The marginal cost of printing another copy of the WSJ is low relative to the SG&A costs of running a newsroom, so I don't think this phenomenon is unique to web startups. But yeah, it makes sense that network effect businesses might sacrifice revenue for uptake.
That said, the promise of big paydays seems like DHH's point: how many more of those are there? Even if the era of the San Francisco Startup isn't ending, there's also a huge bias in the reporting of outcomes for aspiring SF Startups: we only really hear about the ones "important" enough to get funded.
Most companies that shoot for the moon on VC and free services fail. Your odds of winning with free are not good. You might even be worse off taking VC money; if you bootstrap on a free service and don't strike gold, you die in 6-18 months; if you get funded, you might lose 4 of the best years of your life on something with no chance.
> The marginal cost of printing another copy of the WSJ is low relative to the SG&A costs of running a newsroom
The concept of "free" and "eyeball economy" probably came from newspapers, because that's the paperless version of the newspaper business model: Newspapers are in the business of putting ads and classifieds in front of your eyes, not delivering news to paying customers.
Now, I can't find the reference, but I read recently that the subscription of a major newspaper (might have been WaPo or NYT) doesn't even cover the paper it's printed on, much less the delivery or the newsroom.
I don't understand how Facebook isn't running a billion-dollar ultra-segmented advertisement business, I would think they had the user data for it. Probably a privacy issue.
The WSJ paper edition is profitable. The for-pay WSJ online edition is more profitable. The core Trib paper edition is profitable. The point isn't that online is better than paper; the point is, plenty of businesses with low marginal costs charge high market-based prices. The marginal cost of a few more ground coffee beans is infinitessimal; the marginal cost of servicing one more customer at a Starbucks that is open anyways is very, very low, but Starbucks doesn't give away a loss-leader coffee product to gain share, and neither do its competitors.
That said, the promise of big paydays seems like DHH's point: how many more of those are there? Even if the era of the San Francisco Startup isn't ending, there's also a huge bias in the reporting of outcomes for aspiring SF Startups: we only really hear about the ones "important" enough to get funded.
Most companies that shoot for the moon on VC and free services fail. Your odds of winning with free are not good. You might even be worse off taking VC money; if you bootstrap on a free service and don't strike gold, you die in 6-18 months; if you get funded, you might lose 4 of the best years of your life on something with no chance.
Just my thoughts about your comment.