Subject: Re: offering pre-purchases
From: "Stephen J. Turnbull" <>
Date: Wed, 10 Oct 2007 17:35:23 +0900

Don Marti writes:

 > And Joel Spolsky is talking about proprietary software
 > -- the transaction costs for open source can be lower.

Nah.  Joel Spolsky is talking about *expensive* software -- the
transactions costs for inexpensive software can be lower.

Marketing costs aren't transactions costs.  Asay's main point is that
marketing costs for free software are lower, because the software
speaks for itself and does so accurately.  You don't have to buy
advertising and commission bad white papers on projected cost savings
or service improvements, that are going to be much less convincing
than a trial install and hands-on play.  He doesn't actually talk at
all about transactions costs (those that are associated with actually
landing a sale) that I saw, except in the trust factor that went with
moving from a partially proprietary licensing model to GPL-all-the-way.

Your point is correct; transactions costs are going to be *higher* for
pre-purchases precisely because you have to trust the developer to
actually put in the effort, and the product is not available for
evaluation, both driving risk way up.

One further issue that occurs to me, one that Joel discusses but Tom
misses, is discounting.  Not only is delivery of "pre-purchased"
software is uncertain, reducing the value, but this is compounded by
the fact that it's in the future, which also reduces the value, while
payments are up front.  No accountant is going to approve that.