Henry Gomez of eBay once famously released a one paragraph press release claiming “free is not a business model.” Of course, a few month later, eBay decided to cut (not eliminate) fees, which the press, rightly?, interprets as EBay China decides ‘free’ is a business model .

Jack Ma of Alibaba did the opposite flip flop.

“We call on eBay to do what’s right for this phase of China’s ecommerce development and make your services free for buyers and sellers in China,” said Jack Ma, CEO of Alibaba.com. “Cutting prices is not enough - it’s time to make your services free and affordable for all of China’s entrepreneurs and consumers.”

So given the short attention span of the industry, Jack hoped (like Henry?) no one will remember his own crowing. Couple weeks ago, Jack announced the new Zhaocaijinbao keyword based monetization scheme. At first glance, it is a brilliant idea, using search engine keword auction mechanism to create a “monetization back door” to eventually push out free listings off the site.

Of course, the user base sees right through the scheme, and creates a revolt. (man, Taobao is more like “eBay” than EachNet is “eBay”). Jack had to apologize and write a introspective post on the boards. Next came a Taobao sponsored vote to decide if the feature stays or goes. (side note, this plus the chinese pop idol thing could potentially be a historical turning point) Thus far, it looks like the feature is going to go. . .

(China web 2.0 review has more details)

So news to Jack, you dont own Taobao, your users do.

Not even in a country like China does online users accept top-down directive. What hope does the rash of web 2.0 startups in the US have? The so called “Freemium” business model is not as easy to implement as VC’s or entrepreneurs want to believe. User will revolt if they believe you will eventually screw or ignore their needs. Better yet, they will head to the next available website playing a game of chicken with their business models.

Java never found a business model . . . I guess Taobao wont either? popularity /= ability to captured value . . . but business model tends to slow down acquisition. . . so whats there to do? hmm. . . I’m not smart enough to figure out the catch-22, maybe thats why I’m not worth billions. . .