If You Live By Free, You Will Die By Free 251
Posted
by
ScuttleMonkey
from the give-it-away-now dept.
from the give-it-away-now dept.
Hugh Pickens writes "Internet entrepreneur Mark Cuban writes that the problem with companies who have built their business around Free is that the more success you have in delivering free, the more expensive it is to stay at the top. '"They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo," writes Cuban. "Someone out there with a better idea will raise a bunch of money, give it away for free, build scale and charge less to reach the audience."' Cuban says that even Google, who lives and dies by free, knows that 'at some point your Black Swan competitor will appear and they will kick your ass' and that is exactly why Google invests in everything and anything they possibly can that they believe can create another business they can depend on in the future searching for the 'next big Google thing.' Cuban says that for any company that lives by Free, their best choice is to run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank. '"When you succeed with Free, you are going to die by Free. Your best bet is to recognize where you are in your company's lifecycle and maximize your profits rather than try to extend your stay at the top," writes Cuban. "Like every company in the free space, your lifecycle has come to its conclusion. Don't fight it. Admit it. Profit from it."'"
Sounds self-contradictory (Score:3, Informative)
Re:This Is Madness (Score:5, Informative)
run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank
Companies should focus on making money?! Outrageous!
Re:This Is Madness (Score:5, Informative)
Actually, if your services are free to the customer, in order to undercut you your competitors will have to pay his customers for using his service.
Actually, the mistake you are making is thinking that you are the customer from companies like Google or Facebook. You are not, you are the product. The advertisers are the customers.
Re:Live free, die hard (Score:3, Informative)
Sumitomo has been around since 1590.
IBM has been around since the early 1900s, and they are still hugely relevant today.
These are obvious exceptions to the rule, but it does show that if a company has a good thing going and can play its cards right, it can survive a long, long, LONG time.
Taking advise from Cuban (Score:4, Informative)
I'm not sure I would take to much advise from Mark Cuban. First, he is a hard worker, but with Broadcast.com he was in the right place at the right time. Beyond that he hasn't exactly made a lot of great desciions. The major investment into HDnet hasn't been that fruitful and the major investment into Register.com was a debacle. He traded a rising star point guard for a bad apple 35 year old point guard. Today, he just spent $25M on resigning that bad apple point guard (now 36 years old) that isn't half the player he onces was.
I'll pass on advise from Mark Cuban.
Google isn't free (Score:3, Informative)
Look, how hard is this, Google isn't selling search services, Email, document publishing software, or the like.
Google is selling eyeballs, just like broadcast tv, broadcast radio, etc. They aren't selling anything to their users, they are harvesting their users and selling them to advertisers. They are able to sell stuff that's pretty well targetted through their search and Email.
The tradeoff of charging for their stuff would be that they would become a lot less valuable to advertisers, and people who are paying to use them would resent the fact that they are "paying for advertising."
So Google's service isn't free, it's just the Mark Cuban isn't their customer. Unless he's buying ad-space with them, in which case he's just not very bright.
Re:This Is Madness (Score:3, Informative)
So the point was that by having constant oversight, it wasn't necessary to engage in massive amounts of intervention (bailouts, subsidies, new regulatory frameworks, etc.) during dire times. So, on average, Canada intervenes in its economy less, because it doesn't need to engage in these massive interventions. (Of course this point could be debated depending on how you scale things like occasional massive bailouts compared to constant low-level regulation.) Despite its support of the free market, the US doesn't let the free market run wild when push comes to shove. In fact the US intervenes substantially.
(This point, among others, is discussed in this interview [youtube.com].)
Re:This Is Madness (Score:3, Informative)
Well, for example, I could point you at the Canadian banking system as a contrast to the American banking system. This article [yahoo.com] talks about it a bit.
By forcing banks to maintain significant capitol reserves on hand, the chances of them collapsing and then requiring point intervention by the government is significantly lessened, and ultimately I think it's a much less significant intervention in the management of their affairs.
Re:never heard of hudsons bay company eh? (Score:3, Informative)
And I quote (with emphasis added):
I never said the basic business had to change, only that a company's offerings had to change to remain competitive. IBM may still be in the office automation business, but they sure as hell aren't relying on punch cards and typewriters to pay the bills. Similarly, Hudson may be in a more modern form of their core retail business, but they're definitely not setting up forts and trading posts to acquire, process, and resell fur pelts.
Re:Good luck with that! (Score:4, Informative)
1) Be generous
2) Create trust
3) Scale out
4) Betray trust
5) Profit
It's called "Selling out". Also known under such words as "Betrayal" and "Traitor".
Yes, this is a good way to make money.
It's such a good way to make money, it really ought to make us re-evaluate this whole "money" concept as an organizational structure. Betrayal should not systematically lead to power. It should lead to death at the hands of your peers, or if you're a sympathetic sort, it should lead to disenfranchisement and a permanent spot at the bottom of societies totem pole.
How about "If you live off the backs of slaves, you will die by the hands of slaves"?
Yeah, that one holds a lot of appeal.