Here's an interview with Nicolas Pujol who has written an excellent new book called "The Mind Share Market." Nicolas and I were colleagues at MySQL for several years and we often discussed the role of our free open source product as a way to gain market share in the commercial sector. In MySQL's case, our goal was to be the #1 choice for web developers worldwide both in the free and the commercial market. Over the years, the notion of having a free product has transcended Open Source and now has many more applications in other markets. It can be quite a challenge to figure out the right way to commercialize a free product. Nicolas tackles the issue head on in his new book.
Q. What was your role at MySQL?
I joined in 2004 to develop partnerships for the company, which included two main activities. The first was the integration of MySQL (as a product) with third party technologies. The idea is that a piece of enterprise software needs to work with other popular components. This work is usually done by product management teams in each company. You need to be on people’s technical roadmaps and supply them the tools to do the integration. The second goal was Sales channels. We found relevant channels that distributed and resold the company’s commercial offerings. The idea there is to augment the direct sales force while avoiding channel conflicts. After 6 years, we had 1,200 active partners and one third of the company’s bookings coming from channels.
Q. What prompted you to write a book?
It is the concept of standalone value: being able to create value before a commercial transaction happens. It’s a fundamental shift in society and in business. Most entrepreneurs are capitalist at heart and believe in meritocracy. But unfortunately, the system generates inequalities that end up as a burden for governments and non-profits to deal with. The fascinating aspect of open source (and generally speaking, “free vs. paid” business models) is that they are both hyper competitive and generate social value. They make businesses stronger and generate incremental value to customers through productive marketing. Michael Porter has a related (but different) concept of Shared Value. If you look at existing literature, authors who tackled the subject of Free and scarcity are those who researched barter exchange, and recently, Chris Anderson. There are also scholars: Marshall Van Alstyne, Geoffrey Parker, Andrei Hagiu, Jean Charles Rochet in the field of economics. I wanted to tell the stories of these game changing businesses to a general audience and from the viewpoint of a practitioner.
Q. Open source has a notion of "free" (gratis) and also "freedom" (liberty). What elements of open source are applicable to other business models and what elements are not?
“Gratis” easily transfers outside of open source: a company can simply set a zero price. It can be done with a commercial license, a freemium upgrade path, a two-sided platform or more humoristic methods called tying (“it’s free if you pay”). Freedom is more nuanced, because it relies on the contract between parties on what intellectual property can be shared. There are over 60 open source licenses, and other ways to grant rights to users under commercial rights. But if you want the freedom of open source, by necessity you’ll want to pick one of these licenses.
Q. Is free really a viable business model? It sounds so 1999. Today there are companies trying to give away so much stuff for free just to get traction. At what point does it just become a race to the bottom?
If you look at Free from a broad perspective, it’s a model that has been practiced for thousands of years as barter and non-monetary transactions. The expression “the free lunch” dates back from 1891, and was first documented by Rudyard Kipling one day he stopped at a bar in San Francisco. It’s in the late 1800s that newspapers pioneered ad-funded models and blazed the trail for the radio, the television, and 1999. Generally, when customers receive something at no cost, they give their mind share to the provider in exchange for value. Mind share is the currency used (hence the name of the book). This initial transaction plants the seed for commercial ones. Races to the bottom happen when companies no longer have something unique to offer. Software has no marginal cost, so giving it away doesn’t hurt you as long as you have something complementary to sell. When you build with Free from the ground up, there is little risk of margin compression. The main risk is to not get traction. It’s trickier when an established business has to introduce an entry level product as a defensive move. But it can be done. Your question raises a broad topic. To stop at a short answer, consider that the largest company by market value today is Exxon, which ironically, sells a commodity.
Q. What are the top things a company should keep in mind as they try to build a high-volume business?
One is finding out a problem that many people will face in the future, and coming up with a solution that everyone can afford. People say that one should skate where the puck is going to be. There is some truth to that. The other consideration is that before high volume, there is a first step in acquiring low volume. It takes a lot of hard work but it’s critical to get initial traction. In my experience, high volume happens when customers tell their friends a product is great and word of mouth kicks in. Customer experience and service is very important as a result. But for this to happen, the product must fit the needs of the customer’s friends. That’s the crux of the matter.
Q. With so much content available free on the web, shouldn't your book be free?
The idea of “free vs. paid” is to have two versions of your work that are not equivalent. Many authors make their works available to everyone through a personal site, through conversations with journalists, and sometimes through academic and technical research documents. When looking at how others shared their work, it seemed like the way to go. I’m in the process of getting these resources out at the moment. There are currently 2 SSRN scholarly papers and a few interviews with experts like you. The book illustrates the concepts with experiments, philosophies, case studies and a short story.
While I don't agree with all of Nicolas conclusions, it's an interesting take on how free products can help drive mindshare. If this is an area you're exploring in your company, whether via Open Source, Freemium or some other model, I encourage you to take a look at The Mind Share Market.
Zack Urlocker is Chief Operating Officer at Zendesk, a cloud-based help desk provider. He was previously the Executive Vice President of Products at MySQL where he was responsible for Engineering and Marketing and helped grow the company to $100 million in revenue. Urlocker is an investor, advisor and board member to several software companies.