The average web startup, even with VC funding cannot burn though cash like this. I believe VCs as well as startup enterprenuers are debating whether the "freemium model" is nothing more than blue sky talk.

My position is it was always "blue sky" talk and there is more proof it doesn't work than proof "freemium" does work. The reality is, there are dozens of web startups each quarter falling and crashing because they couldn't generate revenue faster than their burn rate.

Isn't that what the dotcom crash was about?

The version of "free" I'm hearing in the comments regards no-cost consumption by a consumer base. I do not believe this "free" is under debate. This type of "free" can be subsidized by advertising, underwriting, selling collected personal data, etc.

The "free" I believe is the subject matter is the socialist web business model. These are socialist web service with the goal of amassing hundreds of millions of people and figure out how to market or sell to them after the fact.

Mark Cuban points are valid – these type of serviced zero-summed themselves to commodity upon launch. People will only see these socialist web services as commodity and will run to the next commodity because it all free.

Free is only good when it is a stepping stone (Napster) and you have real skills to get to the next level. It is not good when the people and the service is a one-trick pony.

In the case of MySpace, the seeds of its demise were sown at its conception. MySpace was not truly a place for friends. It was more of a "night club" where you could meet anyone, be anyone and of course, be "hit on" through spams and predation, by anyone. Upon News Corp's acquisition, the focus shifted to creating a music and media portal to monetize the traffic. On the other hand, Facebook chose to be a place where connections are real. Facebook continued to innovate but concentrated on what attracted users in the first place – a place for friends.

If there's a lesson here, it is not so much that you will die from "free" but rather that "free" is a powerful marketing tool and the lost leader of choice of the internet. Free is good. The real lesson is that narrow and deep is the way to sustain your business. Do one (maybe two) things really, really well and you will outpace your competition.

Now, I've just oversimplified it.

I agree with everything Cuban said, except I disagree on Google to some degree. Google has demonstrated that it is far from a one-trick pony. While they still depend on search ads for much of their revenue, the Google innovation machine has been moving aggressively and successfully into other spaces. This flies under the radar because, unlike a company like Apple which is front-heavy on promotion, Google's MO is to release new products under the radar, perfect them, and let word-of-mouth take care of crushing the competition.

However, I have to say, Mark makes some very valid points here that echo my thoughts in this space over the last 2 years.

Free=Dead.

Yikes.

I think Mark circles the way to combat the "Black Swan" but doesn't quite hit it (which is not to combat the Swan at all, but to adapt to neutralize its impact and repercussions — refer back to Taleb).

Instead of the full-frontal arms race and corporate bloat that typifies a #1 free co, entrepreneurs should build sustainable businesses, and keep them fast and lean, and make them profitable from the get go. Yes, corporate execs and the bigco masses that follow them tend to make counterintuitive decisions in their scramble to keep their jobs and show forward progress. But that tendency can be avoided if the people running the companies think more like soccer (small gains, keep pressure, create opportunities, rely on speed, adaptability and creativity) and less like American football. CEO's, boards and INVESTORS should ease-up on the non-sensical "headline" metrics and constant pressure to linearly increase numbers, and instead take a more holistic approach to building companies with strong foundations and solid fundamentals. Sure, at the end of the game the score may be 3-1 and not 21-7, but a win is a win and counting by 7 can get you in trouble.

Oh, and if soccer's too "foreign," basketball is a decent analog as well Mark.