Fred Wilson is wrong about “Free”

Fred Wilson is one the smartest, most genuine people in the tech business. He has a huge fan club that he has earned by being radically transparent and consistently engaging in public debate. I have emailed with him a few times over the years, and actually met him and shook his hand a few weeks ago. I think Fred Wilson is awesome, and if I saw him on the street today I would walk up and shake his hand again. One great thing about people like Fred is that you can have respectful disagreements and debates with them, without it devolving into a non-constructive flamewar.

With that being said, I am now going to make an argument that his blogpost, “In defense of Free”, which was apparently intended as a response to my blogpost, “An audacious proposal”, is wrong.

The semantics #

So to start with, let’s talk about semantics. I am making arguments about Web2.0 services. One defining aspect of a Web2.0 service is that it has an API and is, ultimately, a platform.

This word, platform, is a very important one. Companies like Facebook and Twitter have actively encouraged companies to think of their APIs as “platforms”. They want people to base their businesses on top of them. If you unpack that word, they are saying that you should think of the APIs they provide the same way you think of an operating system like Linux, or a hosting platform like Amazon Web Services, or a programming platform like Ruby on Rails.

Platforms are great because they enable you to get all sorts of benefits from the work done by others. I am convinced that Facebook and Twitter really are platforms in that sense of the word, because if you choose to use their APIs you can do amazing things that would be impractical if you attempted to build the entire service yourself from scratch. The concept of platforms is one of the key reasons that Web2.0 actually did meet its promise of widescale global adoption and technical innovation. Long live Web2.0.

However this “platform” word starts to get very troubling when talking about business models. Building on top of a platform is a foundational risk, and if your platform decided one day that it doesn’t like what you are doing, or likes what you are doing so much they want to compete with you, it’s Very Bad. Your platform partner can easily damage your quality of service, or simply shut you down. If that happens, your business is dead. Web2.0 built a lot of really cool, shiny things, but the foundational aspects of them are built on what I am arguing is a flawed premise. I am not simply criticizing, I am saying we can do better.

Fred Wilson makes some arguments about Pay TV. Great. Is he saying TV is a platform? Did HBO build its business and audience by providing an API for app developers to extend… and then systematically acquire or destroy the developers that basically drove their early success? My arguments are that platforms should not be ad-supported. I never said that “free” is the wrong business model for everyone. Of course it’s the right business model in certain cases. How exactly did Fred refute what I actually said?

I would summarize many of his other points as “Dalton’s idea will never work, we have seen people try this before, and it’s a waste of time”. OK, great, we’ll all find out, won’t we? But the title of his post is “In defense of Free”, not “Dalton’s proposal sucks so everyone please stop talking about it”. To mount an effective defense against an argument, it’s usually a good idea to address the offensive argument… right?

On “being a bitch” #

I tweeted:

Remember when @fredwilson said that Twitter had no monetization strategy at start & developers shouldn’t build on it?

I wanted to remind people that Fred Wilson made the following statements:

Don’t be a Google Bitch, don’t be a Facebook Bitch, and Don’t be a Twitter Bitch. Be your own Bitch.

He also said:

Twitter didn’t have a set strategy at the start. If it were planned, Twitter would have launched with all platform clients.

That strategy sounds like, right?

At any rate, Fred replied to my tweet:

@daltonc i never said developers shouldn’t build on twitter. i said “be your own bitch”. that means building for everything, incl Twitter.

I find his response illuminating. He seems to be admitting that Twitter, Facebook and Google treat their platform partners as their “bitch”. In the Fred Wilson view of the world, life as a 3rd party developer is nasty, brutish and short. The best defense is to hedge the companies that will invariably make us their “bitch” by playing them against each other.

And hey, if we’re lucky, maybe they will be kind enough to buy us before they put us out of business.

Fred, I want to live in a world where I am not anyone’s “bitch”. I’m trying to build a platform where the core values and associated business model are set up to ensure no 3rd-party developer will need to hedge against the possibility that, one day, their platform partner will decide to make them their “bitch”.

I think my proposal is a whole lot better than yours, Fred.

The media business #

I spent the majority of my 20s building an incredibly large and ultimately unsuccessful digital music business. Because of that experience, many consider me an “expert” on the digital music business. If you have the time to watch my post-mortem on that experience, you will hear that I walked away with the feeling that the human beings that work in the music business all seemed like essentially good people trying to do the right thing. The problem was, their control and scarcity-based business model was/is intractably flawed. The vast majority of innovations created by digital music startups will be crushed because the labels have a fundamental financial incentive to do so. This is the way that I feel about most “media” business models. Attempting to create a huge platform business that is at its core about controlling and monetizing “bits” is a fool’s errand.

It seems very clear that Twitter (the company) is under the impression that the “content” in their system, ie the manifestation of tweets, social graph and “intention stream”, is their core asset. Once you take on that “let’s control our content” state of mind, no matter how fundamentally good your employees, management team, or board members are, you are screwed. Twitter is already well into their harrowing journey down the slippery slope. It seems that most folks in the tech world, except the people still working at Twitter, know how this story is going to end.

Open vs Closed #

Fred seems to be implying that a paid business model is more “closed” than the “open” ad-supported one. I think he is dead wrong. Media business models are predicated on control of content. The business model of the proposal is predicated on providing a service to its users and developers. In my business model, trying to monetize in and around other people’s “content” is not our reason for existence. The propagation of “content” through our pipes is just the side effect of providing an amazingly useful service. In other words, content is not king– it’s just bits passing through our system, at the behest of our customers.

In my view of the world, digital “services” are valuable/easy to monetize, and digital “content” is not. If we think of Twitter and Facebook as communications platforms, rather than media/entertainment sites, it seems that their business models are on the wrong side of history.

Remember #

Whether you agree with me, or disagree with me, I am not just another complainer on the Internet. I’m putting my money where my mouth is.

I’m trying to create the service I want to exist, because I am trying to create the future I want to live in. The alternative is depressing.


Now read this

OK, Computer

Aside: I have been working on a blogpost about the major label marketing machine during the 90s, and thought of this story. Since this anecdote didn’t fit anywhere in my other post, here it is. Some background # Radiohead is a band that... Continue →