USB Flash Drives, all grown up

Business 2.0: The size of a pack of chewing gum, the USB flash drive combined cheap flash memory with omnipresent USB connection technology to kill off the floppy drive. At first blush these devices are poster children for the curse of commoditization. Falling prices have boosted adoption — nearly $4.5 billion worth of these drives were sold in 2004, and that number will top $5.6 billion in 2006, according to market research firm Web-Feet. This fast adoption means opportunity. Take Apple’s (AAPL) iPod Shuffle. At its core the iPod Shuffle is nothing but a cheap USB flash drive. While a 512-megabyte flash drive costs about $45 in the open market, Apple sells the Shuffle for twice as much. How? By adding special Apple software and some chips, it turned a cheap drive into a slick music player. (The lesson here is that if you want to make real money, you should differentiate the commodity product with good industrial design and software.) More over on Business 2.0