Mark Cuban recently wrote an article titled When you succeed with Free, you are going to die by Free.
Lets look at the rule that eventually KILLS all freemium based content plays:
There will always be a company that replaces you. At some point your BlackSwan competitor will appear and they will kick your ass. Their product will be better or more interesting or just better marketed than yours, and it also will be free. They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo. You get the point. 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. Or will be differentiated enough, and important enough to the audience to maybe even charge more. Who knows. But they will kick your ass and you will be in trouble.
What’s the difference in this equation between free and non-free services? Does being non-free insulate one from competition?
Let’s imagine a world where search isn’t free. Google search is so good that they have killed off all of their competitors, and they decide to start charging $5 a month for everyone to use it. People pay because hey, Google always finds what they want and what else can they do? In this very imaginary scenario, Google’s black swan would be any other remotely decent search technology provided that it is offered for free. The point of this extreme example is that Google is more insulated from competition by already being free, so the above argument is silly.
The rest of the article goes on to say that no matter what type of service you offer, you should be on the lookout for your black swan and when it arrives, assuming you can’t purchase it, you should take all the money you’ve earned and run, rather than stay and fight an expensive losing battle. (I’m oversimplifying quite a bit, mostly because this isn’t the part that I care about)
That’s…fine, although I don’t necessarily agree on that point either, but Mark attacks some of the commenters in his blog for picking on the “free” aspect of his blog post like I am doing here because they miss the point at the end about how cutting and running. Perhaps if he had stuck with his original intended title “The Freemium Company Lifecycle Challenge” he wouldn’t have caught so many peoples attention and it would have just blown over. But if he really didn’t want these disputes popping up, a better title would have been “Everyone has a Black Swan, the trick is recognizing and reacting,” or something, you know, actually related to the true premise of the article. ;)