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Demand Side Capitalism in the New Market

by Allen Weiss  |  
January 1, 2001
  |  7,920 views

A few months ago I read an Above the Crowd newsletter by Bill Gurley of Benchmark Capital in which he introduced the idea of "Demand Side" vs. "Supply Side" Capitalism. Demand side capitalism is where an Internet startup comes up with a product that customers need, while supply side capitalism is where startups dream up a product, and hope that demand will soon follow.

Examples of demand side capitalism might be ebay (EBAY). They satisfied a need already apparent from flea market and garage sale fanatics, and the frustrations people felt when trying to find that perfect something or trying to sell some velvet Elvis portrait mistakenly purchased long ago.

Some people think that Amazon (AMZN) falls into the supply side corner, but most definitely the whole PC industry does. After all, the argument goes, no one knew they needed personal computers until companies like Tandy (now Radio Shack (RSH)), Hewlett-Packard (HWP), Apple (AAPL), and IBM (IBM), not to mention Intel (INTC) and Microsoft (MFST) came up with them.

So, the PC industry supposedly created customer needs, rather than the other way around.

Gurely calls for an end to supply side capitalism that seems rampant in the Internet space, and a return to demand side capitalism.


I think this is important advice for Internet companies. After all, Gurley is considered by many to be an Internet guru, so people should pay heed. But let's be clear that these ideas, like those of many so-called Internet gurus, are quite old. I assure you, one can find them in any Marketing 101 textbook.

In marketing, we just use different names. For example, I have always asked my MBA students: Is marketing about creating needs (Supply Side Capitalism) or filling needs (Demand Side Capitalism)? Throughout history, some firms have more production oriented (Supply Side) or market-oriented (Demand Side).

Those of us who teach marketing have always argued for "finding a need a filling it!"


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Allen Weiss is the founder and publisher of MarketingProfs.com. He can be reached at amw@marketingprofs.com.

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