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If You Live By Free, You Will Die By Free
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."'"
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!
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.
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.
One example is Canada. During 'normal operation' Canada regulates its economy a bit more than the US. But that very regulation keeps things reasonably stable. So when the economic crisis hit, the Canadian economy suffered but was remarkably stable. No Canadian banks failed. (Regulations that were in-place prevented many of the things the US financial institutions were doing...) The Canadian government did intervene because of the crisis, but the magnitude of the intervention was small compared to what we've seen in the US (after scaling for the obvious differences in the sizes of the economies).
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.)
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.
-1 Uncomfortable Truth