Eventually, most things will be commoditized, but this happens slower for some things, and faster for others. How does the 'dhh style company' keep that at bay - or do they? How sustainable is the business in the face of cheaper competition?
This is where branding and marketing come in. Ask Apple, BMW, Mercedes, Luis Vutton, etc etc.
These businesses all sell their products for much more than comparable products, and they do quite well. Why? Because there are two types of consumers that are sold by their marketing: those who appreciate high quality, and those that want to be seen as appreciating high quality.
You don't have to appeal to everyone.
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Indeed, thinking about it a minute, a lot of my experience with 'branding' online is that small and independent is cool. How much cooler is it to have a @yourowndomain.com email address than @hotmail.com? Remember geocities? Another thing that was sort of the lowest common denominator.
Maybe Google has a positive brand at this point, but I pay for very few things there. I suppose I might pay a little bit more to them for some things in the future to have everything 'tied together', but that's getting away from 'branding'.
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Salesforce
Flickr (picasa is free, and people still use flicker)
expedia/travelocity (not startups anymore mind you)
I thought that idea was one of the highlights of the presentation. If you can sell 400 accounts at 40 USD a month, you're going to live very comfortably. If you can't find a market niche where 400 people would be willing to pay 40$ (or 4000 people pay 4$), you might need to reconsider your idea.
This was a big point in the Italian restaurant analogy as well. You don't have to redefine Italian cuisine, you just have to build a restaurant far enough away from the other guys and make good enough food (among other things) to attract a large enough customer base to meet your goals.
The point is that you can do that kind of thing in that market sector. Can you in IT? Maybe, but certainly not in some areas. The economics and marketing are quite different.
That period of time includes the present.
companies made a lot of money selling Unixes
They still do, with Apple being the most obvious.