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Suicide Money

Adobe did something very smart:  They are offering a completely free web-based version of Photoshop called Photoshop Express.

They could have made a different choice.  They are already making decent money selling inexpensive consumer versions of Photoshop, hoping that consumers will upgrade to the full versions.  Most major companies would have squeezed that revenue to the very end.

Which would have opened the door to competitors offering the free online version.

Google Docs wouldn’t exist if Microsoft had offered a free web-based word processor. 

But it’s hard to let go of that last bit of money from the old model to jump on the new model.  It’s hard to give away something that you are selling, even when you know that it’s preventing you from moving to a better place.

Holding on to this money is suicide. Current revenue is an addiction that prevents you from succeeding at the next thing.

It’s hard to say "no" to immediate cash, even if you know that competitors will use your addiction to take you down.

Here’s what you need to do:

  • Look for the inevitable trend. Where will your industry be in three or five years?  What is that thing that all companies are going to have to offer because of consumer pressure. 
  • Jump there right now.  Beat all your competitors, thrill your customers.

Lesson: The first one to make the obvious move to the finish line gets all the glory, money, and customer love.  The second and third ones look like reluctant copycats.

P.S. Seth Godin wrote about this in Free Prize inside.

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Comments

  1. Zane Safrit April 23, 2008 at 8:40 am #

    Adobe Lets Go of Bad Profits

    Adobe recently announced their completely free online version of Photoshop. That little stream of lost revenue at best would generate bad profits*. Sure, it would add to short-term financial goals. And it would do nothing to develop long-term customer …

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