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mark
i’ve been writing a lot about this topic over the years and posted my thoughts on gladwell and anderson’s recent efforts yesterday
http://www.avc.com/a_vc/2009/07/freemium-and-freeconomics.html
i’m a big fan of free, freemium, and business models based on some form of free access to web services.
i agree with you that technology is a fast moving industry and there is always a company around the corner who is going to take you down.
but i don’t think that free makes you more vulnerable.
in fact, i think paid makes you more vulnerable.
craigslist hasn’t done much in the history of the company on its platform and UI and yet it continues to beat all comers in internet classifieds. why? because its mostly free.
if it was mostly a paid service, i think it would be way more vulnerable to new entrants.
i’m a big clayton christensen fan and he talks about how the companies that are going to take you down always come up from below. there isn’t much below free
fred
Comment by fredwilson — July 5, 2009 @ 8:37 pm
Big fan of your blog Fred. I agree there isnt much below free. And that Craigslist, for now, is a stellar example of free working. On the flipside, MicroSoft and Oracle are longer term examples of companies who have battled free software for the ages. If you remember, MicroSoft Office, was all but free whenit was first introduced. You could upgrade from competitor products for nothing and buy the whole suite for 99 dollars. Then they evolved to paid and have survived. This of course could fall into your category of firms that live off of paid upgrades. Which IMHO, is the best model.
Im a big fan of give them a free taste, then make them pay for upgrades. It is why I am still involved in a nicely profitable company, Filesanywhere.com, which competes with a company I used to be involved with, Box.net. Both offer online backups. One charges and uses that revenue to differentiate with upgraded services and customized services. The other used to charge (which is why i got involved), but now is facing the challenges of being primarily free.
There are companies on both side of the argument, but I would rather be invested in a company that can afford to continue to invest in their products without depending on advertising, incredible volumes of traffic or raising more money.
m
Comment by markcuban — July 5, 2009 @ 9:28 pm