(2007-03-13) Haque Zelenka Free Model

Anne Zelenka says that you can't just launch a free Start Up without some plan for an actual revenue stream from somewhere. (Not really the End Of Free.)

Umair Haque thinks that's too narrow-minded. There's a very simple reason almost all businesses dependent on complex Network Effect-s ultimately shift to free pricing. These aren't just 2.0 plays - in fact, free pricing can be seen at work across media, software and increasingly, consumer goods, pharma, etc. The reason is that there are powerful Increasing Returns dynamics at work. In other words, free maximizes the potential for value creation... So, to capture a share of the value we've created, we can take many paths. We can shift to services, we can resell consumption, etc... ("pharma"? - free drugs?) I Commented to ask for examples of successful (e.g. profitable, not Buy-Out) plays.

Related: a couple posts by Jeremy Liew on the economics of building an WebAd-driven site (if you want to hit $50M in revenue, which is probably the target necessary for VC funding).