“As the number of long tail micro-markets increases, the less profitable each one becomes. This is because each long tail micro-market competes with an increasing number of other long tail micro markets.

More of any product or service means less revenue for that product or service. A current example: more housing on the market means a lower price for housing. Same thing applies in any market.”

Of course all of those competitors are also simultaneously helping drive down storage costs with all of their large purchases of disk space.

That said, I wouldn’t trust grandma’s photos to a server I didn’t control. Hosting is dirt cheap these days and likely to continue to spiral downward. Most people who post to Flickr, however, seem to do so in large part to enjoy the benefits of the network effect there which also act to keep competitors out…. until someone comes up with an open, widely accepted method to tie everything together without having to use Service X and then those folks are toast.