open-source-business-model

Open-Source Vs. Freemium: Open-Source Business Model In A Nutshell

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.

Open-source origin story

The “open source” started by the end of the1990s as a software licensing model, where the code is made available to anyone to change, or perhaps distribute under the open source license. While open source itself is not a business model, but a software licensing model, it has given rise to the whole industry of companies in which business models have been built on top of it, which we will call open-source business models.

But if the open source is free and open, how does it get monetized?

Mozilla Open-Source Model

The way companies build a business model around an open-source can vary widely. Usually, the open-source software is held by a foundation, which is a non-profit company. In Mozilla’s case, the foundation is the one owning the open-licensed browser. The Mozilla Corporation instead collects the royalties coming from the deals built on top of the open-licensed software.

For instance, in 2018, the Mozilla Corporation generated $435.702 million from royalties mostly coming from a deal with Google, featured as a default search engine on Mozilla.

how-does-mozilla-make-money
The 94% of Mozilla Corporation’s revenue comes from royalties earned through Firefox web browser search partnerships and distribution deals. According to StatCounter back in 2008 Mozilla Firefox controlled over 26% of the browser market. Today, due to the market dominance of Google Chrome and Safari, Mozilla has a 5% market share. 

Read: Mozilla Business Model

Slack Freemium Model

slack-business-model

Slack follows a freemium model, where a free version is developed in-house. Thus the software is closed and proprietary. The company, which is a for profit holds the right to distribute the software and therefore doesn’t have any constraints in its pricing and distribution strategy.

Free users are converted in paying customers if they want more usage or advanced functionalities. Slack combines the free model with a direct sales force to acquire enterprise customers with yearly recurring revenue of over 100K. Those customers were 575 in 2019, and they accounted for 40% of its revenues. 

Read: Slack Business Model

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here