Openness wins

January 14, 2011 | 3 comments

Android and iPhoneDan Lyons, writing in Newsweek, doesn’t think the introduction of the iPhone on Verizon will stop Android’s momentum:

Apple’s phone would have snuffed out the Android a year ago, but now Google’s device has become an unstoppable juggernaut.

[…] “Android is a global phenomenon,” [Fred Wilson] says. “The big deal is, Android is free software, and handsets that can run it are getting super-cheap. So we are going to see a massive shift from ‘dumb phones’ to ‘smart phones’ around the world this year, and iPhone will not be the big beneficiary of that trend.”

This is exactly the mistake Apple made over twenty years ago, when it let IBM walk all over the personal computer market with its open specification. Sure, the Apple Mac popularized the idea of easy-to-use home computing, but over 90% of the machines actually sitting on peoples’ desks were IBM PC compatible. Worldwide, Mac market share is less than 5%.

I’ve complained about Android in the past, but version 2.2 changed my mind; more recently, Android-only features have been saving my bacon. It’s a great system, and its open structure allows for more innovation both in hardware and software than its competitors. To build an iPhone app, I’d need to pay to join the developer program and buy a Mac. To build an Android app, I can download the SDK and get going – no matter what kind of computer I use. That’s a real difference in attitude, and one that will ultimately see Apple’s phone devices share the fate of their desktop cousins.

Illustration: Android and iPhone by Quinn Dombrowski, released under a Creative Commons license.

Making money with open source

January 12, 2011 | 10 comments

If you’re going to do something, do it well

Open source chairI’ve been thinking a lot lately about open source business models. The project I’m most often associated with, Elgg, developed a business some two years after the project itself was founded. Now that I’m considering a new project, I’m exploring what it might mean to create an open source model that has a business model baked in from day one. Not as a loss leader or the engine for a consultancy company, but as the core of a scalable business that turns a profit proportionally to the popularity of its end-user product.

An image problem

Particularly on the web, open source isn’t cool anymore. For a while, in around 2004-2006, the success of projects like WordPress and Firefox meant that new, web-based open source projects were coming out fast and strong. The former arguably gained its market share after Movable Type, previously the market leader in blogging, imposed an ill-conceived commercial license. Five years later, although new projects like StatusNet and Diaspora are getting headlines, and WordPress is going strong as the basis of at least 12% of all websites, most new open source efforts are on behind-the-scenes technical infrastructure like CouchDB and node.js.

Furthermore, open source in general faces a demographic problem. Only 1.5% of open source contributors are women, for example, compared to the already questionable 28% in mainstream software.

Yet off the web, end-user open source projects are growing, often in conjunction with a strong business model: think Ubuntu, Android, Boxee et al. However, on the web, WordPress’s parent company Automattic is the only company I can think of that’s significantly bringing in revenue (estimated to be $30-40 million annually, and breaking even).

I believe in open source, but I also believe that for open source projects to be sustainable, they need to be able to fund their developers and be emotionally rewarding. I think there’s a place for a friendly open source project that’s both accessible to new users, and to the kinds of people who would not ordinarily contribute, while both turning a profit and having a good time.

Routes to success

There are a bunch of different commercial open source models out there. Here are a few, in increasing order of commercial viability:

  1. Donationware. Some projects solicit donations from their users, charity-style. Although this may result in a few hundred dollars here and there, it’s not going to make a significant contribution to payroll; people mostly won’t pay for something unless they absolutely have to. Asking for donations bases your business on goodwill alone.
  2. Advertising. Think Firefox, which makes around a dollar per user per year from its integration with Google search. Products like Vuze also contain advertising. For stand-alone apps, products like OpenCandy can bring in real cash. Open source web apps, however, are very easy to edit and customize. While that’s a strength and a net positive, it means that adverts – perhaps embedded into an admin system, for example – are very easy to remove. Once again, you’re reliant on goodwill, unless the advertising is present on the open source project’s community site. Elgg has a page where users can find third-party hosting, and makes money from affiliate links. Meanwhile, many have forgotten Matt Mullenweg’s foray into search engine spam before WordPress settled on a business model, which speaks more to the difficulty of making money with open source than Matt’s ethics. (Automattic is a great company, and he’s proven himself to be a great guy.)
  3. Consultancy services. Many projects provide tailored customization features to individual customers. This can be profitable, but isn’t particularly scalable: because each customization or advisory report is bespoke, your potential profit is capped by the number of human-hours your team can put in. Effectively, you become a digital agency, with your open source product acting as a way to draw attention to yourself. Think of your software as a fridge. If GE had to design a new fridge for each customer they had, they’d never make any money, and fridges would cost $100,000. Instead, they design a fridge once and sell hundreds of thousands of them for $500. Fridges scale; bespoke consultancy does not.
  4. Freemium hosting. This is the model used by WordPress, StatusNet and others: allow anyone to create a free, hosted account, and charge for professional extras like analytics features and support. Determined, technically savvy users can still download and install the software themselves (this site runs WordPress on my own server), but using the commercial offering is often a simpler, more sustainable way to go. This is a slow burn, but WordPress has shown that if you create a product with enough critically reliant users, it can work.
  5. Physical, commercial products. Boxee sells an actual set-top box in conjunction with D-Link, which is doing well. Android is a red herring here: while it certainly sells phones, with the exception of Google’s Nexus range, where the company presumably takes a cut, the operating system is provided for free to handset manufacturers. The real money comes through search advertising.

What’s the right path?

I’m not sure there is a correct solution for open source web projects – except to avoid #1 and, preferably, #3. Here’s what I’m thinking at the moment:

Open source projects are continually bombarded with feature requests. Fundry, the crowdfunding site for software projects, is very interesting to me as a platform for these, and as a contributory business model for open source development. The site allows users to add new feature requests and back them with money. The development team can then choose which ones to undertake. The core team would probably have to seed the Fundry page with a number of features to begin with, but with a little momentum I think it holds some promise. It’s also a great way for community members to practically contribute without creating code, documents or designs.

However, that alone is unlikely to allow anyone to eat (particularly looking at the current level of funding pledges – at the time of writing, Fundry itself has only managed to raise $128).

Another model might be to outsource the hosted freemium service, in a way that’s tightly integrated with the open source community site. A potential user might visit the project site and see a great big “create your site” button; on clicking that, they are led to a third party (or given a choice between third parties). An affiliate commission would be provided by the chosen service provider.

Commercial support services are a viable option, and can be deeply embedded both into the project site and the software itself (as a clear “get support” button). Commercially hosted value-added services, like Automattic’s Akismet anti-spam service, are another.

Most likely, a commercially successful open source project will use a combination of these. But what do you think? Is there a glaringly obvious open source business model that most projects have missed? And does profitability have a place in the open source movement to begin with? Let me know in the comments.

2011: happy new year

January 3, 2011 | 5 comments

sydney habour bridge & opera house fireworks new year eve 2008I’m a little late to the party for end-of-year wrapup / start-of-year prediction posts. Instead, I thought I’d write about some of the things I’m looking forward to playing with this year.

Vanquishing piracy through better business

First, though, I do have one prediction: this will be the year that traditional content producers finally get to grips with piracy. They won’t do it using restrictive DRM and other counter-productive tactics that have been shown not to work; instead, they’ll do it by allowing anyone to buy their content in a convenient way.

The BBC is already talking about broadcasting Doctor Who simultaneously in the US and the UK; they are also planning to release their iPlayer on-demand service internationally. Its US counterpart Hulu, meanwhile, is also planning an international release. All of this is a tacit acknowledgement that a great deal of piracy is the direct result of artificially enforced border restrictions, but it’s also a bigger, more general change: the realignment of incumbent media companies around the Internet, instead of treating it as just another conduit. Just in time to save their businesses – maybe.

The year of the tablet?

Last year, the iPad shook everyone up. It’s a great device, which somehow makes computing a more intimate, human experience – I bought one, and it gets far more use than any other computer I own. (This Christmas, it’s got at least a couple of hours every day from Celia playing Angry Birds.) It’s so good that everyone’s prediction posts for 2011 have been colored by it. Wired; Leonard Lin; Technorati; The Times of India; The New York Times; GigaOm; etc etc etc. I’ll be at CES in Las Vegas next week, and I fully expect tablets to dominate the talk of the town. (Most interesting tablet advice I’ve heard lately: buy a Nook Color and root it to turn it into a fully-featured Android tablet. Not bad for $250, if it works.)

After a rocky start with the operating system, I’m looking forward to developing Android apps. Although I’m still not sure what the platform’s developers were thinking in the early years, the 2.2 release was a major one, and the 3.x previews look pretty good. It’s got a very good chance of being as popular as Microsoft Windows for non-PC devices. Either way, the devices are now exciting enough for me to want to kick the tires and play with some new kinds of social interaction.

Here, my obsession with decentralized models continues. I believe that WikiLeaks represents the Internet beginning to fulfill its true potential, but the furor over it illustrates how dangerous building an information outlet or essential service around a single point of failure can be. The web is decentralized; social, content and information applications should follow the platform’s example.

The couch potato is dead; long live the couch potato

But it’s going to go beyond interaction. With the advent of consumer-friendly devices like the iPad, and living room web clients like Google TV, I think we’re going to see more web apps designed for the couch potato set: people who want to sit down and passively consume content after (for example) a hard day’s work. Right now, even products like the Roku require a fair amount of clicking around before you watch something. Nothing quite has the ease-of-use of television – but apps like Flipboard come close.

Just how do you filter the hundreds of millions of content streams the Internet has to offer so that I see just the right thing when I collapse into my armchair at the end of the day? Could channels, one day, be individually curated content streams, with the content itself sold directly from the producer to us? That would make companies like Apple the new Viacoms and Universals, and make our friends into our TV Guides, with the net result that we will have a much larger range of content available to us, and content producers will have a much easier route to market. I will certainly be playing with this in 2011, from a number of angles.

Getting paid

Ultimately, I think this is the year that analogue content producers – filmmakers, writers, musicians, artists, animators and so on – find a model that really pays for their work online. Once that’s happened, the decentralized, monetized web will be our mainstream source for all content. That means fewer gatekeepers, better content, and a much better information environment for consumers and democracy.

Photo by Hai Linh Truong, released under a Creative Commons license.