The marketing ploy of Open Source

This just in from Matthew Aslett. A true must read if your business has anything to do with Open Source, as it clearly show how Open Source strategies can be a powerful marketing tool. Case in point: a unnamed company switching to an Open Source distribution model, with mind-boggling numbers about their first year of operations (emphasis mine):

In its first year using an open source distribution model the company saw:

  • A 12X increase in ‘awareness’ (web hits, community engagement, media mentions, conference visits etc).
  • A 13X increase in web site visits.
  • A 17X increase in software trials.
  • A 40X increase in qualified leads.
  • An 8X increase in engagements.

[...]

  • The company’s executives estimate that it would have cost in the region of $2m in marketing to get those leads if the company was not open source.

What's not to love? With Open Source being the ultimate marketing WonderBra, it's no surprise that everyone and his dog are dropping stuff on Sourceforge and friends. Numbers are strange beasts, though, and Matthew doesn't fail to recognize how a 40X increase in qualified leads brings to an 8X increase in engagements. Just read the numbers backwards to find the culprit: even assuming that the mean deal size was constant over the year (which in itself can be quite a leap of faith considering how Open Source is typically cheaper), the outcome is lead conversion being 80% worse with Open Source. While the term "qualified lead" would deserve a fair bit of discussion, performance of Open Source seems poor when it comes to what is actually paying the golf membership for the VP of Marketing. 

It looks like an happy problem, actually: any VP of Sales will at least consider trading her daughter for an eight-fold increase in engagements, yet there are at least a couple of issues to consider:

  • sales aren't free. There is a considerable cost associated with closing a deal: phone calls, paperwork, travel, proofs of concept, prototypes and the like. Sales staff isn't cheap, and conversion rate getting 80% worse is a sure way to make costs skyrocket and margins nosedive at the same time.
  • am I the only one seeing a problem with value here? I'm missing a few key figures here, but it seems that open sourcing is a great recipe to have 40X more people interested enough in buying something from you to get in touch and ask questions (that is my reading of "qualified lead", for the record). It seems, though, that a lot of these guys don't quite find what they're looking for, as the conversion rate isn't stellar. In a nutshell, even when you manage to get in touch with a customer in a direct way, there doesn't seem to be enough perceived value to move the conversation to the purchase department. Why is it so?

Having said that, I have a few takeaways from these numbers:

  • tactically speaking, there is a clear need for streamlining the sales cycle. It's not a surprise that Matthew is using those numbers to prove that LoopFuse, a tool to monitor and increase lead conversion, can be a tremendous help in separating the wheat from the chaff and bring those sales costs down.
  • a tool, no matter how nice, is still a tool and there is only this much it can do. Better sales conversion needs a comprehensive approach, working through general and market-specific issues. Such as being close enough to the customer in a global market, which is a big challenge for the average Valley-based Open Source shop: in the enterprise world, telemarketing and phone calls just don't cut it, yet a global sales force is difficult to attain. If you were wondering why Sourcesense has being forging so many partnerships, here is your answer: we hit the road day in day out, making customers and vendors meet. Open Source  is great at marketing, but still needs the channel to shine.
  • we can't sweep the real issue under the rug for much longer: Commercial Open Source needs a solid value proposition. It doesn't take much to convince a user that freebies are a good thing: the difficult bit comes when trying to make customers pay for the very same free lunch. Or (even worse), pay for the whole meal just because they might be like some ketchup on top.

Last but not least, these numbers are great news for those who consider Open Source as a part of a bigger marketing strategy: if all you need is (co)marketing, Open Source can be the ultimate silver bullet. It doesn't really come as a surprise to me, but it's good to see some figures in print.

3 Responses to “The marketing ploy of Open Source”


  1. 1 Matthew Aslett

    Hi Gianugo,

    One important point that I didn’t make in the original post (and should have done) is that the figures for awareness, web site visits, software trials and qualified leads show year-on-year growth, while the figure for engagements is cumulative, so it’s not really accurate to calculate engagements as a proportion of leads.

    Additionally, for small companies focused on just a couple of customers and a handful of leads the conversion rate is likely going to be disproportionately high.

    That said, I agree that there is clearly more thought that needs to be put into the value proposition. I have noticed that this January, compared to last January, there were far fewer open source start-ups boasting about their download numbers. Maybe they realized downloads are not enough.

  2. 2 Gianugo

    Matthew,

    thanks for the clarification. It makes more sense now, but still I’m not sure if there is any metric we can rely upon, as semantics (eg. “qualified leads”, whatever that means) are getting in the way. At the end of the day I guess it’s just old school: bookings, bookings, bookings.

  3. 3 Redhuan D. Oon

    That $2m figure was mentioined by our parent project that we forked from sometime ago. Nah, maybe its a coincidence that all such companies based on the same 2m figure as what they hope to save on when they go Open Source.

    red1
    ADempiere Project
    Community Open Source forked from Compiere (commercial open source)

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