Free Doesn’t Help if the Market Isn’t Ready

Recently I was talking to an entrepreneur who’s working on a new open source product for a small but fast growing market. After talking about it with him for 10 minutes, and learning more about the opportunity, I told him that I thought he was much too early. Free doesn’t help if the market isn’t ready.

For our company Pardot, we could give away our software for free and we wouldn’t materially increase the number of active, successful clients. The challenge with our market, and the market this entrepreneur is going after, is that there’s a) a significant lack of market awareness and b) a significant lack of product understanding. The two are related in that the more people use a new technology the more awareness there is of it and a positive adoption cycle continues until it’s mainstream.

Because so few people have used our type of technology, we spend thousands of dollars per customer making sure they’re successful and manually helping them out. 5-7 years from now enough people will have used our type of technology such that a lower cost entrant in our market will be successful by offering a simpler interface with only the most important features and they’ll be able to sign up companies that already have experience, and thus don’t need a comprehensive on-boarding experience.

Free or open source works for an educated market. When the market isn’t ready, these types of distribution models don’t work as well as traditional models.

What else? What are your thoughts on free or open source products in a market that isn’t ready?

One thought on “Free Doesn’t Help if the Market Isn’t Ready

  1. I agree with the title- price doesn’t matter if there isn’t a market. There are lots of examples of this. YouTube (free) would’ve gotten little traction before broadband was everywhere. A cloud consulting company (now red hot given your recent posts) would’ve been a niche play back when VMware workstation first came out and zero enterprises were doing virtualization.

    But I don’t think this applies as directly to open source. Most open source guys are scratching their own itch. Addressing a real pain (itch) can be a great way to create communities and platforms before a market exists. A community developed around open source linux well before before RedHat the company came in to offer commercial support for it, and later Enterprise Linux. Snort (intrusion detection system) was a great open source tool and community driven project before SourceFire came to be. Developers hacking on non-relational databases like MongoDB paved the way for companies like 10gen long before anyone knew what NoSQL would get us.

    That said, open source has its own risks. It’s a much longer term play, it should be a labor of love (since you aren’t making money for a long time, if ever) and fostering the community around it is a big part of life. Otherwise it will be another GitHub repo that, like my personal blog, only my mother visits.

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