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 Send to email | "Free" is Killing Us--Blame The VCs in General |  By Silicon
el 04-Apr-2008 |
nacholibre.jpg: Paste this image in your site, Myspace, Facebook, Ebay copy this code...
 I believe it should be possible to start a small
business and to have a small number of profitable customers, and to
earn a living. From there, it should be possible to work hard, and to
grow your business into something substantial. Until recently, this was
the American way, and it applied to technology as much as to any other business. But no more.
In
today's 'free' world, in most online business categories, it is
inherently impossible to start a small self-sustaining business and to
grow it. This is because in the digital world, advertising, the only
real revenue stream, cannot support a small digital business. If
businesses were based on the idea that people paid for services then
small companies could succeed at a small scale and grow. But it is very
hard to charge when your competition is free.
The
economic problem with advertising businesses is that advertising
businesses do not work without really significant scale. In the past, a
good product or service could address a niche and succeed without being
a home run. Today, a home run is required because if you do not reach a
massive scale, advertisers are uninterested. And even if advertisers
could be attracted, CPMs are so low that the revenue would be
inconsequential. Small Internet businesses don't work.
So how did we get here? In a word, VC.
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.
With
less 'free' floating around, a more regular supply and demand dynamic
can take hold, customers will have to pay for the things that are
important to them and non-quantized growth dynamics can return. In the
meantime, why should consumers pay for products and services that VCs and their pension fund investors are willing to give away for free?
The
good news is at some point VCs will indeed realize how dumb all of this
is and stop giving away everything of value on the Internet. This will
all stop when the average VC can't get any of his/her companies to scale because there is just too much VC sponsored free stuff out there. Then and only then will this crazy eyeballs business model redux finally be put to bed.
I cant wait.
SAI Contributor Hank Williams is a New York-based entrepreneur. He recently launched a new blog: Why Does Everything Suck? Exploring the tech marketplace from 10,000 feet.
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 | Kotaku`s The Gamers Guide |  Blogger | XBOX 360 Gamers Weblog
Gossip, news and leaks for obsessive gamers Kotaku As if you don't waste enough of your time in a gamer's haze, here's Kotaku: a gamer's guide that goes beyond the press release. Gossip, cheats, criticism, design, nostalgia, pred |
| More Crimes to Blame on GTA IV [Grand Theft Auto IV] | | If GTA IV is going to be truly groundbreaking, then it will have to break ground in another realm: Real-life crimes to blame on it. Happily, GamesRadar is on the leading edge of this, spotting eight new crimes that imbecilic mainstream media will be thril [..] Read complete article | | Published 12-Apr-2008 by Owen Good in crime and punishmentgrand theft auto IVHere We Go AgainJack Thompsonoverreactionsviolent video games
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| Kotaku`s The Gamers Guide | Blogger | XBOX 360 Gamers Weblog
Gossip, news and leaks for obsessive gamers Kotaku As if you don't waste enough of your time in a gamer's haze, here's Kotaku: a gamer's guide that goes beyond the press release. Gossip, cheats, criticism, design, nostalgia, pred |
| Age Of Conan Features Festive Goat Killing [Get Your Goat] | | The festive folk at Funcom have managed to pull off a gaming event involving killing a goat that won't get the gaming community upset as part of the holiday festivities in Age of Conan. Unlike that other video game goat-killing event, Funcom keeps things virtual with it's holiday [..] Read complete article | | Published 24-Dec-2008 by Mike Fahey in Get Your Goat Age Of Conan Funcom Goatgate Happy Holidays Mmorpg
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| Kotaku`s The Gamers Guide | Blogger | XBOX 360 Gamers Weblog
Gossip, news and leaks for obsessive gamers Kotaku As if you don't waste enough of your time in a gamer's haze, here's Kotaku: a gamer's guide that goes beyond the press release. Gossip, cheats, criticism, design, nostalgia, pred |
| Kotaku`s The Gamers Guide | Blogger | XBOX 360 Gamers Weblog
Gossip, news and leaks for obsessive gamers Kotaku As if you don't waste enough of your time in a gamer's haze, here's Kotaku: a gamer's guide that goes beyond the press release. Gossip, cheats, criticism, design, nostalgia, pred |
| Euro MK Vs. DC Maintains The Killing Joker [Boom, Headshot] | | By far the coolest thing I've seen come out of Mortal Kombat Vs. DC Universe was the Joker's fatality, which you may remember from back in August.So of course I, along with a great many of you, was upset to hear the the punchline to his killing joke was edited in order to [..] Read complete article | | Published 06-Nov-2008 by Mike Fahey in Boom, Headshot Europe Midway Mortal Kombat VS, DC Universe News Ratings
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| Kotaku`s The Gamers Guide | Blogger | XBOX 360 Gamers Weblog
Gossip, news and leaks for obsessive gamers Kotaku As if you don't waste enough of your time in a gamer's haze, here's Kotaku: a gamer's guide that goes beyond the press release. Gossip, cheats, criticism, design, nostalgia, pred |
| Kotaku`s The Gamers Guide | Blogger | XBOX 360 Gamers Weblog
Gossip, news and leaks for obsessive gamers Kotaku As if you don't waste enough of your time in a gamer's haze, here's Kotaku: a gamer's guide that goes beyond the press release. Gossip, cheats, criticism, design, nostalgia, pred |
| Undeserving Ellen Fans Get Wii Fit [Daytime TV] | | I said it before, and I will say it again...I need to start attending more daytime talk show tapings. In case you have trouble getting your hands on a copy of Wii Fit today, feel free to direct your blame to Ellen Degeneres, who today gave out not only the sought after fitne [..] Read complete article | | Published 21-May-2008 by Mike Fahey in daytime TVFreeNewsNintendoTelevisionWii Fit
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| Kotaku`s The Gamers Guide | Blogger | XBOX 360 Gamers Weblog
Gossip, news and leaks for obsessive gamers Kotaku As if you don't waste enough of your time in a gamer's haze, here's Kotaku: a gamer's guide that goes beyond the press release. Gossip, cheats, criticism, design, nostalgia, pred |
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My last post gave some people the impression that I am against all business models that hinge on giving away products and services for free. I am not. I am just against irrational free. [..] 
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