37Signals Drives Another Company To The DeadPool

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iSkype Phone?

Ok, the title is a bit ridiculous. But 37Signals has been urging developers for years now to charge for their software, and attacking anyone who suggests a business can be made from giving that software away for free instead. Their model works for their own products, at least so far. But I believe they are responsible for influencing a number of startups to charge for products that were already commoditized by the time they launched. Which is suicide.

Feedlounge, a subscription-based online RSS reader, is the most recent casualty. They launched in 2005 and offered a web based feed RSS feed reader for a monthly subscription fee. There were a number of free competitors at the time, including Bloglines and NewsGator, which had dominant market share. FeedLounge planned to carve a niche for itself by offering speedier and slightly better service.

The reader was good but not great, and came out in the middle of the pack when we reviewed the competition in mid 2006. But the company defended its business model until the end – hear our podcast interview at TalkCrunch with founder Alex King where he defended his business model.

They shut down over two months ago, canceled everyone’s subscriptions, and no one seemed to notice until now. FeedLounge is now in the deadpool, although they may re-emerge as a free service at some point.

If you are in a position to charge for your software and you aren’t that concerned with dominating your category, by all means go for it. But to blindly follow the idea that software must not be free because, damnit, people put a lot of time and effort into it, means you probably shouldn’t be making the business decisions for your company. And if you are entering what is already a commoditized business (online feed readers in this case) that has a price point of zero, you are absolutely crazy to try to charge for that product.

Offering your product for free isn’t always the right choice, either. Often, the right choice is to never have entered the market to begin with. But just because 37Signals tell you you are dumb to go the free route doesn’t mean you have to be a lemming and walk over the cliff.

Thanks Smaran for the tip.

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