The Effect of Cloud Computing on Marketing of Web-Based Services

Abstract

Cloud computing technology has changed the way web-based firms perform computation tasks. The cloud offers users on-demand computing resources over the internet where they pay only for the resources they use. Cloud computing offers unique features that can have new marketing implications. Two key features of cloud computing are studied in this dissertation: Autoscaling and Spot pricing. Autoscaling allows cloud users the ability to scale their capacity as their demand changes. Using a game theory model, I show autoscaling in cloud computing can intensify competition among entrepreneurs when the likelihood of success for entrepreneurs is high. Alternatively, I find when there is high uncertainty about success in a new market, autoscaling results in higher prices for end users. Spot pricing refers to the discounted selling of unused cloud resources. Spot resources are not guaranteed to remain available for users. The option to diversify resources across multiple pools is offered to users as a way to handle such interruptions. Modeling the effect of interruptions on the cloud providers' pricing decision, I show diversification can be chosen for low likelihood of interruption when users are highly differentiated. The findings of these studies provide clear implications for marketing decisions made by cloud users as well as cloud providers.