> Marginal cost is simply not a useful metric with startups. There are plenty of similar industries, and the notion that this means anything at all is garbage.

I read the 'marginal cost' stuff in Varian and Shapiro, the former of whom is the chief economist at Google: http://en.wikipedia.org/wiki/Hal_Varian

It's a worthwhile book, because it goes into a lot more depth that any comment here could, and comes directly from the horse's mouth.