If someone can do it for free, then it will be inevitably free(montrealtechwatch.com)
montrealtechwatch.com
If someone can do it for free, then it will be inevitably free
http://montrealtechwatch.com/2008/07/27/building-a-profitable-business/
7 comments
I think what they mean by "free" is "no charge to the user"; it still costs money to run Web 2.0. Maybe a better tagline would be anything that can be subsidized will inevitably be subsidized.
One of the problems with newspapers is that they also aggregate content, so some of the fluff and other stuff pays for the reporters and good bits... or so I recall. I think they do not face an easy transition to the web.
Only if it's fun or prestigious.
Corollary: The less talented the founders of a company are, the more they should focus on things that are not fun or prestigious.
People who are very talented can do a better job even at things other people are willing to do free, and charge for the difference. But if you're no better than the people working for free, you can only charge for things they're unwilling to do.
E.g. if you're really good (for some definition of good) you can make money playing your own songs. If not, you can only make money playing covers at weddings. The distinction in software between product companies and consulting companies is the same.
Corollary: The less talented the founders of a company are, the more they should focus on things that are not fun or prestigious.
People who are very talented can do a better job even at things other people are willing to do free, and charge for the difference. But if you're no better than the people working for free, you can only charge for things they're unwilling to do.
E.g. if you're really good (for some definition of good) you can make money playing your own songs. If not, you can only make money playing covers at weddings. The distinction in software between product companies and consulting companies is the same.
> People who are very talented can do a better job even at things other people are willing to do free
However, that doesn't necessarily mean that people doing things for free are not very talented. Linus Torvalds, for example, is very talented, and initially did Linux for free, and of course still releases his work under a free license, even if he gets paid well to do it. In those cases where you have very talented people doing things for free, getting paid for doing something similar for pay is going to be difficult.
I don't think the last word has been written on this, though... it's a fascinating phenomenon that is rapidly transforming industries like ours, and I have a feeling that it will take some time to reach the right equilibrium where producers get compensated adequately for their time, and people still get relatively open access to their work.
However, that doesn't necessarily mean that people doing things for free are not very talented. Linus Torvalds, for example, is very talented, and initially did Linux for free, and of course still releases his work under a free license, even if he gets paid well to do it. In those cases where you have very talented people doing things for free, getting paid for doing something similar for pay is going to be difficult.
I don't think the last word has been written on this, though... it's a fascinating phenomenon that is rapidly transforming industries like ours, and I have a feeling that it will take some time to reach the right equilibrium where producers get compensated adequately for their time, and people still get relatively open access to their work.
>Corollary: The less talented the founders of a company are, the more they should focus on things that are not fun or prestigious.
Would it be a good idea for a founder to focus on boring/lame things anyway, if only as a way to improve his/her odds? Which viable ideas strike you as the most boring?
Would it be a good idea for a founder to focus on boring/lame things anyway, if only as a way to improve his/her odds? Which viable ideas strike you as the most boring?
Of the ones I included in that recent list
http://ycombinator.com/ideas.html
the most boring is probably 5 (enterprise 2.0), preferably in the form of 7 (something your company needs that doesn't exist).
21 (finance software) and 29 (site builders) are also promisingly boring.
http://ycombinator.com/ideas.html
the most boring is probably 5 (enterprise 2.0), preferably in the form of 7 (something your company needs that doesn't exist).
21 (finance software) and 29 (site builders) are also promisingly boring.
if someone can do it for free, then it will be inevitably free.
I agree. It's similar to reversion to normal profits through commoditization, but where the costs (labour and capital) can be donated or supported by advertising.
But "inevitable" means one day it will be free. It doesn't mean "today", just that your window of opportunity is time-limited.
People serious about business should then move to areas where people can’t replicated it easily, for instance by having unique technology [...]
Unique technology can be protection by patent law (especially if it really is original and non-trivial). But how effective are they against well-heeled corporations - in practice? How effective are they against open source - in practice? (they are not 100% effective, but I'm not saying they are 0% effective - just asking how effective)
Unique technology can also be protected by confidentiality, but usually it's not hard to reverse engineer, if competitors want to. Saas hides your tech better than software products (that competitors can access), but both can be reverse engineered. Secret tech does buy you time (how long?). You can keep ahead indefinitely if you can keep coming up with additional unique technology Assumptions: there are additional techniques to be found... and it is you who finds them.
I think unique technology protects against free only to an extent. It can give you a head-start, during which you can establish other protection - which will also eventually crumble.
Maybe the best thing is to make something that can't be made for free - like chewing gum, chocolates, soda, bricks, CPUs - and then use all these protections to fractionally improve your profits?
I agree. It's similar to reversion to normal profits through commoditization, but where the costs (labour and capital) can be donated or supported by advertising.
But "inevitable" means one day it will be free. It doesn't mean "today", just that your window of opportunity is time-limited.
People serious about business should then move to areas where people can’t replicated it easily, for instance by having unique technology [...]
Unique technology can be protection by patent law (especially if it really is original and non-trivial). But how effective are they against well-heeled corporations - in practice? How effective are they against open source - in practice? (they are not 100% effective, but I'm not saying they are 0% effective - just asking how effective)
Unique technology can also be protected by confidentiality, but usually it's not hard to reverse engineer, if competitors want to. Saas hides your tech better than software products (that competitors can access), but both can be reverse engineered. Secret tech does buy you time (how long?). You can keep ahead indefinitely if you can keep coming up with additional unique technology Assumptions: there are additional techniques to be found... and it is you who finds them.
I think unique technology protects against free only to an extent. It can give you a head-start, during which you can establish other protection - which will also eventually crumble.
Maybe the best thing is to make something that can't be made for free - like chewing gum, chocolates, soda, bricks, CPUs - and then use all these protections to fractionally improve your profits?
if someone can do it for free, then it will be inevitably free.
While this is a trend, it might not always be true.
In France, Mediapart (mediapart.fr) is a website with a focus on investigation-journalism, built on principles such as independence from political/media groups.
Subscription fee: 9 euros (14 usd)/month. The project founders are hopeful to reach a sustainable number of subscribers (which is 65 000, 3 years from launch; they currently have 8000 subscribers after 4 months).
Conclusion: a high-quality customized product for a niche, although online, could justify the price - directly paid by the users - for that product.
While this is a trend, it might not always be true.
In France, Mediapart (mediapart.fr) is a website with a focus on investigation-journalism, built on principles such as independence from political/media groups.
Subscription fee: 9 euros (14 usd)/month. The project founders are hopeful to reach a sustainable number of subscribers (which is 65 000, 3 years from launch; they currently have 8000 subscribers after 4 months).
Conclusion: a high-quality customized product for a niche, although online, could justify the price - directly paid by the users - for that product.
Some services (in context of web), these days, are not only free: they offer their users (and eventual contributors) a piece of their cake, too. Random examples are google (search + adsense), and scour (search + annotation).
I wonder where this is going to get: how strong will the "make money too" factor prove over "it gives me what I want" motivation?
I wonder where this is going to get: how strong will the "make money too" factor prove over "it gives me what I want" motivation?
"For instance, that’s why content-based businesses (say newspapers) are doomed because there’s always people like Mark, me or even the average guy willing to spend one hour in their day writing articles and take pictures of what’s up."
It's sad that newspapers let it get to this. It used to be that their journalism was a cut above. They spent the (relatively) big bucks on the good reporters, gave them the leeway to chase stories, many of which never amounted to anything, in order to provide hard hitting analysis. Now they just farm it out to AP or Reuters, until some clown bloggers think their hour a day is a solid substitute.
Newspapers that actually do quality reporting (NYT, WSJ) are struggling with the new economy but will come out ahead in the end.