04.04.08
Free Isn’t what is killing us, Lack of Innovation is
Hank Williams at Silicon Alley posted a short rant about a topic NPR discussed the week before, entitled "Free" is Killing US– Blame the VC’s
What Hank missed is that he is only write in the VC against VC market. Many small online businesses are growing using a paid service model.
The other thing Hanks missed is that CPM’s are only low if you let them be. I get $15 cpm on my Sites and I am not doing razor sharp advertising based on GEO-IP, age, and gender.
I’m also making plenty on my consulting business, selling services based on the track record I have proving that I can make money on web sites, or make money running ads to sell products. My girlfriend is doing quite well with her services sites as well, her only growing pain is how to go from one person to two, with out starving in the time it takes to go from enough work for 1.25 people to enough for 1.85 people.
Hank the problem is not free, it is that NO ONE HAS A NEW IDEA. There I said it. Facebook is barely better than MySpace, and now you can’t tell the two apart, throw in Linked In. Half the time I can’t tell what service I’m using since everything gives me a blue dash board telling me what all my online friends are doing.
You want to make money online do something other people aren’t, then hire some one that knows something about how to make money for page views. I’m a white hat, and I do $15 CPM there are black hats that are making 10x what I make that could every Ning competitor in to a multimillion dollar a year site.
Look at Hank’s Post…. I bet Silicon Alley is getting less than $1 CPM for it, because it is so far from being optimized to make money that they would probably be better to just run Etology ads for online dating, because with 3 ad blocks they could make $1.50 CPM, and then they wouldn’t have to pay a sales rep to sell the
Sun ads that I’m sure no one is clicking.
Why does everything suck? Because people like Hank think that the problem is where the money comes from not how you plan to get it. The reason VC’s like free services is that the model is proven. If you are going to do a Social network site you are going to have to get users so some of those users will have to be free, but if Hank had listened to the NPR story he ripped off, he would realize that the better model is free for most, pay for some. Loss Leaders have been adopted by everyone from grocery stores, to crack dealers, and Flickr.
Yes, Hank just like we can’t tell your article from NPR, which also uses the loss leader model, the difference between their success and your failure is that they have figured out how to give something away for free to the majority, and stay in business on the minority who pay.
This is post is a response to: