
Open Source Apps (2013) - rimher
https://stratechery.com/2013/open-source-apps/
======
sheetjs
@patio11's recent tweetstorm touched upon the core point

> Most open source software is written by programmers who are full-time
> employed by companies which directly consume the software, at the explicit
> or implicit blessing of their employers. It is not charity work, any more
> than they charitably file taxes.

[https://twitter.com/patio11/status/936629310785437696](https://twitter.com/patio11/status/936629310785437696)

The actual monetization, as the post explains, comes from related products and
services. The presented Oracle analogy to IAP is fascinating:

> Oracle offers a basic version of MySQL under a GPL license, with additional
> closed source – and expensive! – add-ons that better fit specific
> businesses’ needs. The allegory here is in-app purchase: a basic experience
> that gets the user invested in your product, with value-added options that
> are more attractive because of said investment

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makecheck
Apps don’t “want to be free”; customers want to _try before they buy_ and
there are not a lot of sane options presented for doing that in App Stores.

Why the _hell_ isn’t there a simple “download now, pay if you keep more than 4
hours” kind of option, for example? Why no simple “upgrade to version 2.0 for
50% off” option? There are lots of common scenarios that _app stores should
provide_ , saving developers from having to hack special purchases into the
product. Worse, stores basically don’t distinguish between _those_ types of
purchases and the many, many scams so after awhile potential buyers equate
“any in-app purchase = scam” and that option disappears. And on top of it all,
good, reputable apps can eventually be updated with scammy features that you
never used to have.

Terrible app search engines. Terrible browsing with unchanging top-10 lists.
Terrible monetization options. Endless garbage apps competing for space. Yet
30% comes off the top _unless_ apps are free. So they’re free, and you get
mostly ads.

What a complete waste of potential in the app ecosystem right now.

~~~
girvo
> Why the hell isn’t there a simple “download now, pay if you keep more than 4
> hours” kind of option, for example

So, one thing I've seen a _lot_ of new apps do is basically this; but sadly,
includes some annoyances itself.

Instead of "download, pay after x hours", they instead have a subscription
model gating most of the features of the app. They give you 1 (week|month)
free, as that's easy to do with in-app payments automatically. Of course, now
you have to remember to cancel this subscription if it turns out it's not what
you're after, which is annoying, albeit pretty simple on iOS.

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osteele
> What makes the software market so fascinating from an economic perspective
> is that the marginal cost of software is $0.

I see this claim a lot.

The marginal cost of software is actually its support cost﹡.

If some customers bought the product without a support contract, then the
marginal cost of the good that is sold to those customers is the (non-zero)
cost for support staff to categorize them and turn them away.

If _none_ of the license includes support, then the vendor doesn't need
support staff or activities, and the marginal cost is indeed zero.

Only some software products — especially among commercial software products —
don't include _any_ support at _any_ price point.

﹡ Also marginal increases in distribution costs. Also costs that stem from
marginally greater exposure to product liability issues and claims.

~~~
reacweb
Having more users even on the free plan gives many benefits: \- more testers
means that bugs are detected earlier. This improves reliability. \- it gives
more opportunities to try to sell the support and convert them into paying
customers \- it increases the visibility of your product. It is free
advertising.

IMHO, the marginal cost is generally better than zero.

~~~
slgeorge
It's a trade-off.

The benefit is "reach" which is beneficial for (a) marketing (b) OSS community
(c) bugs and contributors.

The cost are the (a) lower conversion to payment (b) costs from a 'shared'
community e.g. community management and user support.

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jeffreyrogers
It's not that apps want to be free, as much as apps that any reasonably
competent programmer can make are driven down in price because many reasonably
competent programmers do make them.

If you look at applications that require a large amount of domain expertise to
build (CAD, audio/video editing, etc.) they're still expensive and have only
recently begun to come down in price, in part because there are some free
versions that, while noticeably inferior, are still useful to a substantial
population of users.

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acover
Can a monthly subscription support a collection of open source apps?

Netflix style. Maybe give donors the option to vote on features. I am
interested in testing if there is a market for this. I've started writing
clone android apps without the ads and freemium.

~~~
ken
It might depend what you mean by "support", but in general, I don't see it.

For a non-open-source example, there's
[https://setapp.com/](https://setapp.com/), but nobody has been able to
explain to me how the economics are supposed to work. They're bundling
thousands of dollars of software for $10/month, and then paying creators based
on usage. Instead of $50 (a common price for these apps), once, developers
will get a fraction of $10, repeatedly.

You'll break even if someone uses your app 1/2 of the time (of the Set) for
about a year. If they use more apps or don't subscribe that long (which are
pretty much the main reasons to use this), you're worse off.

Bundling, open-source, subscriptions -- at the end of the day, users simply
don't want to (directly) pay what it costs to create software.

~~~
acover
I think it is about lowering the price to increase users. The user experience
is also improved as you just install and go.

Thanks for the info.

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nategri
As a counterexample, Dark Sky is one of the few apps I pay for that has an
endless array possible alternatives. The last time I looked all substitutes
were ugly, clunky, bloated by ads, or all of the above. I pay so I don't have
deal with an inferior experience in a frequently used app. So, while the
details of what an app accomplishes may be easy to replicate... maybe there's
always room for a premium experience?

~~~
Pulcinella
Indeed I would say that with an app like Dark Sky the value is almost entirely
in the experience, in a way.

The data is provided by the government for “free” but weather.gov is not as
well designed and presented as Dark Sky and other weather apps.

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jbob2000
This applies to a very, very narrow segment of software. If I have to run a
server, then yes, I do indeed have costs. And those costs go up the more
popular my app gets.

And if the app gains any kind of serious pickup, I am going to need a client
service team to handle all the bull crap people will be flinging my way.
(Seriously, how many open source projects die because the maintainers get sick
of managing the issue board?)

~~~
xxpor
If your costs are servers, your marginal costs are still $0 for the app
itself. IMO, you're better off with a $0 app and a subscription model, than
capturing the revenue once when someone purchases the app.

~~~
jbob2000
You are technically correct - yes, an app is not the server it is deployed on.
But practically speaking, if I saw a spike in my traffic and got hit with a
huge bill, I'm not going to say to myself, "gee, it wasn't the app's fault the
server got really popular...".

I think you missed my point that this article applies to a very, very small
category of software. As soon as you have a subscription model, or any sort of
payment structure, now you need an accountant! Those guys don't work for free.

It's like, calculator apps and notepads that this philosophy applies to.

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ppeetteerr
There are too many counter-examples for this to be true:

\- Microsoft has been charging for years for Office before getting into the
recurring payment model. The reason they got into the recurring payment models
is that most office software requires server support and server support is a
recurring cost

\- There may be future competition but let's not forget that software still
costs money to develop. ie. if an entrepreneur sees a market with 2-3 strong
providers, they will hesitate to enter in direct competition. And why would
they, their profit margins will be minute in comparison to the cost of
building the software.

\- The market may have software that is so good, that to catch up, competing
players would have to spend years building the software (see point 2)

An example of this is Linux. It is free but it's rarely used by non-IT
professionals. One can argue that Windows is effectively free these days, but
it still charges a license and the price of a laptop is still affected by
having Windows installed.

~~~
detuur
You've answered your own implied question. The price of MS Office is still
high because it's in a category of its own, with no competition in sight. But
all it takes is one well-motivated competitor to achieve feature parity and
that would be the end of MS Office's cash cow position.

MS is already offering Win10 basically for free. Not because of competition,
but because it doesn't _cost_ anything to make it free. They can risk changing
their business model without being forced to throw money down a hole.

~~~
slgeorge
It's tough to make that argument.

Features are only a small part of how users consider change - and 'parity'
definitely doesn't cut it.

Office is a good example ...

StarOffice originally and then RedHat, Suse, Mandriva (and the previous
versions), Canonical and a host of other commercial Linux vendors I'm
forgetting, plus Sun, IBM, Linux Foundation, etc have all put resources into
competing.

OpenOffice is feature equal for most users - but, it didn't make much of a
dent.

For me the Windows 10 situation is partially about competition, but it's
mostly about protecting their core market. For the most part they make money
from corporate users, not users buying 300 dollar laptops - those are just
market capture for the serious money. Any time you hear a parent say "Jonnie
is learning MS Office" (not word processing) that's a future corporate buyer.

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kazinator
> _Because all PCs ran Windows on top of Intel chips, there was no
> differentiation, and prices dropped._

Umm, no. PCs ran Windows on top of _expensive_ Intel chips with little
competition.

The lack of differentiation caused the prices _of much of the other stuff that
goes into a PC_ to drop.

And ironically, that other crap, like network cards and whatever, going into
PC's, _is_ differentiated.

That doesn't help because it's not differentiated in a way that the user cares
about.

If processors were differentiated they way network cards, keyboards or mice
are differentiated, it wouldn't make a difference, except making PC's even
cheaper.

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QasimK
The same would apply to any digital content (zero-copy cost) which can be
_substituted_. For example, why watch film A when film B is available more
cheaply. Of course, it's difficult to have substitutions for entertainment
(for various reasons)... right now.

However, I do think the long-term trend here is downwards as well and I'd use
music as an example. With streaming services, the cost of music is much lower
compared to purchasing music. The streaming service acts as an aggregator for
different content and has an incentive to pick the cheaper content (with the
opposing force of consumers wanting particular things). But really, if the
quality is high and the music chosen to be played is automatic (via
recommendations) the underlying artist is less significant (in general - I
know people can be _fans_ ).

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mynick
The marginal cost of software is not always zero. You may have cloud cost,
support erc.

------
confounded
(2013)

~~~
sctb
Thanks! Updated.

