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."'"

Comments

Re:Live free, die hard

[MyLongNickName]

Tell that to this company.

From Mark Cuban? Take it with a grain of salt

[i_want_you_to_throw_]

So he built broadcast.com, sold it to Yahoo! and made a ton of money: what else has Cuban done? I mean really?

I tend to take everything he says with a grain of salt.

I disagree.

[apodyopsis]

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.

Re:free markets

[TheLink]

> In a free market none of these companies would have been bailed out. Instead they would have been forced to declare bankruptcy

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.