Free Software, Paid Support(avc.com)
avc.com
Free Software, Paid Support
http://www.avc.com/a_vc/2011/02/free-software-paid-support.html
27 comments
So would a lot of large content publishers. Apparently advertising revenue isn't satisfying their needs yet.
I believe you are referring to indirect ways of generating revenue, but recently, publishers seem to be heading more towards direct monetization models. Some examples: News Corp. is giving it a shot with The Daily, the television networks are working with Hulu Plus and the music labels have been selling through iTunes for a while.
Hope I've interpreted your comment correctly, but as far as I know, outside of direct advertisements and collecting data on users that can be sold, there is currently no proven/successful model for monetizing free content.
To speculate, some sort of Gillette model could have potential, but I think it's currently difficult to understand a consumers intent and the types of "add-ons" they would be willing to pay for. Perhaps hard copies of the content that contain something original &/or personalized would have value.
I believe you are referring to indirect ways of generating revenue, but recently, publishers seem to be heading more towards direct monetization models. Some examples: News Corp. is giving it a shot with The Daily, the television networks are working with Hulu Plus and the music labels have been selling through iTunes for a while.
Hope I've interpreted your comment correctly, but as far as I know, outside of direct advertisements and collecting data on users that can be sold, there is currently no proven/successful model for monetizing free content.
To speculate, some sort of Gillette model could have potential, but I think it's currently difficult to understand a consumers intent and the types of "add-ons" they would be willing to pay for. Perhaps hard copies of the content that contain something original &/or personalized would have value.
Example for anime would be something like give away the anime and sell the merchandising (toys, t-shirts etc).
But that's an entirely different business model: selling add-ons, not support. One, by the way, that does have analogues in open source: WordPress's Akismet is a good example.
(Back in my investment banking days, I worked on a thought piece with all the various business models for open source; if I recall correctly, I think I managed to find six distinct revenue models. Sadly, I don't have the presentation nor can I remember the other four off the top of my head.)
(Back in my investment banking days, I worked on a thought piece with all the various business models for open source; if I recall correctly, I think I managed to find six distinct revenue models. Sadly, I don't have the presentation nor can I remember the other four off the top of my head.)
The selling of add-ons would be an equivalent model, of the general model the author is talking about, for anime.
From the article: "This approach can be mimicked by anything that is made of bits not atoms. It can be applied to writing. It can be applied to music. It can be applied to film. It can be applied to photography, anime, cartoons, etc, etc."
The author is talking about the general business model where the thing made of bits is given away (e.g. the anime made from the bits) and the stuff that costs money to create (e.g. the merchandising made from the atoms) is charged for. Obviously, there is no notion of support for anime, music etc that the author mentions.
From the article: "This approach can be mimicked by anything that is made of bits not atoms. It can be applied to writing. It can be applied to music. It can be applied to film. It can be applied to photography, anime, cartoons, etc, etc."
The author is talking about the general business model where the thing made of bits is given away (e.g. the anime made from the bits) and the stuff that costs money to create (e.g. the merchandising made from the atoms) is charged for. Obviously, there is no notion of support for anime, music etc that the author mentions.
yup, it was a metaphor. there isn't support in the case of many forms of digital content
I think there's a mismatch of scale in this conversation. Many of the free apps I see and use are small scale operations. It's just my theory, but I think an issue being masked here is the fear of rejection, For these small apps and utilities, the fear of support and returns is exaggerated in the mind of the developer before they ever occur.
Doesn't this mean you're back to selling time, then, rather than a product, losing the almost-zero marginal cost benefit of selling software?
If you're giving away software at no cost then you are taking advantage of the marginal cost of software being close to zero.
You could charge, but then you might fail in the market due to competitors not charging. You can attempt to build a market for your time, by giving away the software.
You could charge, but then you might fail in the market due to competitors not charging. You can attempt to build a market for your time, by giving away the software.
Giving away software can definitely build a market for your time - but in the end you're selling your time, which you have a limited amount of, instead of a software product which might scale indefinitely (see "Angry Birds", for example).
Yes, and it's a bad thing.
Successful software sales are a function of your support costs (assuming you've jumped the first hurdle which is writing a product people want to buy).
x% of your customers will take up y hours of your time. The software (and support materials) must be designed so that x and y are reducing in size as time goes by.
Free software with paid support is more like consultancy. To scale means more staff.
Paying for support is also more complicated - there must necessarily be a two-way conversation about work done, hours taken, etc. Collecting money for software is a one-way conversaton - here's the price, take it or leave it.
Successful software sales are a function of your support costs (assuming you've jumped the first hurdle which is writing a product people want to buy).
x% of your customers will take up y hours of your time. The software (and support materials) must be designed so that x and y are reducing in size as time goes by.
Free software with paid support is more like consultancy. To scale means more staff.
Paying for support is also more complicated - there must necessarily be a two-way conversation about work done, hours taken, etc. Collecting money for software is a one-way conversaton - here's the price, take it or leave it.
Yes, and is this a bad thing?
I wouldn't put it in good/bad terms, I did this for years. If you are the type who enjoys building things, ultimately it gets very boring. If your business is successful (mine was) and you need to hire people, it's hard to convince the very best people to join a consulting business with little upside. The question is not whether it's good or bad, but whether it works for who you are.
It depends on your definition of "bad" and your situation - if you are selling licensed software, then selling licenses "scales" (there's little added cost for creating another license), while support has a harder time scaling since it is time based. If your business is built on selling licenses, then yes - it is "bad".
If you are releasing free software then it doesn't matter since your not offering support any way, so it's not bad.
If you are releasing free software then it doesn't matter since your not offering support any way, so it's not bad.
The flip side of that is that Open Source scales up for developer hours and creativity, limited only by the size of the program's audience. As the audience grows, so also the programming resources and ideas for improvements.
Closed source development does not scale - it is limited to the available work hours and imagination of the owners.
Closed source development does not scale - it is limited to the available work hours and imagination of the owners.
I didn't really think of this in terms of good or bad. I guess, like most things, it can both.
I had a lot of fun doing support & sales work with clients as sales engineer for an open source software company. Access to free software is, obviously, great for me as a user.
On the other hand, it seems harder for very small companies to make a living on support (the kind you can really charge for, SLAs with big corps etc) than to sell an iPhone app, for example.
Also, if you're making your money on support, there's a possibility you might be less motivated to make your product very easy to use (not that paid software is always great in that respect, of course).
I had a lot of fun doing support & sales work with clients as sales engineer for an open source software company. Access to free software is, obviously, great for me as a user.
On the other hand, it seems harder for very small companies to make a living on support (the kind you can really charge for, SLAs with big corps etc) than to sell an iPhone app, for example.
Also, if you're making your money on support, there's a possibility you might be less motivated to make your product very easy to use (not that paid software is always great in that respect, of course).
I don't code to make a pile of money, I code because is fun, if you code just to make money you're doing it wrong, programming is an art that's something non-programmers can't understand.
For some reason reading the original Programmers Stack Exchange post made me think of the infamous An Open Letter to Hobbyists:
http://en.wikipedia.org/wiki/Open_Letter_to_Hobbyists
For some reason reading the original Programmers Stack Exchange post made me think of the infamous An Open Letter to Hobbyists:
http://en.wikipedia.org/wiki/Open_Letter_to_Hobbyists
Also increasing the cost of any ongoing maintenance and support (and the need to charge for that support and maintenance) are the "unhedged option calls" [1] made when the idea was first expressed in code.
[1] http://www.m3p.co.uk/blog/2010/07/23/bad-code-isnt-technical...
I'm also reminded of the joke: "How did God manage to create the world in only six days? He didn't have any installed base he had to worry about backwards compatibility with."
[1] http://www.m3p.co.uk/blog/2010/07/23/bad-code-isnt-technical...
I'm also reminded of the joke: "How did God manage to create the world in only six days? He didn't have any installed base he had to worry about backwards compatibility with."
I think the problem with this model is a question of scaling. Suppose I write a fitting program which I sell. Sure, I have to support it for some fraction of users, but for the most part, I have the initial cost of creating/marketing it, but everything above that is profits. If I am selling support, I have to have enough people to cover the support and naively, I think that the costs scale with the number of sales (and one support engineer can only cover so many customers)--so, the only way I can win is if I charge a lot for service.....
What about giving away software free initially to build up a user base and search engine ranking etc, and then once your software is established, either charging for the software that was once free or introducing a premium version? Seems like that could be a good business model when entering a competitive niche if you have few marketing funds available. I would be interested to hear the thoughts of others on this.
In a similar vein to what Fred is saying...
Free software, paid support, amass users, then...
Watch and listen to what features are missing and what solutions the software isn't providing... and charge for those.
Free software, paid support, amass users, then...
Watch and listen to what features are missing and what solutions the software isn't providing... and charge for those.
I think most free software is destined to stay that way. How many free software projects have kept their existing user base once have started charging for the software ? My guess is that it is a very low number.
But why is that?
It's very hard for a software vendor/author to actually gauge how good their products are unless they charge money for them. Free software distorts the normal feedback mechanism of the marketplace, which is getting someone to part with their hard-earned money. So, people use free software products (not all, but many) primarily because they're "good enough", given that they are free. This leads the software vendor/author to assume that their existing users will gladly pay money for the software, but sadly, this is often not the case. Once you start to charge money for something, "good enough" is no longer "good enough", and the conversion rate is very low.
Take it a step further. Design software that can accept lots of data for free, and encourage users to adopt said system. Then charge whatever you want because you're in control of something that's vital to them.
The cost of building software pales in comparison to the cost of maintaining, enhancing, and supporting it.
Totally nailed it.
if you're building a super-simple product, this might be the direction to take it all along. make them pay for your expertise...not your software. if you want to deter competition once the popularity ensues, you'll have to put it out there for free or else the me-too market will try to undercut you.
Fortune 500 companies do not strike me as having huge anime consumption habits which they wouldn't blink at writing 6 figure yearly support contracts for.