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Unformatted text preview: ky strategy, f irms may o f f er to subsidize
initial ado ptio n in ho pes that netwo rk ef f ects might kick in sho rtly af ter. Subsidies to ado pters
might include a price reductio n, rebate, o r o ther giveaways. P ayP al, a service that allo ws users to
pay o ne ano ther using credit cards, gave users a mo dest rebate as a sign-up incentive to enco urage
ado ptio n o f its new ef f o rt (in o ne early pro mo tio n, users go t back f if teen do llars when spending
their f irst thirty do llars). This brief subsidy paid to early ado pters paid o f f handso mely. EBay later
tried to enter the market with a rival ef f o rt, but as a late mo ver its ef f o rt was never able to
o verco me P ayP al’s mo mentum. P ayP al was eventually purchased by eBay f o r $ 1.5 billio n, and the business unit is no w co nsidered o ne o f eBay’s key drivers o f gro wth and pro f it. Gilt Gro upe, a high-end f ashio n f lash deals site, used subsidies to
increase ado ptio n o f the f irm’s mo bile app “Gilt o n the Go ”—f ueling the Figur...
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- Winter '14