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> If your marginals costs are so low, and you can charge $49+ (whatever) for what is essentially air, that means more money in your pocket.

If it's that profitable though, competitors will show up. Indeed, there are plenty of 37signals competitors. What really differentiates 37signals is how very visible they are (their oldest, most popular product is their blog), which makes it easy for them to get enough people to sign up to turn a tidy profit. That is their barrier to entry.

> Why do you think Microsoft is such a cash cow?

Because they have a monopoly. Operating systems and office software have a lot stronger network externalities than project management software does.




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