Google Reader’s upcoming shutdown and Mailbox’s rapid acquisition have reignited the discussion of free vs. paid services and whether people should pay for products they love to keep them running sustainably.
But users aren’t the problem. As Michael Jurewitz wrote, many tech startups never even attempt to reach profitability before they’re acquired or shut down. Nobody ever had a chance to pay for Google Reader or Mailbox.1
When a free option is available in a market of paid alternatives, far more people will choose the free product, often by an order of magnitude or more. Asking people to pay unnecessarily is asking them to behave irrationally and against their own immediate best interests, even if it’s probably worse long-term. (This behavior affects far more than the tech industry.) And when the free product is better in some ways, which is often the case when a tech giant or well-funded startup enters a market previously occupied only by small and sustainable businesses, the others don’t stand a chance.
The risks are very low for new consumer tech startups because everything required to start one is relatively cheap and can often be ready to launch within a few months of starting development. If a product grows huge quickly, which almost always requires it to be free, it will probably be acquired for a lot of money. Free products that don’t grow quickly enough can usually die with an “acquihire”, which lets everyone save face and ensures that the investors get something out of the deal. Investors make so much from big acquisitions that they can afford to lose a lot of other unsuccessful products in the meantime.
So even in the worst cases, free products don’t usually end too badly. Well, unless you’re a user, or one of the alternatives that gets crushed along the way. But everyone who funds and builds a free product usually comes out of it pretty well, especially if they don’t care what happens to their users.
Free is so prevalent in our industry not because everyone’s irresponsible, but because it works.
In other industries, this is called predatory pricing, and many forms of it are illegal because they’re so destructive to healthy businesses and the welfare of an economy. But the tech industry is far less regulated, younger, and faster-moving than most industries. We celebrate our ability to do things that are illegal or economically infeasible in other markets with productive-sounding words like “disruption”.
Much of our rapid progress wouldn’t have happened if we had to play by the rest of the world’s rules, and I think we’re better off overall the way it is. But like any regulation (or lack thereof), it’s a double-edged sword. Our industry is prone to many common failures of unregulated capitalism, with the added instability of extremely low barriers to entry and near-zero cost per user in many cases.
If you try to play by the traditional rules and regulations, you run the risk of getting steamrolled by someone who’s perfectly willing to ignore them. Usually, that’s the biggest potential failure of the tech world’s crazy economy, which sucks for you but doesn’t matter much to everyone else. But sometimes, just like unregulated capitalism, it fails in ways that suck for everyone.
Google Reader dominated the feed-reading and feed-sync markets so much that almost no alternatives exist, and the few alternatives are very unpopular. Reader is effectively a monoculture, if not a monopoly. And it isn’t just one popular provider of an open standard — it’s a proprietary service that takes a lot of work for anyone else to replicate (as many people are going to learn over the next few months).
While the constant churn of young free products doesn’t usually do much harm, proprietary monocultures are extremely vulnerable to outcomes that suck for everyone. And a proprietary monoculture that’s unprofitable, shrinking in popularity, or strategically inconvenient for its owner is far worse. It’s likely to disappear at any moment, and there may not be anything to fill the gap for months or years, if ever. For all of the people who use RSS every day, as part of their jobs or hobbies, imagine the disruption to their lives if Google had shut down Reader immediately without notice. (Now think of how far off July isn’t.)
If Reader was just a free, popular host running open-source software, anyone could just set up the same services on any web host and migrate their data without much disruption. But it’s not, so it’s going to be a lot more work and much more disruption to our workflows and habits in the meantime.
And we lucked out with Reader — imagine how much worse it would be if website owners weren’t publishing open RSS feeds for anyone to fetch and process, but were instead posting each item to a proprietary Google API. We’d have almost no chance of building a successful alternative.
That’s Twitter, Facebook, and Google+. (Does the shutdown make more sense now?)
The best thing we can do isn’t necessarily to try to pay for everything, which is unrealistic and often not an option. Our best option is to avoid supporting and using proprietary monocultures.
Charging money for something also doesn’t guarantee profitability. Consider Sparrow. ↩