I help organise a local tech entrepreneurs drinks once a month, it was at the last one I was discussing Chris Andersons article Free… with Nic of Litmos a few night backs, we both agreed that yes you can get undercut by free.
If you look at the long run, who is still about, who keeps turning up? It’s those that persevere.
(Especially when you look at bootstrapped startups.)
In order to do so you must be making money somewhere.
You must also have a passion for what you do.
Sure someone can undercut your service by making it free but do they have the passion to keep at it? Through the hard times, the ups and the downs.
You see you can be undercut by free and still thrive but being undercut by passion? That’s a hard hard battle.
You should stick to what you’re passionate about.