“You’re not free? You’re gonna die!”
When doing interviews or chatting at conferences, I can always tell who was paying attention during the “last” boom-bust cycle here in the Valley. Sadly, most weren’t. They’re the ones telling me my company is on the brink of death because we’re not free and, thus, going to lose the land-grab that’s sure to ensue. According to them, some free site is always about to steamroll over us. 
Imagine my surprise to find an article today on GigaOM entitled Free: a Tactic, Not a Business Model. Is this a sign of the Apocalypse? Is the latest bubble about to burst?
Probably not, but it’s surprising none-the-less. At nearly every tech conference, the vast majority of the business models seem to be either “Grow fast, sell to Google” or “Grow fast, slap AdWords on it”. While these may actually work from time-to-time, I find it strange that no-one seems to think these are risky approaches.
The article is right on the money: free is a tactic. For some, it’s an incredibly good one. For others, it’s not. At SmugMug, we dabbled with free and found to our great amazement that it damaged our product, our brand, and pissed off our customers. I really need to blog about what we learned one of these days….
The article also references another fascinating blog post entitled The Penny Gap. It’s definitely worth a read, too.
Our mantra? You get what you pay for.
March 13th, 2007 at 6:51 pm
I don’t think people are unaware of the risks involved in going with the free model. I think what’s more likely happening is “free is easy. paid is hard.” Your offering doesn’t have to be refined or remarkable if you’re going free to gain some traction. The mad dash to “so now how do we monetize it?” is the business cycle that most of these free businesses seem to be stuck in and most perish in.
March 18th, 2007 at 10:24 pm
Don, glad to see the GigaOm article has brought out people like you and I that chose to go the business route vs. free/adwords. For too long, I’ve heard we were too small even though we make more of a profit than most Web 2.0 companies combined.
Apart from being disappointing, it was also clearly a recipe for disaster. You knew it, we knew it, now the blogosphere is finally getting it. Perhaps we’ll start getting a little more attention for our ability to incorporate W20 tools that businesses are willing to pay for.
Best,
George