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This is a classic "bottoms-up" model that is quite viable (eg Dropbox, Slack, Zoom, Elastic, MongoDB). Not sure why anyone would call it a scam. In fact, I woul
by akulkarni 7y ago
This is a classic "bottoms-up" model that is quite viable (eg Dropbox, Slack, Zoom, Elastic, MongoDB). Not sure why anyone would call it a scam. In fact, I would be wary of software companies without a base of free users, as that means the company needs to keep spending a lot of its revenue on sales and marketing.
- papito 7y agoNot necessarily. You don't need marketing and sales people if you have a free-tier product that markets itself. Michael Stonebraker, the guy who took Postgres from academia and into the real world, talks about how he applies this with VoltDB https://www.se-radio.net/2013/12/episode-199-michael-stonebraker/ https://www.se-radio.net/2013/12/episode-199-michael-stonebr... Only on a tangent - it's an otherwise fascinating episode from a database wizard.
- ac29 7y ago> Dropbox, slack Are these good examples, though? Dropbox is down ~35% since IPOing, and Slack is down almost 50%. This certainly suggests the market thinks they were both overvalued when they IPO'd.
- notyourday 7y agoI think you are confusing the opening price with an IPO price. Slack went public at $26, it is at $23.50 today. It is less than 10% less than the IPO price.
- jazzyk 7y agoYes, but this is at a time when the overall market is close to an all-time high. What happens when the inevitable correction comes? The Fed will run out of monetary tricks, eventually.
- sarah180 7y agoThis is arguably a "things might go wrong in the future" argument, which has no real substance as it can be made about literally anything. To really say something, you'd need to provide some more substance about why you think the current investors in Dropbox and Slack are less informed about economic conditions than investors in the rest of the market.
- dragonwriter 7y ago> The Fed will run out of monetary tricks, eventually. No, it won't. It might run into a monetary-policy resistant situation (e.g., stagflation), but the Fed has infinite range of monetary policy tricks available (literally, there's no floor to rates now that the Fed has taken notice of the use of negative rates elsewhere.)
- john_moscow 7y ago>This is a classic "bottoms-up" model that is quite viable (eg Dropbox, Slack, Zoom, Elastic, MongoDB). None of which are profitable. >In fact, I would be wary of software companies without a base of free users, as that means the company needs to keep spending a lot of its revenue on sales and marketing. I am much more wary of companies that keep or burning cash for years and years with the only excuse that "Amazon did that as well".
- akulkarni 7y ago> I am much more wary of companies that keep or burning cash for years and years with the only excuse that "Amazon did that as well". I think about this a little differently. Spending money on free users is actually a much more efficient "marketing expense" than classic outbound strategies (e.g., online advertising).
- john_moscow 7y agoYes, but if your marketing expenses systematically exceed the revenue from the paid customers, your business isn't viable.