The real money is in web traffic, not the applications themselves necessarily, i’ve been looking very closely about getting traffic on the net and found that its not that simple.
I’ve got friends that have some great web 2.0 applications but not able to get anyone to use them, even if they are great!
I’ll be posting some more info on my blog about these bits of software, check it out by clicking on my name, or go to http://www.davegoldmaker.com/
A little historical perspective might be in order.
After Linux, arguably the most successful open source project around is probably Apache (though Sendmail and Bind are probably right up there too).
These are examples of software originally developed internally in academic environments, with research funding, for both research and operational purposes.
Over time, they stopped being research (hence, no more research funding), but had been widely adopted across the Internet community. Open source code, and community support have proven to be a good model for supporting widely-adopted code.
In essence, open source has been largely driven by user communities - where employer-paid users (e.g., in IT departments of various sorts) are providing distributed maintenance of a shared code-base.
The trick seems to be to have a good reason to develop code for internal use, with internal or customer dollars - then spread ongoing support costs over a large user base. I.e., the goal is to cut your own costs rather than to make money selling software.
Zope comes to mind as another example.
There are open source billionaires. I believe the president of redhat might be one. The company is certainly worth billions.
The free software movement has political and religious overtones that many do not appreciate. Obviously for money software will be seriously challenged by free software. In the end all software will probably be free. I say that because I believe that machines rather than people will write code in the near future. Obviously industry shrinks from such a prospect. But if you think of the Buddhist monks who go with a begging bowl to get the left over food from others plates so that they can avoid a need for money it starts to kindle some feelings. The early Christian church was very similar. The notion that people should make money is not all that firmly established in our culture if you consider that notion over very long periods of time. Free communication and free information challenge the powers that be. To that extent the free software movement is revolutionary in nature.
In spain we’d say, the guy who wrote this article can’t tell speed from bacon.
Yes, Jeff, I see more and more hybrids going on over time… I mean, it’s hard to imagine a world where that would not be the case.
Then I imagine the value would shift away from “owning” the code to “managing” the code. And if somebody figures out how to do a good enough job of it, in a way that can scale to millions of people relatively cheap and easy, then why wouldn’t an open source billionaire [or at least, millionaire] be inconceivable? Just asking.
how Microsoft makes a living in this space
Thruth is open source usually sucks big time, if it works at all it’s usually impossible to make sense of because of lacking documentation or sorting out the correct version of fifty different versions with hundreds of dependecies that are all still buggy in different ways.
Thats why Microsoft and any other company doing proper software makes billions, their stuff works, without diving into config files or hunting often non existing documentation.
What amazes me is that there are actually people that questions how companies can make money creating software, why wouldnt they ?
That Linux distribution timeline almost killed me.
The open source billionaires can be found at Google. Linux and open source technologies are essential to their success, allowing the company to rapidly develop at lower costs new services.
The model of open source-enabled services, rather than software companies in the mold of Red Hat and Novell, will produce the first wave of billionaires.
Going off a tangent, the taxpayers funding national and state governments in places like China and Brazil appear to be the other big winners. Public services delivered using open source technologies and supported by domestic technology eco-systems (software, hardware, services, support, IT, etc) are already saving these and other countries millions.
“These guys are paper billionaires because they hold a lot of stock in the companies they founded, and the stock market has decided that the stock is worth that much. This valuation isn’t really based on anything in reality, otherwise Microsoft’s stock, based on huge sales of real products with a large barrier to entry, would be worth much more than Google’s (large ad sales, no real products to speak of beyond the ad system).”
This is an economic noob statement. MSFT’s market cap is nearly double that of GOOG’s, so in reality MSFT stock is really worth more than GOOG’s. There’s just more shares of MSFT floating around compared to GOOG.
Henry’s right. MSFT is worth twice as much as GOOG, and once the dust settles I expect the ratio will be much higher.
Very little of the value of Google and YouTube is in any way related to the role open-source software has played at those companies. Red Hat is probably the best open-source success story, but remember-- Red Hat doesn’t make money from selling the software. Red Hat has made its money by supporting the software. If there was no Linux, the Red Hat business model could be applied to Windows instead (and I think a lot of people wish someone would do exactly that).
The author of the original article got the facts right, but merely danced around the obvious conclusion. Pure open-source projects like Linux will never make anyone any money because nobody has an exclusive right to the work. Without the ability to exclude competitors, there’s no profit, no return on investment, no commercial incentive at all.
But-- if you enjoy developing software, please do work on open-source software. It really does help make the world a better place.
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Excellent discussion.
Speaking of Google, perhaps it’s time to admit that the emperor is buck naked? Google is no longer an asset to small business. It’s digressed into a black box designed to extract as much money as possible from small business while giving back as little value as possible. This piece explains why Adwords is something to be skeptical about: “Why Google Adwords is Not Helpful to Small Business” http://smartstartup.typepad.com/my_weblog/2007/07/a-fable-doing-b.html
Free software does not reduce profits “By Design” – it’s "designed " to grant Freedom to the user, which is something totally different from reducing profits. Whether or not it affects profits is totally secondary to what it’s “designed” to do, which is to grant Freedom to the user. Now, as for “Open Source”, which is not necessarily the same as “Free”, (although usually any “Free” program is also “Open Source” and so one could say “Free” programs are a subset of “Open Source”), I’m not so sure, but Free software definitely is not designed to affect profit but to grant freedom to users.
“Peter G.” wrote:
“But-- if you enjoy developing software, please do work on open-source software. It really does help make the world a better place.”
But what about making money from the software, so I can then go and spend that money on helping the world instead of just hoarding it as an end in and of itself?
How to be an Open Source Billionaire
by Alex Nartin
Too many open source programmers think the same way.
They think: No bucks, no money.
Here is how to be an Open Source Billionaire:
Think of the Wild West!
The telegraph brought the news to people quickly!
So goes Open Source Billionaires!
The code will be so good, it will be free! The network is formed.
Agents of the OS Billionaires (OSB) will charge reasonable sums to
deliver (by foot, bicycle, parasail or car or US Mail) the great new
OS software! The software is free, but a person who chews on the bacon will say–“OK, cool $20 for delivery of UltraMountain 2.0 and 2.5 in the next 6 months, cool, I’ll take it! Get the CD over to me!
You don’t think I’ll waste my time and ComputerPort resources downloading the sucker, right?”
Distribution is the first way.
The 2nd way is Independent Contractors (ICs). They will charge a mere $60-$80 to install or troubleshoot or upgrade OS systems.
Service is the second way.
The third way?
Let’s call it “Dessert”.
Let’s say Willie Bob’s “Mongolian Barbeque of Western Arkansas” has been having a lot of fun, very happy customers chawing at nice tender BBQ. He has been operating an Open Source software program called: "Mountain High Ultra Cash Grow Wealth Allocation System"
for the last 3 years. Cool! Not only does Willie Bob keep 1000’s of customers and 20 employees happy, he regularly spends 3 week vacations WHEREVER he wants to!
So he gets a postcard in the Mail from the OS Billionaire Developer. Willie Bob paid a mere $25 for the original OS program CD 3 years ago. He says" “I loves free software that is followed by a mere 25 dollar shipping fee.” Willie Bob’s accountant Chumbly Humblee tells him–“Buy this upgrade, the $90 is tax deductible.”
So Willie Bob buys the $90 Ultra Platinum edition of this awesome OS software, he gets it overnight on 4 CDs, and then his business grows up to BBQ palaces in 12 states, 300 employees, and Willie Bob only shows up in the office just 3 days a month!
Do you see the beauty of the OSB concept?
These developers make their billions in 3 ways:
Distribution, service and upgraded ULTRA editions
The fourth way could be the couriers, the installers, the service people and the upgrade indie contractors could all network nationwide
either through network marketing or an over-ride commission system (2 levels) with this great motto–“The network is the dream. We live the dream and share the wealth.”
This is how it works!
Cool!
Alex Martin
Copyright 2008 by Alex Martin
Burger Flipping Billionaires?
Part 4 of my above book–the Network. Let’s say, the great OS software is sold for a penny (to make it legal), then the rest of the cost can be distribution and upgrades. So everyone in the network makes money, they get commissions, they get overrides on those they signed up (only 2 levels in this network).
So a guy or a dudette might START OUT (it’s not a sin to start!) as a burger flipper, might sell X many units of ULTRA HUMUNGO LIFESTYLE AFFIRMING WORDS open source software, sign up 6 people under him or her to sell ULTRA HUMUNGO.
Aha! What is this GENIUS doing?
Earning ultra-wealth through the network of OS moguls! Maybe Susie of Kansas or Wilbur of Louisiana has 8 or 20 people signed up, and they are all 1)Having LOADS of FUN, since they KNOW that LIFE is BIG, and money flows without worrying about it all the time 2) Using and learning awesome things from their OS Software and 3) Earning commissions and overrides from their OS software sales.
Just denominate their sales in scrip, say 1 penny equals One Million
Mongos! So they easily are Millionaires, just by enjoying Life, having fun, being themselves and benefitting from using their software!
OS Billionaires? OS Millionaires? Easy. The network of Indies (Contractors, Operators, all receiving their 1099’s) spreading , using, refining and ultra-enjoying their ultra-easy very useful software!
It is real!
Alex
“So a guy or a dudette might START OUT (it’s not a sin to start!) as a burger flipper, might sell X many units of ULTRA HUMUNGO LIFESTYLE AFFIRMING WORDS open source software, sign up 6 people under him or her to sell ULTRA HUMUNGO.”
What your are describing has been around for many years. It’s called multi-level marketing. It’s basically a few steps down from a Ponzi scheme.
Does it work? to some degree. The people at the top make lots of money (top 1%) and the people below don’t (the rest of the losers shilling for dollars). In my mind, this is worse than spamming.
“OS Billionaires? OS Millionaires? Easy. The network of Indies (Contractors, Operators, all receiving their 1099’s) spreading , using, refining and ultra-enjoying their ultra-easy very useful software!”
If you enjoy your career as a programmer, you should listen to this statement. Basically, people using your software are getting value from it (and saving money). The original developers are getting nothing.
Eventually, as open source gets better and better, businesses will have less of a need for actual developers. This means less jobs in the future for software engineers and developers and more for code monkeys (and a cheapening of the craft overall. Think of the new programmers as mechanics rather than engineers).
This may be the future, but just realize that by developing open source for the masses, you are paving the road for it.
When people say there is no money in open source, they are talking about the people that develop code and sell it, not the free-loading user that is saving X amount of dollars by not having to purchase a couple of licenses from Microsoft.
“…to balance the scales by devaluing the obscene profit margins that exist in the commercial software business.”
There’s nothing obscene about them. They are determined by the free market. And if Open Source succeeds in a big way, it will lower those “obscene” margins. The free market at work.
You’re also talking about gross margins but that’s a whole other story…Exxon has lower margins but they make more money then any software company. Perfume bottles that sell for $20 contain 5 cents worth of perfume, and makes software margins look like peanuts, but the csot to market and advertise the perfume are huge. I realluy enjoy your bog but I just hate it when people make absurd economic statements.
Love the last quote. It is how you use tech to “work” for you.
Umm, you know what, Google look pretty open source billionaire to me.
The whole thing of open source frameworks is that they’re like the wheel. It’s not conceiving it and patenting it, it’s making it available that has a huge difference on general prosperity.
It’s not what you’ve got, it’s what you do with it.
oh yeah, BTW, bill gates was ousted for some thouroughly illegal and monopolistic business practise, with which he was conning lots of n00bs into using the highly inferior, and actually in some places hazardous MS tech.
In the land of the blind, the one-eyed man is king.
In the land of the n00bs, the MS software rules.