From open source to freemium, open business models need not be philantropic; Here’s how you can make good money from an “open” and “free”

The traditional way to do business is simple — design a product, copyright or patent your inventions, and sell them without having to worry about being undercut by copycat businesses. But the past couple of decades have seen a surge in the number of organisations with the “open business model”. Take Wikipedia for example — any user can contribute content to this website, and more importantly, can use content from this website for their own commercial projects. Wikipedia is a non-profit however, and the larger question is if a similar open business model can work for other profit-driven entities.

There are several reasons why businesses go “open”. Here are a few ways a business could profit from driving a venture with an open business model.

Branding

Branding is a popular reason to offer copyrighted products under an open label. This is routinely done by artists and businesses in the creative industry. The idea is to popularize one’s work through free distribution and profit from branding and derivative work in future. American songwriter Jonathan Coulton, who is famous for songs such as “Code Monkey”, “Still Alive” and “Want You Gone”, is a wonderful example of using Creative Commons to build his brand. The success of his songs has helped the singer sign music deals with NPR, CBS and several other enterprises.

Digital to offline

Launched six years ago, “Cards Against Humanity” is a raging success. According to some estimates, this popular card game has amassed several millions in revenue despite the fact that you could download this game from the website and get the cards printed yourself — without having to pay the inventors any money.

Opendesk is a London based company that provides copyright-free designs of work desks that one may use to build their own desks. Businesses like these bet on the convenience they offer by providing physical versions of their products for a cost. The open business model helps spread the word about the business and the organisation profits from a large chunk of customers who pay these organizations for the convenience of actually producing and shipping it to them.

Also read: Why Southeast Asia should embrace the open source movement

Traffic magnet

Consumers love creative work that is free of copyrights, and this is a wonderful way to lure traffic to your other money making ventures. For example, Shopify, recently launched Burst, a platform for entrepreneurs to download high resolution CC0 images for their website or marketing campaigns. The idea here is to bring aspiring entrepreneurs to their platform who may then proceed to use their e-commerce platform to sell their products.

Add-on

This is perhaps the most profitable open business model strategy in the online space. WordPress is a very good example of a company that makes use of this strategy. The idea is to make your basic product open source and free to download and customise. This makes customer acquisition extremely easy and businesses can scale their reach to several millions of users with very little marketing.

The profitability comes through the sale of add-on products and services. WordPress makes money selling ads on its free sites (on wordpress.com) as well as offering premium services, including hosting, to a section of the audience. Given the popularity of the open source platform, even this small percentage of users who pay WordPress for its add-on services has been high enough to shoot the value of Automattic, the company behind WordPress, to over a billion dollars.

Open business models do not have to be necessarily philanthropic. Crowdsourcing product designs and using the popularity of copyright-free content for virality are perfectly legitimate ways to grow your business. Do you have a business that is open or an interest in the business model? Share your views about this model in the comments below.

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