If You Live By Free, You Will Die By Free 251
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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."'"
Re:Live free, die hard (Score:4, Interesting)
Tell that to this company [wikipedia.org].
From Mark Cuban? Take it with a grain of salt (Score:3, Interesting)
I tend to take everything he says with a grain of salt.
I disagree. (Score:4, Interesting)
I disagree.
I think that when any technology - be that DVD, FaceBook, Internet Explorer - reaches a mass audience and is perceived to be good enough to meet the users needs it is more or less impossible to dislodge even when there are technically superior products out there.
The only way a new product will ever dislodge a entrenched rival is when they offer something unique and compelling or are readily interchangeble with the old one.
I kind of get what they are saying, but I see more evidence of entrenched mass market products that are seen to have reached an acceptable level of functionality and ease of use.
A bit naive (Score:2, Interesting)
Twitter is the only company mentioned that has been reluctant to monetize their traffic. Not because they can't, but more so because of some philosophical reason they choose not to. Yet despite that there are third parties that are monetizing Twitter's traffic, as in:
http://tech.slashdot.org/story/09/07/05/2151220/uSocial-Sells-Twitter-Followers-By-the-Thousand [slashdot.org]
Re:Isn't this true of almost all businesses? (Score:2, Interesting)
Re:This Is Madness (Score:2, Interesting)
Only if you insist on pedantic sematics.
For instance, you can provide more value for free (say, faster, more accurate results). Not quite undercutting free, because free is free, but you are giving more away, which is similar enough in concept.
Re:At first thought he was arguing against it (Score:3, Interesting)
Right. Because you could just as easily live by free and die by proprietary. Or vice versa. Its all about how you leverage your core competencies, extract the maximum amount of profit, and then either sell out or invest your profits in the next big thing. What 'free' tools buy you is the ability to hang onto as much of your revenue as possible (free as in beer) and be able to move to better platforms as time goes by (free as in speech).
I've seen too many proprietary products priced based on how much revenue the customer has, effectively skimming profits off the top. And then the cost to switch (either to reduce expenses or improve processes) is designed to ensure lock in.
Re:This Is Madness (Score:3, Interesting)
The US government tinkers in the economy more than most other free nations do
[citation needed]
it's led us from one bubble to the next, and it won't stop for at least one more boom bust cycle
Booms and busts are inevitable, especially without regulations. But as long as we have the best government money can buy, you're not going to get any meaningful regulation. For instance, the only reason they're thinking about universal health care now is because the corporations have started to realize that employer-provided health benefits put them at a disadvantage to companies in countries where they don't have to pay those costs. Notice that the insurance companies won't be out of the loop; more likely we'll still have health insurance, only it'll be mandatory and the employer won't be forced to provide it.
Re:STFU, Cuban. (Score:3, Interesting)
+1
Cuban is con man. I heard the sales pitches for broadcast.com when he and Mary Meeker (unethically on her part) were trying to sell that scam. His lies are thick, he relies on bullying/shaming people and he took a lot of money Yahoo could have used to help free software and be a healthier business.
He is not a typical clueless MBA, he is a con-man and should be actively avoided.
Re:This Is Madness (Score:1, Interesting)
Only an inordinate amount of regulation - to the point of stagnating the economy - could prevent bubbles and busts. There has been a bubble and bust every 30 to 50 years since the United States was born. Some mostly within our borders, others international.
Bubbles and busts will likely continue to happen as long as people are involved. Regulation can stifle economic opportunity into oblivion, and likewise limit bubbling in order to mitigate butsing. The only cure, however, is education. Most people seem to be droning on about how awful this particular bubble/bust combo was, but I can only guess that it because they have no clue as to what happened in the 1800s.
Lack of education will be our undoing, if it hasn't already sent us well down the road.
Re:Isn't this true of almost all businesses? (Score:3, Interesting)
Step 1: Come up with a new idea for making money that nobody has ever thought of.
Step 2: Make as much money as you can, while other people scramble to get into the market.
Step 3: Compete a bit with people, staying in the game as long as you can still make money at it.
Step 4: Move on to something more profitable.
Somehow people have confused getting as big as possible for making as much money as you can. Without making money, big = bad.
Re:free markets (Score:4, Interesting)
But which country has this mythical free market? The one that has a thriving market in flying unicorns? Or is it the one where legislators and regulators can be bought and sold?
Reminds me a bit of those "True Believer arguments". e.g. "A True Believer would never do X" where X is something bad. Looking through that "lens" you'll find that the real world has rather few "True Believers", and you don't really learn much about what the True Believers actually believe in.
Anyway, to me what is important is not whether a market is free or non-free, but whether the market is well-regulated or not. And we should focus on how to have a well-regulated market, not on how free it is. Quality not quantity[1].
There have been arguments that the regulators should be people from the industry, since they know the industry well etc, and that's why it's ok and inevitable to have the "ex-CEO of Company X" end up regulating "Company X" and stuff like that. Somehow I'm still not convinced by those arguments (especially given the observed results
[1] Similarly there's always this popular debate about big vs small government, I find that rather stupid since what seems far more important is the quality of the government, not the quantity of it. But in a democracy I guess that's ultimately determined by the general quality of the voters.
Re:This Is Madness (Score:2, Interesting)