Back to Stanford GSB today to attend a class on MySQL, taught by Robert Burgelman, including the (B) case sequel of the already published case I co-authored in 2004. Marten was a class guest, and, as usual, it was big fun.
One thought that I took away was the fact that $50M MySQL has a larger marketing budget than $15B Oracle. What? How is this possible?
Well, ask an economist. Here are my numbers:
MB (open source company) = N x CS + R
where CS = PV - 0, i.e.
MB = N x PV + R
---
MB - Marketing Budget
N - number of GPL users
CS - Consumer surplus of the GPL version
PV - Perceived Value of the GPL version
R - Residual = real marketing dollars spent
For MySQL:
N = 8 million installations - 3,000 paying customers = 7.97M
PV = I don't know. Let's assume it's on average at least the commercial price of $400 for those that pay
R = about $10M
Hence:
MB(MySQL) = 7.97M x $400 + $10M = $3.2B
In comparison - Oracle (from its 10K; includes sales): MB(Oracle) = $3.2B
MySQL and Oracle both have a marketing budget of $3.2B, MySQL in terms of foregone revenues through its GPL/community version. This explains why MySQL is probably as well known as Oracle today.
A very powerful tool for a start-up: You can compete with a 800 pounds Gorilla in terms of S&M expenditure!
Your currency to spend is the goodwill of free/community users! Invest in it and spend it wisely!
This is the logic behind a company like db4objects investing in features which "just" matter to free/community users. It is a rational business decision. I go to my board and say: We invest this amount of engineering into features where we don't expect direct revenue from. Let's earmark this as "marketing expenses". Cool, isn't it? You invest in your product and it comes back as sales & marketing mileage. Unlike the S&M spending of Oracle (which are of no specific value to their customers: why do they care if Oracle has a huge stand at Comdex?), this is a triple-win scenario for community users, commercial customers and the company!
Christof