Cuban's Death by `Free' Theory Overplayed
Entrepreneur, provocateur and Dallas Mavericks owner Mark Cuban wrote an interesting post about the short lifespans of 'freemium' companies, i.e. ones that largely give away content.
Someone will come along and do a better free, he argues. Live by free, die by free. Google is to Yahoo what Facebook is to MySpace, Cuban writes. He labels upstart companies that eventually take over the market as "black swans." But someone comes along and builds a better car or airplane, too and those are not free.
Cuban's advice to a struggling outfit like MySpace is try and make money as fast as possible and stop trying to out-Facebook Facebook. "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," Cuban writes. No more get big fast, the mantra of the last dot com bust.
That's sound advice, but I can't imagine it hasn't already occurred to CEOs at Yahoo, MySpace, Facebook and Google. What's so special about free except that it sounds cool to say live by free, die by free? Hey Mark, they say that too about bball teams that rely on three-pointers too much.
Companies come along and replace the staus quo in every industry regardless of the business model. Microsoft has been more or less on top forever, but someone or thing will come along with better software and bump iinto second place or transform it into something dramatically different than what it is today. Or Microsoft will make a series of strategic blunders and go out that way although it doesn't seem so inclined presently.
GM's been almost finished about three times in the past 25 years. IBM nearly expired in the mid-nineties, If you have scads of money, you certainly stand a better chance of successfully reinventing yourself. And you have more time to do it.
Cuban's point is spot on, but he overplays the free thing. Facebook, Yahoo, Google and MySpace are little different conceptually than controlled circulation magazines where purchasers get them for free because advertisers are willing to pay to reach that audience. Google's putting a stake through print publishing wasn't because it gave content away. Rather, Google came up with a cheaper and more effective way to define and reach audiences all the while using other's (hence free) content. Some day, Google will taste the same medicine it administered to print publishers.
In another post, Cuban writes that Google's attempts to steer customers toward paying versions of GoogleApps recognizes the fact that free means death. Certainly there's no harm in trying, but to say the free content model -- what other online content model is there, really? -- threatens Google's at this moment existence is silly.
Free won't kill Google. Another company with a better product will, free or otherwise.
Follow me on Twitter.
This post was originally published on Smartplanet.com