The always clever, almost always insightful, and sometimes good dancer Mark Cuban has a great post today about “Freemium” companies. Cuban suggests:
Its not that they can’t make money offering free. They can , have and will. The problem is that they know that its literally impossible to be the king of the mountain forever. But that won’t stop them from trying. And that is exactly what will kill them.
Their better choice would be to run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank. More importantly, when you see your BlackSwan company appear and you know they will kick your ass, rather than ramping up to try to compete, get out. Sell. Or maximize cash and pay your shareholders every penny you have.
Like every company in the free space, your lifecycle has come to its conclusion. Don’t fight it. Admit it. Profit from it.
I think Cuban is right on, though I think he’d also agree that most companies won’t take his advice, especially Google which stands to gain (but also lose) the most from maintaining their massive search revenue and general online dominance.