That's not what marginal cost means to a supplier. The question isn't whether it costs more to acquire 2000 email addresses than it does to acquire 1000 email addresses, the question is whether it costs more to distribute to twenty buyers than it does to distribute to ten.
Thus, the cost of hosting is a marginal cost (probably zero in this world of pastebins and digital lockers). The fee taken by the payment processor is a marginal cost. The cost of finding twice as many emails is not.
No, a "supplier" has to pay for all of his raw materials costs. That includes inventory costs as well as distribution. Of course you can always restrict your timeframe and assume away this cost (inventory as already incurred), but this is not true in the general sense. In particular, if this is true, by assumption, the there is a limited supply by deduction. If you increased your supply [of information bits, not duplicate bits], you would have to pay to incur inventory at that margin precisely. So you never have together zero marginal cost and unlimited supply, this makes no sense.
notatoad 1 day ago | link
I don't think that rule applies for digital goods where the cost of reproduction is zero. The supply is infinite.
To sum, "the cost of reproduction" is <not> the cost of "supply", unless the supply is assumed fixed. Thus the second sentence does not follow per-se.
I don't think you are understanding. Of course there are big costs in acquiring more product to sell. The question is: Do you have to pay those costs for each customer, or can you pay them once and amortize the cost over many sales?
For example, Adobe Photoshop probably costs a lot to design. It has really high fixed costs, because you need to hire good developers and implement a bunch of advanced operations. However, once Adobe pays the fixed costs, the marginal cost of Photoshop is pretty minimal: packaging, printing a DVD, maybe some marketing. It still costs a lot because the fixed costs are so high, and there's not much competition.
Conversely, a plumber has relatively low fixed costs: a truck, some tools, and some training. But plumbers also cost a lot, and this is because they have really high marginal costs: they have to spend an hour at the house of each and every customer.
So I agree with you, there may be high costs in acquiring email addresses to sell. My point is that they are in no way marginal costs.
The costs are marginal at the point of periodicity.
example: reseller> pays adobe every month/quarter
example: adobe> pays versioning costs every 24 months
Provided you shrink the window of analysis, you can say "already paid for inventory, just amortizing it". But in that case, you don't have unlimited supply, you just have whatever you paid for.
In the case of adobe, despite having "unlimited copies" of CS5, they would (eventually) run out of supply of salable product if they did not version into CS6. So while its trivially true they could make unlimited copies of CS5, its not a great idea to perceive this as unlimited supply. The supply that matters is the part people are willing to pay for--this is the marginal information content-- not the marginal bit content of what is delivered.
In some ways I don't think we're disagreeing, just focusing on different elements of the analysis. My larger point was exactly that -- keep in mind the broader elements that are considered as relevant by CxO.
THe CEO of adobe makes decisions, for examople, about how often to incur the marginal cost of versioning the next Creative Suite, how rapidly and how much to budget, etc. COO of facebook looks at the marginal cost of data centers for the next 200 million users, etc, in part because s/he is looking at timeframes and scales which are not the same at the level of a project team, etc.
Thus, the cost of hosting is a marginal cost (probably zero in this world of pastebins and digital lockers). The fee taken by the payment processor is a marginal cost. The cost of finding twice as many emails is not.