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It’s funny to me how often the “first one’s free (or cheap) “ playbook gets used on Amazon, AirBNB, Uber, Netflix, Google, Facebook (with FB API), Datadog , Spl

It’s funny to me how often the “first one’s free (or cheap) “ playbook gets used on Amazon, AirBNB, Uber, Netflix, Google, Facebook (with FB API), Datadog , Splunk – and still continues to work. Create a service and run it at a loss subsidized by investor funding. Customers & Partners naturally adopt it because it’s cheap in the short term and they lack long term thinking. Kill all competition. Once the customers/partners are hooked, and the competition is gone, jack up the prices . Even massive businesses & consultants with actuaries fall prey to this, including hotels, movie studios, fortune 500s. Just remember there’s no free lunch. If something is free or cheap then they are getting you hooked.

skybrian 3y ago
Seems like the lesson is to take advantage of free stuff (or low prices) while you can? Nothing lasts forever, but they got some good years out of it. (Looks like reCaptcha started in 2007.)
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- hot_gril 3y ago
  Not always best, but in this case, yeah getting several years of free captchas would be worth. And it's not too hard to switch elsewhere if needed.
mey 3y ago
Been exceptionally wary of Atlassian's free beta products recently because of this.
hn_throwaway_99 3y ago
I think there is a very different dynamic from what Google is doing and what some of those other companies are doing. For example, I'm not aware that AirBNB significantly changed their commission rates at all. I know originally lots of hosts weren't requiring taxes, for example, but that's really a very different thing. Similarly, I don't have as much of a problem if a company charges X per instance of something and then over time raises rates to, say, 1.25 * X. What Google does, though, is charge 0 for X instances of something, and then say "we're providing additional pricing options" by now charging 0 for only 0.01 * X, but then everything else has a much higher per-instance cost. They also do this with products where the switching costs are relatively high. That's much different than just saying "Oh well, I'll cancel my Netflix subscription because they raised the rates by 25%".
hot_gril 3y ago
It's dismissive to say that these customers all lack long-term thinking. Even if you can accurately predict that the free one is going to kill off the competition, where's the long-term thinking in using the competitor? Besides, upfront costs have long-term ramifications too.
- tonymet 3y ago
  Here are a few subject areas exhibiting short term thinking * music producers and iTunes * movie studios & Netflix * retailers (e.g. Toys R Us) and amazon * Zynga & FB * Taxi drivers & Uber * short-term-rental buyers (taking massive risk) & AirBNB There are hundreds of these cases. Within 2-5 years the risk will change. The solution isn’t “use the competitor”. The proposal I’m making is “don’t fund the business that is out to destroy you”
  - hot_gril 3y ago
    In most of these cases, the individual couldn't make a difference, especially taxi drivers.
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skybrian 3y ago

Seems like the lesson is to take advantage of free stuff (or low prices) while you can? Nothing lasts forever, but they got some good years out of it. (Looks like reCaptcha started in 2007.)

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hot_gril 3y ago
Not always best, but in this case, yeah getting several years of free captchas would be worth. And it's not too hard to switch elsewhere if needed.

mey 3y ago

Been exceptionally wary of Atlassian's free beta products recently because of this.

hn_throwaway_99 3y ago

I think there is a very different dynamic from what Google is doing and what some of those other companies are doing. For example, I'm not aware that AirBNB significantly changed their commission rates at all. I know originally lots of hosts weren't requiring taxes, for example, but that's really a very different thing. Similarly, I don't have as much of a problem if a company charges X per instance of something and then over time raises rates to, say, 1.25 * X. What Google does, though, is charge 0 for X instances of something, and then say "we're providing additional pricing options" by now charging 0 for only 0.01 * X, but then everything else has a much higher per-instance cost. They also do this with products where the switching costs are relatively high. That's much different than just saying "Oh well, I'll cancel my Netflix subscription because they raised the rates by 25%".

hot_gril 3y ago

It's dismissive to say that these customers all lack long-term thinking. Even if you can accurately predict that the free one is going to kill off the competition, where's the long-term thinking in using the competitor? Besides, upfront costs have long-term ramifications too.

tonymet 3y ago
Here are a few subject areas exhibiting short term thinking * music producers and iTunes * movie studios & Netflix * retailers (e.g. Toys R Us) and amazon * Zynga & FB * Taxi drivers & Uber * short-term-rental buyers (taking massive risk) & AirBNB There are hundreds of these cases. Within 2-5 years the risk will change. The solution isn’t “use the competitor”. The proposal I’m making is “don’t fund the business that is out to destroy you”
- hot_gril 3y ago
  In most of these cases, the individual couldn't make a difference, especially taxi drivers.

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