dealing with "lock-in." The writers compare cars with computers. You can switch from a Ford to a Chevy with no trouble, but changing computers may obsolete your present software. How do you convince customers to switch to your product or service when a switching cost is involved? The authors discuss several strategies.

Problems with "lock-in" and "switching costs" also often occur when you purchase durable equipment and service contracts. The authors advise you to carefully consider the costs of being locked-in to you supplier¹s parts and services. They especially caution regarding "evergreen contracts" which automatically renew.

Many interesting historical examples are used to drive home points. Edison, for example, with regard to establishing standards, invented the word "Hello" for answering the phone. He was hard of hearing and the English "Hallow" didn¹t grab attention as well. Incidentally, Alexander Graham Bell pushed for "Ahoy." The battles for standardizing railroad gauges and the classic standards battle that established AC power over DC power are detailed. (No mention of Tesla, a shame.)

The enormous role "blocking patents" can play when a formal standard-setting process is taking place within an industry is discussed. Most people think of industry standards as being dictated by the mighty corporations, but if the small guy is not invited to the table his firm "is not required to license its patents on fair and reasonable terms." The government may also monitor a standard-setting procedure with regard to monopoly considerations. When the steel electrical tubing people attempted to stack the deck, the plastic electrical tubing people cried foul and won.

Yet another interesting historical example is given in the discussion regarding how the concept of reasonable royalties and "just price" arose. It goes back to medieval times: "the just price of a horse was the price that would prevail at the open market at the annual fair, not the price that happens to emerge from a traveler in desperate need of a horse."

Like most growing fields the Internet has generated many unique and delightful terms. Vaporware is one such term. That is the promising of a new product and not delivering or delivering very late. This business tactic has been used by even the biggest (IBM, Microsoft), but as the authors note, it has often boomeranged.

While promising too much too soon is dangerous, the book makes the point that in this age of rapid technology progress "rigidity is death." the French became world leaders in the 1980s with their Minitel system, but today only 3 percent can access the Internet. A case where success also resulted in a high switching cost.

Each chapter of the book concludes with "Lessons" which are capsule summaries of the chapter¹s main points. Like the rest of the book, legalese and the jargon of academic economic courses are completely avoided.

This book is so readable and practical one can only hope other professors will use it as an example of how to write without arcane technobabble.

I saved a lot of money buying this textbook on-line. It was in good quality.

Although this book was written in 1998, it is just as relevant if not more so today. The book discusses how Internet entrepreneurs should price their goods/services; how they can create lock-in effects to instill customer loyalty; and perhaps most importantly, how they can create network effects so as to exponentially increase their client base and barriers to entry. A brilliant book written by two leading authorities on economics.

The authors say that the circumstances of one era may be unique, but the underlying principles that govern the exchange of goods in a free-market economy are the same. The book is about the economy rather than managing information itself.

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.

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.

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.

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!