Maximizing Monetization with a Modules Marketplace

For Open Source projects whose software architecture allows it, inviting developers to extend the core product through add-on modules and plug-ins is a great way to raise interest and awareness and thus kickstart or foster an adoption/contribution cycle. In such a setting, Open Source vendors and their business partners should consider building and maintaining an online marketplace or exchange for add-ons, which will serve as a highly effective distribution and sales channel.

Distribution and Sales Channel

Such a modules marketplace allows business partners and community developers to showcase their work, maximize its visibility and earn money by selling custom modules to end-users.

Typically, you’d find all or some of the following offerings in a modules marketplace:

  • Open Source core product (e.g. Community Edition)
  • Commercial core product (e.g. Enterprise Edition)
  • Open Source modules
  • Free proprietary modules
  • Commercial proprietary modules

Benefits

Distributing a product and its extensions through an online marketplace offers significant benefits:

  • Ease of access: By definition, the online marketplace is available 24/7/365, allowing a global audience of users and developers to access it at times that are most convenient to them. This has the potential to increase direct sales volume.
  • Brand building: The marketplace helps strengthen the vendor’s brand, by collecting all (or at least the most important) extensions in a single place, rather than having them scattered over multiple third-party sites.
  • Reduced dependence on third-party distributors: The vendor exerts final control over the marketplace and its actors. This allows it to verify and certify modules and developers, and also reduces its dependence on partners and third-party distribution channels.
  • Better customer information and analytics: By routing all interactions with end-users through the marketplace, the vendor is able to build a better database of its end-users and thereby extract useful analytical information from it (eg. most popular modules, most high-value users, etc.)

An online marketplace is not only good for developers; it’s also good for end-users:

  • Central directory of add-ons: Users now have a central, vendor-endorsed directory of modules and extensions that they can use to enhance the product’s core functionality. Instead of having to search multiple sources, they can look in a single location (which saves them time and effort) and they might also be able to read comments and reviews from other users  (which guides them to an appropriate solution).
  • Access to specialists: The online marketplace is also a good place to connect with developers who have specialist experience in that product – which is handy when there is a need for special customization or system integration.
  • Ease of use: If the marketplace is tightly integrated with the core product, end users can directly try, buy and upgrade extensions through a simple one- or two-click process within the application itself, without needing to fire up a separate Web browser window (Irakli Nadareishvili recently wrote an interesting blog post on the benefits of this approach in a Drupal context).
  • Lower software cost: The online marketplace allows the vendor to deliver its product over the Internet in a secure manner, thus saving on shipping, printing and CD/DVD mastering costs. These benefits are passed on the end-user in the form of a lower price. The marketplace also serves as a central “memory”, allowing users to re-download the product at a later date if required

Case in Point: The Android Market

As an example, consider Google’s Android Market, which is exactly the kind of exchange platform I’m talking about above. Google provides and maintains the Android Market infrastructure, allowing developers to freely list their custom apps for users to download or buy. Any Android-based handset can access the Android Market free of charge (it comes pre-installed on most Android phones). In effect, Google has created a giant exchange platform for developers and users to connect and transact with each other, increasing revenue potential (which makes developers happy) and spurring innovation (which makes users happy).

That isn’t all, though. The Android Market, which offers an app for almost anything you can think of, is a key driver for Google’s “product”: the Android operating system. The more apps there are, the more interesting Android becomes for end-users, and the more end-users there are, the more likely developers are to build apps for Android. It’s a virtuous cycle with tremendous potential to drive adoption, and it has benefits for all actors in the ecosystem.

Additional Source of Revenue

Creating a marketplace for business partners and community developers to distribute and sell their custom modules and extensions is an important step in driving community adoption and to monetize on top of it for every member of an Open Source ecosystem. It offers time and efficiency benefits for end-users and revenue potential for commercial entities.

But perhaps the biggest beneficiary is the vendor at the center, who now has a self-sustaining distribution and sales channel charged by the community around its product, plus some additional revenue such as:

  • Commission: The marketplace also becomes a new indirect revenue stream for vendors once they ask for a commission for each module sold.
  • Certification: Raise visibility of certified extensions in the modules marketplace to provide an incentive to buy training and certification services from the vendor.

About Sandro Groganz

Sandro Groganz is an expert in the field of marketing open-source products. He co-founded Age of Peers, a global communications agency for organizations in Open Source. He served as Head of Marketing at Magnolia, creator of the open web content management system Magnolia CMS, Vice President of Marketing at Mindquarry, an open source startup financed by Hasso Plattner Ventures, and Vice President of Communication at eZ Systems, the creator of the open source content management system eZ Publish.

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