Free Today…Gone Tomorrow?

When I’m speaking with someone either at a conference, or strategy session, I’m always stunned on how business plans are thrown out in willy-nilly type fashion. Most businesses don’t plan 3 months in advance never mind a longer view, but what really catches my attention is when they state the foundation of their business model is using what is now “free” on the web, or what is the newest “fad.” Then an assertion will come that not only will the “free” aspect become even better because of increasing usage from the market place, but will always be assessable for their use. From my perspective, all this leads to pie in the sky pricing where fixed costs, revenue generation, and functionality becomes not a “business plan” but a fairy tale.

At the time that I’m writing this the newest craze of course Facebook. Everyone is running, and dashing to build their new business based on it. It’s quite possible that some will build great business models, however, what happens if it goes away tomorrow, what then? Crazy you say? It’s a fair point so I’ll offer the example of MySpace. I know..MyWho? And that’s my point. Remember when MySpace was the “Facebook” at its inception. It was revolutionizing that segment of the web, but now it’s rumored to be on the verge of shutting down. It’s as relevant as that other great never to be toppled  juggernaut AOL. There were many businesses, and entrepreneurs that based their whole structure on using these platforms as their foundation. As they withered away, so too did most of them.

What many fail to remember is what they now take for granted as “free” is all based on speculation that at some point it can become profitable on its own. All the hoopla one hears across the media is more akin to tabloid reporting. MySpace was backed with billions in resources via Rupert Murdoch’s vast holdings. Time Warner and AOL joined forces to become one of the largest media deals ever. Both are now unprofitable, and irrelevant. MySpace never became profitable, Facebook is still in the “we’ll see” category. If at some point investors become disillusioned, or don’t see the “big payday” coming soon, they’ll take their investment capital and move on. At that point most adjunct business models are left along the side with a pile of AOL spam cd’s that are also worthless.

Using these platforms to enhance your real business model is well worth the effort. There are new, and ever-changing things going on right now that can be leveraged in ways that were inconceivable just a few years ago. The trick is, if it’s an enhancement then you are in control, or at least to the highest degree one can be, but if these models are the very basis of your business foundation, then not planning for possible disruptions or alternatives just might leave you out of business.

Music stores never saw iTunes, classifies ads never saw Ebay, AOL never saw Yahoo, Microsoft never saw Google, book stores never saw Amazon, and none of them saw Facebook,or Groupon. Who knows what we could see next.

Most of the above happened in less time than it takes a landlord to terminate your stores lease to rent out to a higher bidder, but you at least thought about that in your business plan…didn’t you?

Mark