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I've met several Drupal companies lately and am finding it hard to believe that so many companies don't contribute back. When asked, most of them express how much they'd like to contribute back to the community, but simply don't know how to make it work financially. They feel that they don't yet have the time or resources. In other words, while they have an objective, they've consistently failed to translate it into an executable strategy. An objective without strategy, or a strategy without execution remains a dream.
At the end of the day, using cost as a reason to not to engage in community activities isn't sufficient justification, because there are also costs in not engaging in the community. Think about all the things you could do for the community: contribute to module development, improve documentation, help organize a local meet-up, or take part in a code sprint. Then, think about all the things the community can do for you: provide feedback (i.e. your employees get free training), confer visibility and credibility (i.e. your company gets extra sales), impart a sense of "something larger" (i.e. your business is informed by a strategic vision). It's fun and rewarding to work closely with the smartest people in the Drupal community (i.e. it helps employee retention). Simply put, the more you give back, the more you get back.
For many of these companies, Open Source and online communities are still new -- perhaps that's why some of them are still stuck in the "standard mode of operation". It may only take a little creative thinking to begin giving back to the Drupal project in a cost-effective way.
One strategy that I've seen some companies use, is to offer all your customers the option to pay an extra 15% that is then invested back into the Drupal community. Make it a line item on your invoice, and use your customer proposal to explain (i) the value your customers receive from other contributors, and (ii) the positive impact community investment has on reducing risk, increasing maintainability, and providing long term support. In other words, make the business case for the community ROI.
That's just one example, but I'm sure there are many more. Do you have your own example? Please share it in the comments.
I've recently been thinking a lot about the freemium business model. For those unfamiliar with the freemium business model, it was first articulated by venture capitalist Fred Wilson in 2006:
"Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base."
I've been thinking about the freemium business model because, inspired by Drupal and Open Source, both my companies, Acquia and Mollom, use a freemium business model. (Technically, Acquia uses an Open Source business model which is different from the freemium business model, but there is plenty of overlap and similarities -- pointing out the differences could be a blog post and discussion on its own.)
At Acquia, we currently provide community subscriptions for free -- people that want help with Drupal installation and configuration can get free support from Acquia's Drupal experts. While our free support is limited to certain channels (i.e., forum only), certain support questions (i.e., no module development help and no security best practices) and comes without response time guarantees, we have people on staff whose full-time job is to help you (example customer story). Further, we invest heavily in Drupal and give those contributions away for free.
Similarly, at Mollom, our basic spam filtering service is available for free to sites with limited post volumes. Our free website protection service provides all the features of our commercial Mollom Plus product, but is limited in the number of posts it will protect each day and in its access to our high-availability back-end infrastructure. The great majority of our Mollom clients are using our free filtering service with great success.
There are a number of things that attract me to the freemium business model. The first, and certainly foremost, is the opportunity to do “good” and “well” at the same time. It’s a great thing to help people build quality websites with Drupal, and it’s a great thing to provide Mollom to help deal with spam. Second, I believe a company is better off with a large install base than a small install base, even if the majority of clients ride free. A large install base translates to direct and indirect network effects, including efficient marketing, greater brand awareness, the collective intelligence of your users, and faster product adoption. And, last, I strongly believe that a successful company built on the freemium business model is simply a stronger and more defensible business in the long run.
The freemium business model is relatively new because it didn't become a serious option until the internet gave us a low-cost distribution channel. Ultimately, I can't help but think the freemium business model is the business model of the future for the sole reason that it puts the customer first. With the freemium business model customers only have to pay when they get significant value from the software (i.e. they have reached the limits of the free version). Compare this to the current model where people have to pay to get access to the bits, or where people have to pay before they got enough value from the software (e.g. most shareware software).
That all sounds great but you have to make the freemium business model work first. Getting free users to convert to paying customers is hard. Conversion rates of less than 1% are not uncommon. Free is often “good enough” and only a few people choose to pay for additional features and services. You have to put enough value in the free version to drive adoption (so that you get the scale and the network effects that derive from it), while providing enough incentive for people to pay for premium features or services. The marketing and sales funnel is really wide at the top, and very narrow at the bottom. Plus, you have to make sure that the paying users subsidize all the free users.
Achieving the right balance between free and paid customers is difficult and requires close attention to a number of variables. As a result, I've been trying to answer questions like: how much should we invest to acquire additional free users? How do you estimate the value of a free user? What is the cost of a free user? How long does it take for a free user to convert to a paying customer, and how many will do so? What are the triggers that convince free users to convert?
For example, in Mollom's case, one could argue that we get thousands of dollars worth of value from free users already. We currently have more than 3,000 active users that use Mollom for free. Say each user spends on average 15 minutes a week moderating his site's content and reporting classification errors to Mollom. Mollom learns from this feedback and automatically adjusts its spam filters so that all other Mollom users benefit from it. At a rate of $10 USD/hour, we get $390,000 USD worth of value from free users a year -- 3,000 users x 15 minutes/week x 52 weeks/year x 10 USD/hour = $390,000 USD/year. If these numbers hold up, the value of a free Mollom user could be estimated at $130 USD/year. And that doesn't include the marketing value they add. That said, the value of a free user probably declines as you get more of them and the business becomes stronger.
Both Acquia and Mollom have just opened for business so we have a ton to learn. It will be interesting to look at the different variables and questions a year from now, and to see what we have learned. I hope we can make it work so we can do good and well at the same time ...
After several months of private beta testing, Benjamin Schrauwen and I are happy to unveil Mollom, your partner in automated content monitoring. Mollom's purpose is to dramatically reduce the effort of keeping your websites clean and the quality of their user-generated content high. Currently, Mollom is a spam-killing, one-two punch combination of a state-of-the-art spam filter and CAPTCHA server. We are experimenting with automated content quality assessments, but these are still in an early testing phase.
We currently provide modules for Drupal 5 and Drupal 6. For all you developers out there who'd like to build Mollom plug-ins, we will be releasing full API documentation very soon. We would be thrilled to put your home-brew plug-in for your favorite platform on our download page.
Mollom vs Akismet vs Defensio?
Mollom does offer some of the same features as Akismet or Defensio, but our goal goes further than spam-blocking alone. We want to increase the overall quality of your site's content. For example, Mollom's CAPTCHA service already helps block fake user accounts, and we are experimenting with various automated content-quality assessments, including blocking obscene, violent and profane content.
We have some great new features in the pipeline, so please check back with us regularly for more news or subscribe to Mollom's RSS feed.
Mollom and Acquia?
Mollom is a self-funded, garage-style project. I do take it very seriously, but it is nowhere near the size or scope of Acquia, which obviously remains my full-time commitment.
Mollom is a separate effort for three reasons: (i) I started it a while ago, (ii) I'm working on it with a friend who is not involved with Drupal or Acquia and (iii) unlike Acquia, Mollom is reaching out to as many content management systems and web applications as we can engage (and not just Drupal).
While Mollom is not associated corporately with Acquia, Acquia does intend to offer Mollom services as part of its subscription offerings. See Acquia's Caliper project.
Thank you to our testers
We would like to thank all of our private beta testers for their help and suggestions over the past months -- you've gotten us to this important milestone, guys. Thank you!
Jeff Whatcott, Acquia's VP of marketing, wrote an interesting blog post about the term content management system, Microsoft SharePoint 2007, and Drupal's opportunity to be the poster child for the social software market space.
The funny thing is that I replied to Jeff's post back in 2006. In 2006, I agreed with Jeff -- and I still agree with Jeff today -- that (i) the term 'content management system' under sells what Drupal is capable of, (ii) that content management systems are consolidating to community and collaboration platforms, and (iii) that SharePoint is mind-boggling in more than one way.
From a content management system's point of view, we can summarize the current state of affairs as:
Web 1.0 = content management
Web 2.0 = Web 1.0 + user management + infinite extensibility
Jeff said it best when he wrote: the genius of what the [Drupal] community has done is to reduce all of the aspects of social software to their core DNA: content nodes and membership, and then build a platform that could be infinitely extended to allow the assembly of almost any styles of online social interaction.
But while Jeff rightfully sees a business opportunity for the Drupal community in the social publishing market, I tend to worry more about the fact that Drupal's key differentiator (i.e. bundling a wide variety of functionality into a single platform) becomes a commodity.
I want the Drupal community to stay ahead of the competition. I want to start implementing today what proprietary CMS vendors will implement in 2013. From a content management system's point of view, I believe, that means (and I really hate to use the term 'Web 3.0'):
Web 3.0 = Web 2.0 + infinite interoperability
which roughly translates to:
Web 3.0 = Web 2.0 + data portability + web service APIs
While the short-term business opportunity might be to go after the social publishing market, I strongly believe that the long-term business opportunity lies in the infinite interoperability and that spans well beyond the social software market.
Thanks to Open Source software and companies like Google, the cost of building Web 2.0 applications will approach zero. Contrary to what one might think, this actually creates a lot of business opportunities. Opportunities that are best monetized through web services. But for that to happen, ubiquitous and seamless interoperability is key.
With the help from pingVision, Popular Science relaunched using Drupal. This move is notable, not only because Popular Science is a popular website, but also because they moved from Vignette v7 (a proprietary content management system) to Drupal (an open source content management system).
According to a recent press release, Vignette's revenue for 2007 was down 3% compared to 2006, and their licensing revenue was down more than 15%. One data point doesn't constitute a trend, but to me, it is further proof that Open Source content management systems are gaining market share. Just last year, Drupal grew by more than 200%.
Today we announced that Acquia has raised $7 million from a group of venture capital (VC) firms. That's a wonderful vote of confidence in Drupal, and a testament to the incredible opportunity that lies before all of us. And it means that Acquia is going to be able to help the Drupal community make Drupal even better.
So you're probably thinking: "Wow, that's a lot of money! What are you going to do with it all?". Well, we're going to do what we said we would do earlier this month: build a company that develops a number of Drupal distributions and that offers electronic services that make Drupal easier to use and manage. The funding allows us to quickly bring together a world-class team, rent office space, buy equipment, etc. Starting a great company is not cheap, especially if you have big dreams and plans. In fact, Jay summed up our goals nicely.
Working with Jay to get this capital secured was an incredible experience: strolling around the areas where VCs all put their offices in Boston and on Sand Hill Road in California, doing the work to show market opportunity, create business plans, working up the courage to pitch investors in partner meetings, and working with the lawyers on the mountains of paperwork. I certainly learned a lot about what investors look for, how they make decisions, etc.
One of the things I'm really proud of is the quality of the investors that Jay and I managed to attract. Just like investors are extremely selective with regard to the companies they invest in, we have been picky about the VC firms that we wanted to work with. There have been few businesses that have tried to do what we're about to do, and so I'm really happy that we found investors that really "get" open source.
Now the money is in the bank, our first challenge is to build out the rest of the Acquia team. Many of our people will be working on things other than Drupal. They'll be building and testing services we plan to provide over the Internet, providing support to our customers, and evangelizing and building awareness for Acquia products and Drupal in general.
However, a good number of Acquia people will be working 100% on Drupal, alongside the rest of the community. This is an important investment, because Acquia succeeds only if Drupal succeeds, and we're going to do our part. We'll contribute code, QA testing and other important things like user experience design, marketing, documentation, etc. We'll talk more about our plans in the near future.
All in all, I think it's a great time to be a Drupal user.