Fred Wilson is wrong about “Free” | Hacker News Reader

Fred Wilson is wrong about “Free”

daltoncaldwell.com

71 pointssachitgupta37 comments

Fred Wilson replied on Twitter:

  great post dalton. i wish your blog had comments because   
  i'd like to publicly agree with much of it and state where 
  i don't. [1]

  the one thing i most want to say is i never intended to 
  refute your points/positions. i just wanted to state mine. [2]

[1] https://twitter.com/fredwilson/status/226027510201204736

[2] https://twitter.com/fredwilson/status/226028140584128513

Some criticism of the App.net project, which I hope is constructive:

It took a bit of reading between the lines, but from what I understand Dalton is trying to build a paid version of Twitter which is beholden to users and developers rather than advertisers. He refers to it as a "realtime feed platform" and is asking for $50/member/year (or more for the Developer and Pro tiers).

If that's the case, the first big question is: Would I pay $50/year for Twitter? It's hard to say for sure, but I'm not sure I would. This makes committing $50 to something that may not work out difficult – I need to be convinced of the value of this project.

The second big question is: Would everyone else pay $50/year for Twitter? Given that Twitter is only useful because of the network of people on there, if they don't come along then my $50/year is for naught even if this project does get funded. I need to be convinced that the value of the network will be there and I just don't see how that's going to happen.

The last piece of criticism is at the messaging. It's been rubbing me the wrong way and I'm not sure exactly why; I feel like when I read about it I'm being told how much I should care, but I haven't been convinced yet that I should care that much. More specifically:

"audacious proposal" - It won't happen unless the support is there, so what's so crazy about it?

"service we all wish existed" - I hadn't really been wishing for this, even though the steps Twitter has taken recently have been a bit disconcerting.

"I'm putting my money where my mouth is" - Your money? That's our money! Again, it only happens if it gets funded.

The funding doesn't seem to be moving along too quickly, so I can only assume other people have reservations about the idea, or haven't been convinced of the value. I'd be interested in knowing whether other people agree with the reasons I laid out.

It slightly rubs me the wrong way as well. Like you said, it doesn't explain the product much at all. Instead it asks us to invest $50+ just for liking his business philosophy. I think both are important.

I have mixed feelings about it (if it is indeed a paid version of twitter). On the one hand, my biggest gripe with Twitter is that it should be federated, and I doubt that's the plan for this service. But on the other hand, if their philosophy is to listen to their (paying) customers, perhaps it is something they would be willing to change.

I think you can re-phrase your question of "Would I pay $50/year for Twitter" as "Would I pay $50/year for something like Twitter, when Twitter is already free".

App.net needs to be considered in the overall market, not as a stand-alone. It's biggest threat (I don't think) is the $50, it's going up agains a free established major brand in a network play. Has this ever been done before?

He is building a highway, who wants to pay for a highway? Well, wait until someone builds a car, and motorcycles and malls, and restaurants. If you understand building long lasting roads is possibly the single most important step towards a better-fast-growing economy, then you will get a grasp of what he is doing.

I had no idea who the guy was and I can care the less about his past experience, but I am confident he is building the future.

He is not building Twitter, and I believe he only uses the Twitter analogy because that is closest to what he is trying to build. He is building an engine that will allow all users to throw data in, be it links, text, photos, news, private messages, anything. This data will be available to developers who are going to build sophisticated tools to make it work for you and others.

I didn't see your refutal of why is he wrong. He argues that when scale and network effects matter, free services supported by ad's win.

How's is he wrong about that? Your article seems to focus on service quality (specifically to developers). You keep saying that you could provide a "better" service if you are not ad supported. Perhaps you can and I assume Spotify/Pandora paid service is better than their free service, but they don't have the network effect problem.

What I have not yet seen you explain is: How do you plan to get millions of users putting a big paywall between the user's and the service?

Me: "Free Platform services are bad for a bunch of widely-understood reasons. I am going to try something crazy to propose a solution. There are a few examples of healthy platforms and I think we can learn from them. This approach may not work but I want to try."

Fred: "Non-free services, both platform and non-platform don't work. Nothing to see here, please move along."

Me: "Um ok, this may not work, but you didn't address my points about why ad-supported platforms are a fundamental risk to developers and bad for innovation. This is my core argument and you seem to be glossing over it. Are you saying we are stuck with things the way they are?"

Fred: "Good post. I agree with a lot of this, but not all"

Your paraphrasing is wrong, because he did not say Non-free services both platform and non-platform do not work. Fred was specifically referring to potential paid competitors to twitter, facebook and similar services.

to illustrate:

Fred: "Free TV does not commoditize paid TV. They co-exist nicely. But we had free TV well before we had paid TV. Free is the foundation that creates a paid tier. "

followed by, Fred: "I would encourage folks to compete with them to keep the web, the mobile web, and the Internet free and open. But I would not encourage those same folks to build paid services."

So Fred was not speaking against all non free services.

Developing for any platform that is not your own presents risks. Just because a developer is paying for app.net does not mean anything goes on app.net. Moreover I would not assume it's bad for innovation. Both Twitter and Facebook know they cannot alienate the majority of their users, they will innovate on their platform as needed. They also know they need to strike a balance when providing services for both their advertisers and users.

Network effect is snake oil. You sell the service to users by promising that their friends are (or shortly will be) using it. Once you plateau to the point where you're not adding users hand-over-fist any more the users satisfaction stops being a priority (you've essentially locked them in), and you start to make decisions that are directly against their interests.

I have no problem with any sentence except your first.

What you're describing is not what's referred to by snake oil. Snake oil is when you sell a useless product to someone; network effects are not useless. You might argue that advertisers are selling snake oil and network effects are facilitating that, but the issue is not network effects.

Snake oil is a product that pretends to be something that it is not. I think that's an apt comparison to "network effect" social services that pretend to be one thing, and then flip the script when they reach their plateau.

Have a look at Google+, I think unless people have a decent set of their friends on the service as soon as they join they are going to quickly lose interest.

Facebook has set a high bar as for lots of people they can find everyone they know. Any competing service will need to match this as well as possible with crazy early growth.

I think comparing Dalton project to twitter is wrong. It's wrong because the whole point of it is that there is huge potential for something else, something more. I think Dalton's vision of what the project could be is blurry and I think thats a good thing.

So does Paul Graham - "The popular image of the visionary is someone with a clear view of the future, but empirically it may be better to have a blurry one."

I donated because I want to see him try and would like to see something new (not twitter) come out of this. I think people lack imagination (myself included) and thats why they keep saying it's a twitter clone that is paid. I'm really glad he has enough courage to try. Thank you, Dalton.

It seemed like an aside, but the issue of being at the mercy of the people who provide platforms and other foundational technology really resonates with me.

("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.")

Have I missed an explanation from Dalton or the App.net crew about how what they're envisioning will be different? What protects a developer from being at their mercy for uptime, timely bugfixes, continued development, and so on?

Actually, on a more general level... what can platform/tech providers do to provide those reassurances? I can't seem to think of anyone who's done a really stellar job of it.

In my announcement of this project, I argued that Github & Dropbox are the best examples I can come up with as examples of healthy, innovating platform companies.

I believe our approach is different in that App.net customers are developers+members paying for a service that is provided. This is different than customers being advertisers, and developers+users being treated as a product, or at worst collateral damage.

I think this all boils down to business model choices and financial incentives: http://daltoncaldwell.com/an-audacious-proposal

Both Github and Dropbox offer a free plan plus they don't need the network effect. If I were the only user on Dropbox I would still find it valuable. Same on github.

However the service you are proposing does have a huge network effect. Twitter/e-mail without users is not valuable.

So whats your plan to get to a million paid users?

NOTE: Pandora had about 71 Million on October 2010 but only about 700,000 paying users. So not even Pandora has been able to get to 1 million paying customers. Just look at the financials. 14% of revenue came from paid users and 84.6% came from ad's. Which supports Fred Wilson point that the majority prefers ad supported services.

I am going to support App.net. I still want to see you try. But I am afraid you don't really have a good answer on how you plan to build the network and Fred Wilson is trying to warn because you will probably fail. But something tells me you don't care if you fail, thats why I'll support you.

I think you're wrong to suggest that having developers and users as paying customers qualitatively changes the conflicts between platform users and platform owners.

Even with paying customers you still face conflicts like:

- conflicts between serving different groups of customers (e.g. IIRC, contractors often complain about Github's pricing because it is more adapted to enterprises)

- conflicts over whether or not specific features are part of the core platform (Microsoft and Apple routinely run into this - and virtually all of their users and developers are also paying customers)

- conflicts over priorities/roadmap and so on

At best, having developers and users as paying customers is an additional weight on the same underlying scales.

Wouldn't any investor be inclined to promote the qualities (Freemium, or not, etc) they best know and prefer to invest in?

To me, VC/Accelerators specialize in different things based on their expertise and their goals, and look for a match.

It doesn't make the opposite wrong. Or anyone right. It's just not in their area of investment.

By engaging this debate, are we inadvertently agreeing investors fund base decisions on one formula or model and nothing else?

These types of posts may, or may not try to influence smart startupheads to lean their way. But somehow the door opens for a religious debate - but the only thing black or white from where I can see is each investor's preference, and not spending time on something customers want.

exactly https://twitter.com/fredwilson/status/226047103867170816

I think it's a great idea that will fail in this implementation.

The first barrier in social networks is people - getting enough people on your network to incentivize others to follow. Is the fact that app.net paid enough to draw people away from Twitter & Facebook? As a developer, perhaps, but as a user, I really doubt it.

A much better sales pitch would be just "you own your data". Give users amazing import/export tools from the get go. Allow third parties to fork your system and allow seamless user migration. Build a protocol, not a service.

With a business hat on, I also worry about the single silo of data in app.net. Say it does become successful, then they're a monopoly again. How can we be sure they'll fairly charge for their API usage when they realise how much it costs to hosts that much real time data? Can we be sure they won't change the playing field again?

Besides all that, I don't get why he wants $500,000 up front. If he wants to "align our financial incentives with members & developers", I would have thought he'd charge a set fee to allow revenue to scale with usage.

Also the language on the site is just so damn confusing. They have lots of ideas jammed in together. Most of the discussion about the idea has been people trying to figure out what they're on about. They need to figure out a sales pitch people can understand and stick to it.

Anyway, lots of huge holes in this implementation IMO. I doubt it'll even get funded.

"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."

Amazing bit of novacaine you applied there. This won't hurt a bit...

It's seems like Dalton's proposal would need to be some sort of protocol like Git, SMTP or Usenet. I don't see how a paid Twitter could possibly do what he describes.

I still think that there is no incentive for developers to switch. This situation has a parallel to the Windows Phone app development grants.

Microsoft is paying startups to hire someone to develop a Windows Phone app. After speaking to these companies they say they highly doubt they'll get any value from it and don't intend to continue developing for the platform.

You're offering developers an open platform to develop on that at the moment has under 1000 users. I think a developer could still make more money on a huge locked down platform like Twitter than on 'join.app.net'?

Even if a developer eventually gets kicked off, I'm sure they earned a lot more in the time they were live than on a small platform.

I think $50 yearly is too high for early adopters and even higher for the developers you need, I love the Pinboard.in model, they offer a one off price that is set based on the number of users. So the earlier you join the lower the price. Right now it's $9.84.

You made some good points, mainly that most developers will/already are taking the risk of being kicked out of the Twitter/Facebook/Etc. platform because that platform already has users.

The way I see it, you as a developer are using what they (Twitter/Facebook/Etc.) built to market your app to their customers that they've spent the time to acquire, it's only fair that they can kick you out of their house whenever they want; that's the way a free market should work, fair or not.

At this point, it sounds like App.net will turn out to be a high-quality network of developers and hackers building interesting stuff, but with no real market or audience. Developers don't build for developers.

Your second point was that $50/year is too much for early adopters:

I agree with you, but to even call anyone who's pledged the $50 'early adopters' is ridiculous at this point. No one even knows what App.net is going to be yet or what it could be, and it's a long ways off being released for early beta testing. What Dalton needs to be doing at this stage is just get people to sign up, for free. From there he can figure out if he'll have enough people to go ahead with it or not.

It's not worth throwing $50 at. Yet.

My impression on app.net, which seams to be a payed "twitter" if I understood correctly, is that it should provided an added value worth $50 in the eyes of customers.

Publishers would very likely find this value is such service, but I doubt for readers. Twitter is already a time sink, so adding a cost to it doesn't make it attractive.

Beside, how much different would be paying publishers from advertisers ? They will/should make sure they get their $50 back someway.

Regarding the funding process, it shouldn't be considered as an idea validation process. Outcome depends on how well the idea or project was presented AND people's preconception on what has been presented.

Pocket hasn't revealed their plans for monetization moving forward, but this post does a great job of explaining free vs paid, and why free is sometimes necessary: http://blog.ideashower.com/post/21276590202/why-pocket-went-...

I have been following this on and off. Is there anywhere where it's been mentioned what the underlying network will look like? Is it actually a Twitter-like social site?

We are posting API docs to github later today, tmrw am at the latest. I'm too busy trying to wrap that up to keep engaging in hn threads, so if I don't reply to other questions thats why :)

Ok, but I just have one three-part question...

> On “being a bitch”

> I tweeted:

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

> He also said:

> At any rate, Fred replied to my tweet:

Yep, that's how you do it alright.

Dalton is obviously just using Fred Wilson's name to market his app.net bullshit.

Protip to Dalton: Nobody cares about twitter ads as you do, it will never take off. After you fail for the 1383th time, please quit.

I really have to admit I share the level of distaste for Twitter ads. And your post sounds really discouraging, something I normally don't see here on HN.

"Dalton is obviously just using Fred Wilson's name to market his app.net bullshit."

I think Dalton has valid points.

That of course is totally separate from whether he gets benefit from mentioning FW.

He does. A smart move. Got me to read the post.

That said I'm not entirely sure after watching the video (btw Dalton it bothered me that you didn't look at the camera..) and scanning the site what is going on here. Maybe it's just that time of day.

What are your qualifications to be giving 'protips'?

HN Feature Request: Filter out Dalton Caldwell/app.net posts.

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