Losing money at scale is truly extreme pricing. But at least it’s probably temporary.
Losing money on cloud services? Not so much.
When it comes to downloadable content and hardware gadgets, it’s pretty easy to detect extreme pricing. But what about the cloud? How do you price something as nebulous as cloud computing?
A price war has broken out between Google, Amazon and Microsoft over the prices they charge for their respective cloud services offerings.
Earlier this month, Amazon and Google each dramatically cut prices on their various cloud services.
It appears to be an all-out price war in the cloud services space. Major players appear willing to undercut each other, making sacrifices in the short term to gain customers in the long term.
It’s impossible to tell if companies are losing money and providing services at a loss. For starters, various cloud services are difficult to compare. And cloud services are like bowling scores. You don’t know how you’re doing now until you find out how you’ll do in the future.
If extreme pricing brings in far more customers, then economies of scale can make it pay off. Maybe.
As we’ve seen, both Amazon and Google are grizzled veterans of the extreme pricing approach. But Microsoft is a relative newcomer -- unless you consider consistently high software prices to be extreme.
All these giants have deep enough pockets to play a very long game. But what about startups? Are they being excluded from the market unfairly?
Do consumers benefit from extreme pricing because everything is cheaper, or does extreme pricing stifle competition and reduce the emphasis on product and service quality?
Look what extreme pricing did to customer service in the airline industry.
What is clear is that the ability to offer extreme pricing strategies has proven to be a strategic asset by the tech giants in their competition against more agile startups -- and each other.
Whether cheap tech cheapens tech remains to be seen.