Mark Cuban wrote a great article yesterday about the perils of free content and though I don’t agree with some of the points he makes, he certainly does make a lot of good ones. I read the article yesterday and meant to write a post about it but got caught up in some other business-related matters I had going on, so I have to thank Mike over at The Domains for writing up on it which reminded me that I wanted to say me 2 cents on the article as well. This post might not make sense to you unless you read Mark’s article first to put it in context — just a heads up.

When evaluating free business models, companies such as Facebook, Twitter, Youtube, etc should be classified differently than say, Google, Microsoft, Bing, etc. When people go to a search engine, they’re looking for information and often those PPC ads provide them with what they were looking for (which is of course making the search engine money), however many people using social networks don’t want to be bombarded with ads and usability studies suggest many, if not most discount their presence entirely. Without even getting into the massive click fraud issue plaguing Facebook (and probably not just Facebook), social network traffic just doesn’t convert the way PPC traffic on search engines does (assuming the person running the Adwords campaign isn’t a retard).

Freemium (eg. some domain forums, online games, software) can definitely work, especially with Web 1.0, however a completely free model in the Web 2.0 space seems to usually be a company that makes money for noone but the owners and early investors when they sell out. Youtube, Facebook, Twitter — there’s pretty long list of Web 2.0 companies that can’t manage to turn a profit despite being massively popular and free to use.

Related posts:

1. Twitter 101
2. Social Media’s Effect on Search Engines
3. Real-Time Search and Social Media