how-does-github-make-money

How Does GitHub Make Money? The GitHub Business Model In A Nutshell

GitHub provides web-based hosting for software development and version control using Git, which facilitates collaborative source code development among programmers. GitHub was founded by Chris Wanstrath, P. J. Hyett, Tom Preston-Werner, and Scott Chacon in 2008. Microsoft acquired the company for $7.5 billion in 2018, and it was integrated as part of Microsoft’s enterprise offering. On top of its free repository, GitHub also offers plans for teams and enterprise customers. And the GitHub marketplace also monetizes on some of the apps developed on top of it.

Origin Story

GitHub provides web-based hosting for software development and version control using Git, a program that facilitates collaborative source code development among programmers.

GitHub was founded by Chris Wanstrath, P. J. Hyett, Tom Preston-Werner, and Scott Chacon in 2008. In the following year, Github amassed over 100,000 users and hosted over 90,000 unique public source file repositories. It quickly earned a reputation as a popular resource, with tech companies such as Apple, Google, and Amazon known to frequent it.

In 2012, the company raised $350 million in funding and opened its first office outside of the United States in Japan. Six years later, GitHub was acquired by Microsoft for $7.5 billion.

GitHub revenue generation

GitHub work on a freemium model of revenue generation. Indeed, their value proposition is such that “anybody can host their software code on GitHub’s servers, and collaborate on it by multiple developers, teams, and organizations.”

As such, access to public repositories is both free and unlimited. For private repositories with a high feature set and customization level, a subscription fee is charged.

Subscription plans

Github offers four subscription plans for both individuals and teams:

  1. Free – a free-of-charge option for individuals and small businesses who require a minimal number of features and storage space. While the company does not make any money from this option directly, it uses the freemium concept to allow consumers to try before they buy, so to speak.
  2. Team ($4/month)
  3. Enterprise ($21/month)
  4. GitHub Onepricing available on request.

The latter three paid plans exist for those who want to scale projects with added features. Such features include more storage, secured sign-ins, and dedicated support. Many also opt for a paid plan to utilize Actions, or higher workflow automation minutes.

It’s also important to note that GitHub makes money whenever its customers exceed the limitations of their plan. For example, repository storage is charged at an extra $0.25 for every gigabyte over the stated limit.

Marketplace

GitHub Marketplace allows developers to enhance the functionality of the GitHub platform through third-party apps.

Apps are categorized according to code quality, continuous integration, monitoring, and project management. Some apps are free, while the company charges a flat or per-unit-used fee for others.

Given that these apps are provided by a third party, it is safe to assume that Github takes a percentage of whatever fee is charged.

Key takeaways:

  • GitHub provides a platform for software development and version control called Git. It was founded by four tech entrepreneurs in 2008 and quickly grew its user base in the succeeding years.
  • GitHub uses a freemium model supported by three paid subscription plans. Each plan offers a different feature set and level of functionality according to the needs of the user.
  • GitHub Marketplace allows third-party app creators to sell their products on the platform. The exact fee the company collects is likely a pre-determined percentage amount and is charged as a flat or per-unit-used amount.

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Related Business Model Types

Platform Business Model

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A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Marketplace Business Model

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Network Effects

network-effects
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c-business-model
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
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