As the Internet dismantles one business after another, it's surprising how fungible the responses to the Web have become.
Reading a recent Economist description of the changing newspaper business, for example, I was surprised by how much its transformation mirrors the software business. The Economist suggests a change to the economics of news businesses:
(T)he plight of the news business does not presage the end of news. As large branches of the industry wither, new shoots are rising. The result is a business that is smaller and less profitable, but also more efficient and innovative.
This is almost certainly what open-source software is doing to the traditional develop-a-product-and-license-a-million-copies proprietary software business. Open source is not a monastic pledge to poverty; instead, it's an alternative way to wring profits from a bloated industry that has gotten away with monopoly rents for far too long.
Intriguingly, though, even the business models that appear to be working for News 2.0 are the very same models being deployed by budding open-source software companies. The Wall Street Journal's bifurcated content model sounds suspiciously like open-source software's Open Core model and our attempts to create hybrid-source business models:
The Wall Street Journal takes a shrewd route to a similar destination. Rather than charging certain types of user, it charges for certain types of news. Earlier this week, it offered for nothing a story about swine flu, a review of the new "Star Trek" film and a report on looming cuts at car dealerships. It charged for pieces on Cigna Corporation's pension plan, Lockheed Martin's quarterly lobbying expenditures and a lawsuit against a bottling company which alleges that a board meeting was held improperly. In short, the fun articles are free. The dry, obscure stuff costs money.
The open-source analog is Zimbra giving away its standard e-mail software but charging for the "boring" (but necessary to enterprise roll-outs) bits like multi-domain support and Outlook/MAPI sync.
This is why I often talk about the entertainment industry, newspapers, etc. in the midst of an open-source software column.
The solution to the music industry's P2P woes should provide significant insight into the business models that will fuel open-source software for the decades to come. The best models for open-source software will almost certainly suggest clues for monetizing Twitter, online video, and more.
Indeed, Twitter's founders on Tuesday told CNET that they're focused on building a great product first, and fixating on profits second, which sounds a lot like Red Hat's model over the past few years of growing revenue slowly, but customer value quickly.
We're all in this Internet thing together.
Follow me on Twitter @mjasay.
Firefox, for all its great functionality and superior performance, has long been a laggard when it comes to managing PDF content on the Web.
Apple's Safari and Microsoft's Internet Explorer browsers both give users the option of reading Portable Document Format content within the browser, while Firefox forces users to navigate to PDFs through its Downloads window. Not very convenient.
Leave it to Firefox's online community, however, to remedy this failing. While there are a range of Firefox plug-ins to help manage PDFs documents, two stand out for me.
The first, Download Statusbar, doesn't actually enable in-browser rendering of PDF documents but gives the user a status bar at the bottom of the browser window that displays the progress of downloads and allows the user to double-click any download to open it in the application of one's choice.
In other words, no more searching for the Downloads window to check on the status of a file download, and no more scouring one's hard drive to remember where the download went. Download Statusbar keeps it all in Firefox. For my PDF documents, I just double-click the status bar to open them in Preview. Easy.
If you use a Mac and you prefer to have PDFs rendered in the browser, you can thank Google for its simple but excellent Quartz PDF viewer, which does one thing really well: opens PDFs as if they were HTML right in the browser. If you want it to do more than that, well, it's an open-source project, so feel free to contribute.
If you use the two together, Google's Quartz PDF viewer overrides Download Statusbar for PDF files. So, if you want to manage PDFs through Download Statusbar, you won't want Quartz PDF viewer. But through add-ons like this, Mozilla and its large and diverse community have you covered.
Follow me on Twitter at mjasay.
Perhaps you didn't notice, but 2008 marked the last year when SourceForge downloads mattered.
Throughout the year, and for a consistent period of several months, the statistics function on SourceForge stopped working. My own company, which had been tracking our downloads closely, suddenly was flying blindly.
Guess what? Life went on. Not only that, but we moved our central downloads repository to our own Web site because we needed consistency that SourceForge apparently couldn't give us. It also became obvious that download tallies were secondary to something SourceForge never gave us: insight into those downloading our software.
The download economy, in short, gave way to the customer economy, at least for Alfresco.
Chris Anderson, longtime champion of "the Long Tail" and the power of giving stuff away, has captured this idea well in a Saturday column in The Wall Street Journal. He argues that the allure of "free" is no longer as strong as it once was for businesses that need to make a buck:
Until September of last year, the model (for companies trying to build a business on the Web) was pretty simple. 1.) Have a great idea. 2.) Raise money to bring it to market, ideally free to reach the largest-possible market. 3.) If it proves popular, raise more money to scale it up. 4.) Repeat until you're bought by a bigger company.
Now steps 2 through 4 are no longer available. So Web start-ups are having to do the unthinkable: come up with a business model that brings in real money while they're still young.
In boom times, it's enough to be popular. In down times, you deservedly die if you don't make money. Open source has shifted from the "free" economy to the customer economy, and downloads have largely become irrelevant.
Of course, open-source companies still need to drive downloads. Downloads feed into leads, which feed into customer conversions.
The critical strategy for open-source vendors is no longer to find ways to goose download numbers; it is to devise product strategies that encourage more paid adoption, something I addressed at OScon in 2006 that has become much more important in the past two years.
This is why Sun Microsystems' MySQL has been changing its business model to accommodate commercial add-on services that help drive paid subscriptions to an otherwise free database. It's why Red Hat has always constrained access to its Linux binary distribution. And it's also why Canonical's Mark Shuttleworth is going to have to move beyond "free" to create a compelling business out of Ubuntu.
SourceForge download statistics didn't work for much of 2008, which helped us to see that they largely don't matter, anyway. Conversions matter. Customers matter. Welcome to the open-source customer economy.
Follow me on Twitter at mjasay.
It was a bit distressing to read that despite tens of millions of Mozilla Firefox downloads, 75 percent of all Firefox downloads never get used, according to Mozilla. Mozilla has therefore launched a contest to get input on how to solve this problem.
It's a good move, but I'm frankly dumbfounded by why millions of people would bother to download Firefox...and then do nothing with it. A majority of existing Firefox users upgrade to new versions, or did so with 3.0. So, existing users seem to like Firefox and want to stay with it, helping Firefox grow to roughly 20 percent of the global browser market.
But why are so many downloads - presumably from newbies - left to sit on the shelf?
It would be one thing if millions of people made it to the Firefox download page and then decided to stick with a previous version of Firefox (or Internet Explorer), but why go through the bother of sucking up your bandwidth with a download and then not clicking on the icon to install it?
Any ideas? Or, rather I should say in the spirit of Mozilla's contest, any solutions?
UPDATE: I heard back from John Lilly, CEO of Mozilla, who offered the following explanation:
It's probably not really three-quarters of the downloads that don't get used -- that's what our numbers show, but some of it is due to downloads not finishing, double downloads, people moving from one machine to a new one (where we gain a new user and lose one, but add a download). But it's hard to find actual information in the wild about usage rates of downloaded software a month after download -- we're sharing ours because we can -- but we can't really find any comparable data -- have you seen any?
I haven't, but how about anyone else out there?
Ars Technica has the dirt on an admission from Vivendi CEO Jean-Bernard Levy: digital music downloads might not be evil, after all.
Just in case you don't know, Universal Music Group--one of the Big Four record labels--is a wholly owned subsidiary of Vivendi. So this is a big deal.
As Ars Technica reports, Universal's music business is up 3 percent, halting a long-term slide toward oblivion:
Digital, of course, is the big driver of better economic performance. At Warner, for instance, it made up 20 percent of total revenues in the second quarter and generated 39 percent more income that it had a year before. Universal notes that its growth is fueled, in part, by "the momentum of digital sales growth."
Imagine that. Studies have shown that peer-to-peer downloaders tend to pay more for music, but I think the larger trend is that many of us simply want easy ways to consume digital goods and that forcing us into an offline purchase was a losing strategy.
Apple has made it easy to buy music online and has an 85 percent market share as thanks.
Clay Shirky, a new media professor at New York University, recently noted that the music industry is the "skull on a pikestaff as a warning to others about how not to deal with the Internet." Finally, however, things may be changing.
The music industry now needs to continue its experimentation with digital downloads, making it ever easier to discover and consume online media. That's the future.
I'm not sure why we continue to persist in talking about downloads, but I'm with Stephe on this one: downloads are not the best measure of success in open source. In fact, they're often not even a remote predictor of success (i.e., sales). Having them, as Stephen O' Grady notes, is much better than not having them, but it would be erroneous in the extreme to assume a company with 100,000 downloads per month necessarily has a bigger market opportunity than a company with 20,000 downloads per month.
The 451 Group's Matt Aslett points out that marketing automation software like Loopfuse can help to supercharge an open-source company's conversion rate. Same number of leads in, many more conversions (sales) out. I agree with that. Aslett writes:
Of course, the statistic [in Loopfuse's results] that will have jumped out for many people is the drop from a 40X increase in qualified leads to an 8X increase in engagements. The theory that leads are not enough in open source software has also been well documented. The ability to turn those qualified leads into paying customers remains a missing piece of the commercial open source puzzle.... Read more
Todd Barr (Director of Marketing at Red Hat) has a great post about open-source revenue mechanics and how they shift as an open-source company becomes an established player. Net net: giving away free software is great for driving adoption, but an open-source vendor needs to figure out more than how to give things away to build a great business.
Sound simplistic? Just try it. Sexy as open source is, you spend far longer ramping revenue (revenue, mind you, not bookings/sales) to cover expenses than you would in a typical proprietary license-based software model, as Todd points out. I've argued that open-source startups have benefits that proprietary vendors can't match (a focus on ubiquity, for one thing, and the attendant benefits that derive from "abundance"), but it's not easy sailing.
Todd writes:
So, start-up open source companies necessarily need low-cost, high-impact marketing tactics. And, by golly, providing awesome software to download for free is a great tactic - it drives a lot of web traffic, builds your brand, helps you get your early adopters, and quickly builds a community of advocates that might buy your value-added services in the future. But the free download tactic is less relevant to the challenges of a mid-sized company:
... Read more
Just read this in The Independent. I admit to never having listened (knowingly) to Ash, a Northern Ireland band, and the band's decision to move all new releases to the web probably won't change this. As in open source, the fact that someone releases their code as open source (or songs on the web) doesn't necessarily make them a good company/band. It just means they have the right licensing model, though perhaps no talent.
What I find interesting about Ash's decision is, however, just how closely the band's thinking mirrors much that we see in open source:
Frontman Tim Wheeler said that Ash... would be "dedicating ourselves wholly to the art of the single for the digital age."
By abandoning traditional recording and publishing methods, Wheeler said fans would be able to download new music as soon as it was recorded.
... Read more
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