Subject: Re: offering pre-purchases
From: Don Marti <>
Date: Wed, 10 Oct 2007 11:35:11 -0700

begin Stephen J. Turnbull quotation of Wed, Oct 10, 2007 at 05:35:23PM +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.

There is some stuff in the Matt interview on the
actual sales cycle: first, it's shorter: three
months instead of 9-18 months, and second, the sales
reps don't have to "knock on doors" or deal with
unqualified leads.  The sales force can be carnivores
instead of herbivores -- closing deals with customers
who know what they want, quickly, instead of chewing
through lots of low-quality leads.

(On a long-term level, much of marketing costs are
transaction costs, because they're the costs of
gathering information on what the customer wants and
what you can sell.  Making the customer's IT staff
do that for you on a wiki can be cheaper than hiring
your own $70 haircut marketing people to do it.)

> 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.

You could just do a prediction market on will the
project accomplish some goal -- but we had that
thread already.

Don Marti