Actually, you can even make more money with Open Source than what you could make in an average well-paid Silicon Valley job.
That’s no exaggeration or any hypothetical. Its as real as it gets with numbers, with actual people and small businesses to prove it.
In the past two decades, Open Source has become an immense ecosystem which empowers its participants and liberates them from their constraints in all respects – not only from proprietary, controlled platforms but also especially financially.
Let’s examine how big has Open Source become first, and then look into how people are making money in a sharing economy.
A wide, wide world
Today, Open Source now has many business models to make money and develop in sustainable fashion. You are not obliged to await donations anymore. One of the many Open Source business models will surely fit your application and your future vision about your business.
To top that, the Open Source ecosystem is now huge. It became so huge that its not far off to say that it is practically the entirety of Internet. From server infrastructure to application space, Open Source has become the new norm of I.T.
The choice for OS for servers is today Linux. Not only tech giants like Google run their applications on Linux server farms, but also Linux is de facto OS practically in all datacenters/hosting corporations which provide Internet space to end-users. You will be hard pressed to find a IIS host today.
Linux has even gotten into devices – leave aside handheld devices in which Linux based OSes became ubiquitous – Linux is being used in many more places ranging from Smart TVs to Home Routers as well.
What’s even more stunning, an entire ~80% of Websites/applications on Internet run on Open Source PHP, ~20% of all websites on Internet are on WordPress, and ~20% of Ecommerce websites are built with one single plugin for WordPress, WooCommerce. WordPress uses GPLv3, which is even more hardcore copyleft than GPL.
Real people making real money in a huge ecosystem
Even without talking about the Ecommerce/Business conducted on WordPress platform, solely the WordPress ecosystem of Themes, Plugins, Services sports over $1 billion dollar market by itself.
540M Active Plugins Makes WordPress a Billion Dollar Market
Together with Themes, it becomes a massive ecosystem:
Just How Big is WordPress Exactly?;
And this is actual cold hard cash – not valuations or estimates, with no investors, no financial schemes. And majority of those who are making money are single programmers, working alone solely on WordPress:
2014 in review – Pippins Plugins;
Pippin Williams, a lone programmer who just recently took on a few team members, made over $700,000 in revenue in 2014. Majority of this money is profit, and it is cold hard cash. A year earlier he broke the $300,000 revenue mark alone. And he did that with only 50,000 active installations of his plugin, Easy Digital Downloads.;
Small software corporations which produce WordPress themes are making multi-million dollars every year.
Leading Premium WordPress Theme Providers Compared;
Whereas WPMU Dev, as a major Plugin development company, is on par.
How Real Businesses Are Making Very Real Money Using WordPress? and the Numbers to Prove It
As easily demonstrated above, Open Source is doing whoop-ass amounts of cash for its developers, and users are quite, quite happy. No programmer in no institution can imagine what Pippin did, by single handedly reaching $700,000 in revenues from tens of thousands of direct-user customers and have a thriving software business – not in Google, not anywhere in Silicon Valley, not in Academia. Yeah, if you are very lucky, you may come up with a ground-breaking piece of software and then get some investors to pay you some good hard cash, but as what you can understand from the trend in current venture capital business, it will either take ~10 years to get there, if you ever get there at all. You won’t get there working for Apple, for sure. The catch here is that there are many like Pippin, even though not everyone makes $700,000/year.
But how does this work? Which business model?
Taking WordPress as an example, its mainly SaaS, with variations:
You can give away your software free, and charge for premium version and its updates.
Many small WordPress businesses use this format. It works pretty well. Free version is posted on WordPress org, and this ends up being advertising/distribution for free. You get thousands of users, whereas a decent percentage of them convert into Premium users because they want specialized/professional features that are required for their particular activity. The free users create an ecosystem of support and also market the product through word of mouth.
The updates are subscriptions, they are charged generally yearly – so its recurring revenue – not one time sale. The software constantly funds itself.
You can give your software free, and sell addons
Recently this is the most popular – the software is given away free, and many addons exist for specialized purposes. Users customize their installation as they need, allowing them minimum cost and maximum specialized functionality for their purpose. Incidentally the addon revenues become significant – because dozens of addons surpass the value from which you could sell a premium version. And its less bloated as well. You can serve paid and free addons at the same time.
Like Premium version method, the addons are also on a subscription basis, with users paying yearly for updates and new features. Its recurring revenue. This is the method Pippin’s Plugins used with Easy Digital Downloads.
You can give a free plugin which provides a specific SaaS
Like how Automattic’s own Akismet plugin does – the free plugin enables a SaaS service – spam control, accounting, any kind of API, social login – whatever you can imagine.
Naturally it is charged as a subscription, making the revenue recurring.
You will give support service in addition to above
All of the items above will incur support needs. Developers generally provide both community support through forums, and premium priority support. Support revenue becomes considerable – Pippin William’s plugin Easy Digital Downloads sells support subscriptions for $299/year, for example. This is a business oriented plugin, hence the complicated-ness and the high price. But in general in WordPress ecosystem the average support subscription ranges from anywhere in between 1 to 3 months to 1 year, with support price being $45 on average. You can offer $45/month support subscription as well as $45/year support subscription depending on the complexity of your plugin.
Premium services, development
These are no joke either – even with free plugins, a vast range of custom development requests materialize and these can very well supply a small software house with projects for a long time. Surely, for this option to be viable, your plugin needs to be widely used or be a very niche plugin and needs to have a sufficiently complex application. But it happens.
Automattic, the company behind WordPress, provides managed enterprise level WordPress hosting for major names like CNN, Reuters, Forbes, New York Times.
Moreover, WordPress hosting is a specialized hosting area, with the average monthly hosting fee being around $20 to $45 – much higher than average web hosting industry rates. Many plugin developers offer hosted version of their plugin as well.
Donations and Sponsors
This works if you are big project like Linux. For medium projects it can have some impact, but it is mostly nonexistent when it comes to small scale.
Anything else that you can imagine
There are many more Open Source business models than what we examined here.
The spectrum and amount of activity in a large open source ecosystem are massive. Thus, any way to legally make money from anything you can imagine is legitimate. What is not known not practiced today, is discovered as a method tomorrow – just like how free + paid addon model was virtually unknown until a few pioneers applied it to much success. Tomorrow there will be new models discovered, new methods applied. A lively, thriving ecosystem is something that develops, enlarges and maintains itself. While enlarging, it also creates its own sub-spaces and sub-specializations, like how it happened with WordPress security, hosting, theme development, plugin development, site administration and the like.
Open Source is an ever-developing world which constantly creates new opportunities as people who participate create new things.
As demonstrated, there are multiple ways to make a lot of money with Open Source today, and they work pretty well. As the ecosystem grew in the past decade, the amount of jobs or customers did not decline – they increased. More developers enlarge the ecosystem, which makes it easier for more users to enter the ecosystem and do whatever they want in it. Many Open Source applications spawned an expertise area in themselves, moreover they spawned expertise areas inside themselves – WordPress Theme development, WordPress Plugin development, WordPress hosting, Administration are all their own specialties for example. Its the nature of software – as it grows and becomes more complex, it creates worlds inside itself.
Of course, not every Open Source ecosystem is as large as Linux or WordPress. However, innumerable projects exist, which have sizable ecosystems that create considerable revenue for their developers – ranging from shopping cart applications to CMSes. These developers make as much money as they could make working for any corporate behemoth as a wage slave. And their jobs are not on the line at any given moment like a corporate developer who could be laid off at the whim of any exec or any economic downturn. Throughout economic crisis, the Open Source ecosystems stayed mostly untouched – millions of websites offering immense array of services still needed their software and needed them working in good condition.
So, you can make money with Open Source. And good money, at that.
Sadly, I’m quite uncomfortable with these ideas. WordPress is, yes, technically Free / Open Source. But people make their money partly because it is so complex and therefore exclusively the domain of experts. There is a clear class hierarchy. At the bottom, the readers. Above them, the content writers. If you’ve got a WYSIWIG editor it’s very easy. At worst you have to learn a little HTML — not hard.
Above them there are those who manage WordPress sites. That needs a certain dedication, but not really hard.
What you really can’t do on your own, without a great deal of time and effort is anything really different or creative. Because it is hard, you have to pay those who have put in the time and effort — either for plugins, or for whole themes.
For me, a really good web site system would be open-ended, with a smooth learning curve, so that ability can grow stage by stage, with no very large jumps. Most people will know someone at the next level up. That way we can start to think about it as a commons. I don’t see WordPress as a commons at all, because there are no direct governance mechanisms linking plain users with experts.
Take Linux. There is a great deal to learn, for sure. But it is my experience that it can be learned gradually, step by step. The more people use Linux seriously, the more comprehensive the learning community becomes. Contrast that with Windows, where the MS Certified people are a priesthood, simply because the path there is that much harder. I think GNU/Linux has all the necessary qualities to support a commons. Windows doesn’t. In that way, I’m afraid to say I believe that WordPress is more on the side of Windows than Linux, belying its legal status as Open Source. And that’s why, it seems to me, there is so much money to be made on it.
I’m not to happy about the tonality of the article either and would not have selected myself
“Sadly, I’m quite uncomfortable with these ideas. WordPress is, yes, technically Free / Open Source. But people make their money partly because it is so complex and therefore exclusively the domain of experts”
Talking as a developer, Simon, i can easily say that WordPress is a platform which makes everything much more easy for users. This is one of the reason why it is so wily popular. You will be hard pressed to find a piece of web software (leave aside platform) which enables non-technical users with more of what used to be the domain of technical professionals than WordPress does.
But, as you observe, indeed, a lot of aspects are still the domain of experts.
However, this is not by design, or out of intent. Its due to the nature of the software:
It is easy to automate and standardize common procedures/activities. Like, creating a post in a blog. Or, putting comments under a blog. When an action is pretty common and standard, you can create a routine on a framework to support that well-defined action, and it suddenly becomes accessible to many.
But when someone comes up and says “Blog posts are all great, but I want my posts to take the form of a dialogue” then everything becomes instantly complicated.
What kind of dialogue. What is the nature of the dialogue-action. Who will be allowed to participate in this ‘dialogue’. To what extent. What is the form in which this dialogue will be presented…
Suddenly the simple action went out of being a simple, well defined action like a “blog post” and became a software design question.
There are plugins which allow users to create/modify entries/posts (ie data types in WordPress logic), like Ninja Forms, but the complexity remains despite you empower the user to create his/her own vision: s/he must define the data type ‘dialogue’, implement its details, and tell the plugin how will this data type be treated.
You see, things get more complicated as you introduce customizability. That’s the gist of it.
So, a user can spend hours in front of a plugin which enables him/her to create such different data types to implement the vision, or, s/he can use another plugin which already does what is wanted.
This is how professional developers make money in WordPress ecosystem, which benefits users and developers alike. In fact, most Developers are users themselves – people use each others’ plugins.
There isnt such a hardly-defined ‘users and experts’ differentiation in WordPress ecosystem. WordPress ecosystem participants range from anywhere in between users totally new even to the concept of of a ‘posting a blog post’ to people who create massive plugins. Its not so unlike hobby electronics scene in 1970s…
“I don’t see WordPress as a commons at all, because there are no direct governance mechanisms linking plain users with experts.”
That would be fundamentally incorrect – from WordPress repository which directly puts the developer face to face with his/her users in the support forum of plugin entries to small software houses which produce plugins/themes having their own forums in which users not only receive technical support and fraternize.
As for governance – entire ecosystem is an Open Source project. Plugin/Theme developers receive input from users (and each other) and they implement changes. Users can modify the plugins themselves by using hooks/filters in well developed plugins. And as any open source project, anyone can fork anything if they are dissatisfied with the rate things are going in a project.
Actually, I would be more cautious about centralized or controllable governance mechanisms.
“Take Linux. There is a great deal to learn, for sure. But it is my experience that it can be learned gradually, step by step.”
To be honest, Simon, even after having to use Linux around ~15 years due to my profession, i don’t see Linux anywhere user friendly as WordPress ecosystem. It improved greatly in the past decade, and installing and setting up various distributions for certain purposes became much easier, but it still remains a mystical, mythical and distant land to the ordinary user. There is much improvement which can be made in the user-friendliness area for Linux.
There is a reason why linux screens are being shown in Hollywood movies to demonstrate ‘complex, hard computer stuff which is done by a super expert’…
Sorry that i am not able to directly reply to your comment since i wasnt able to find the reply link in comments listing and Im not able to manually override it. Same happened with my reply to Simon.
The tone of the article is intentional. It is intended to take on the hardest criticisms and stigmas about Open Source software and clear doubts in the minds of developers/programmers about making a living/self-financing.
When a software developer addresses his/her concerns about going open source in his or her mind, the tone of the internal discussion that takes place is not one of a scholarly discourse. Its down to earth, ‘real’ talk which involves serious survival concerns and tough criticism. Actually, when a software developer discusses such things with his or her colleagues, the discussion eventually takes the same tonality if it gets serious enough. God forbid in a small software company which may be thinking of going open source.
The article is intended as a participant for such discussions, with the same tone, to address real world, down to earth concerns.
This is the reason it is not offstandish, formal or scholarly. Its intended to be from heart to heart, from mind to mind.
Though, I have to admit, Michael indeed had a point in that the entrance of the article was too strong, since the article first came to being as a piece written in an online forum – Quora. With the modifications i made to the opening paragraphs, it should be more amiable without losing anything from its actual intended down-to-earth tone.
I agree with Ozgur. Persuading people (and especially entrepreneurs) that you can make money with OS is the only way to spread it.
I’ve always though that the best way to do that is what I call “the Pizza metaphor” (you know, I’m italian). Everybody can obtain pizza’s recipe, there is no copyright or patent over it (so we should say that it is an Open Source product), but this did not result in the failure of the restaurants, or the companies that make frozen pizzas. Moreover, people can even buy ingredients and do-it-themselves.
In an Open-Source common-based economy, profit should be made over services, not knowledge: the more you are lazy, the more you pay. If you don’t want to cook and wash dishes, you go to the restaurant and pay someone else to do that for you.
Another good example is Open Hardware, and specifically 3D printing. You can buy a ready-to-use professional 3D printer, or you can just order a RepRap Kit. Some spanish companies just sell the kit to-be-assembled, and they make money.
Ehhh, I think the article is a little confused. If WordPress for example is “open source” at its core, but then sells plugins, are the plugins themselves open source? They’re probably not, so the business model isn’t ultimately open source. Some of the other models mentioned are open source though.
WordPress plugins are also Open Source indeed. GPLv2 to be exact.