Originally posted by mbml
can anyone estimate how much it costs to set up a new site? I'll try to make a few hundred k in the next few years, then come up with it lol ♦
In addition to set up costs you also need traffic, which very hard (if not impossible) to obtain, since traffic creates traffic. These two points - high set up cost and lack of traffic form a barrier that keeps cheaper providers off the market and allows the major providers milk their customers to the max.
I'd like to quote a very informative post from 2p2 forums (author momo_the_kid) that pretty much says it all:
"An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι (oligoi) "few" + πωλειν (polein) "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants.
Profit maximization conditions: An oligopoly maximizes profits by producing where marginal revenue equals marginal costs.[1]
Ability to set price: Oligopolies are price setters rather than price takers.[1]
Entry and exit: Barriers to entry are high.[2] The most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms.[3]
Number of firms: "Few" – a "handful" of sellers.[2] There are so few firms that the actions of one firm can influence the actions of the other firms.[4]
Long run profits: Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits."
