Winning When Software Is Less Than Free

I just read a fantastic blog post by Venture Capitalist Bill Gurley on the less than free business model. What does this mean? In short, it’s when you get paid by the company instead of the company paying you. Mr. Gurley talks about this in terms of Google’s strategy, that rather than pay Google to use their services, Google will actually pay you a percentage of the revenues they make from ads.

Disruption is a major concern for every business. In the early days of Infinity Softworks it was disruption by Microsoft, who had the clout and power to knock anyone off their perch just by threatening to be in your market space.

But it wasn’t until Microsoft released Internet Explorer that this really got scary. Not only could a company beat you by charging a lower price or be a better known company, now it can kill you by offering for free what once was charged. Chris Anderson, author of Free, would argue that this is the natural evolution of the market. (I wrote about that here.)

The irony, of course, is that Google is now doing to Microsoft what Microsoft did to Netscape: killing it with free. But Google may be cannibalizing it’s own “free” business model. Instead of free, Google is gearing up to pay you to use it’s services.

So for all you entrepreneurs, how do you fend off less than free in your business? (You know, besides the obvious: pray Google buys you so you don’t have to worry about it.)

One thought on “Winning When Software Is Less Than Free

  1. by moving up the value chain into the higher-value activities, like business logic, services, etc; by focusing on niches; or (if going for the home run) by focusing on emerging trends.

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