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Summary:

‘Long Tail-Schmong Tail, Chris Anderson’s-free-will-be-the-death-of-me.’ Or some such, griped founder Hank Williams over at Silicon Alley Insider yesterday in “Free” is Killing Us–Blame The VCs”: Venture capital has totally distorted the market. VCs are investing billions of dollars in companies with instructions to get big fast […]

‘Long Tail-Schmong Tail, Chris Anderson’s-free-will-be-the-death-of-me.’ Or some such, griped founder Hank Williams over at Silicon Alley Insider yesterday in “Free” is Killing Us–Blame The VCs”:

Venture capital has totally distorted the market. VCs are investing billions of dollars in companies with instructions to get big fast and to worry about advertising revenue later. As a result the competition is for users and not for paying customers. Unfortunately, to fix this, many more companies need to die.

Put Hank’s way, I wanna party like it’s 1999 all over again. So this prompts our

Question(s) of the Day:

* Is it good or bad that the bucks are going right out of Busine$$?

* Is it the VCs fault?

* Should ‘free’ be the future?

* Or, is Hank’s scenario better?: “With less “free” floating around, a more regular supply and demand dynamic can take hold, [and] customers will have to pay for the things that are important to them and non-quantized growth dynamics can return.”

AND * Did you get into this startup business to make money selling your product/service, or would you be content to merely make it by selling your (VC-funded, eyeball-oriented free-product hawking) company?

Tell us what you think.

  1. It’s good that stuff is getting cheaper – because one of the ways that the web industry is creating value is to do things in new more efficient ways. No-one is really doing it for free though of course – free to the end user means paid by advertising, or payment deferred in the hope of future monetization. That’s risky for a start-up of course, if the company runs out of money first.

    And someone needs to be selling _something_ for real money, or the advertisers won’t be prepared to pay! Free everything is not sustainable.

    Our start-up (not yet launched) is going for the freemium approach. Because we’re aiming at a B2B market and we should be saving our customers money as well as allowing them to do things better, then we think that a modest subscription charge is feasible. (As well as necessary to keep the company going!) We’ll see after we launch if that proves to be true.

    It’s important though that the free part of freemium is good enough to give customers confidence that the full service is really worth paying for.

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  2. Free is a good thing, but it cannot be everything. I know that ad-supported works, but I am not a fan of that business model. I believe that your product or service should build enough value in itself that asking for payment isn’t far fetched.

    Thats the direction our startup(not yet launched) is taking. If you have a product or service that provides its clients some sort of benefit butits web-based, doesn’t mean customer shouldn’t be charged for it.

    It’s also a better business model when the hype has all but left and advertisers aren’t willing to pay as much as they once did, but you still have a strong steady client base who you can depend on to keep the lights on and make yourself a decent living .

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  3. Yes it is bad that the money is going out of busine$$ because it skews the beliefs of future entrepreneurs – they come to believe that building a business around users is more important than building a business around earning money.

    VCs are not the only ones to blame. Acquisitions like Youtube set a dangerous precedent – it says that all you need to do is build an audience and get acquired, don’t worry about a revenue strategy. Also, VCs don’t only fund web startups, lots of “normal” companies are being funded under traditional standards.

    Naturally, many of these ventures only focusing on users will die so it all works out in the end and hopefully people learn from the mistakes – although few of the web 2.0 set seem to have learned from the dot-com bust.

    My venture is primarily ad-supported, but it is an online media company operating in a niche. Even then, we are now launching actual products to sell because even MTV doesn’t just depend on ad revenue, they sell DVDs of their programs and so forth.

    This is our second attempt – the first time we only focused on users, and ran out of money before some major investor stepped in or we got acquired (our primary goal was never acquisition). This time we are building to generate revenue without ever getting VC capital, but if they come, fine, we can show actual revenue.

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