Jan 27, 2009

OSWs + Profit == Ethical?

The other day I posted about OSWs (open source websites, I shortened it because I might be talking about this a lot) and what their feasibility would be.

I've been thinking about this further and have come up with more ideas. One major difference between a web app and a regular app is that web apps require hosting. You can't just slap it up on SourceForge and say you're set.
The problem is that hosting costs money. Under the assumption that your site actually starts getting traffic, I don't feel that it is really fair for you to have to foot the bill while lots of other people are using your site. Not only is it unfair, but quite unsustainable unless you have another job which rakes in the dough.

This got me thinking about revenue models. If you look at other free sites, the make money off things like advertising, market research, donations, merchandise, etc. For the first two you need a lot of traffic to begin with, so if you don't have something great to offer users then it isn't really a great platform. If you're targetting a niche market with your OSW, then you're out of luck here. Merchandise works if your site has a branding, like webcomics or unique online games like Kingdom of Loathing (KoL). But if you don't have this, you're left to rely on donations. While I'd like to think if I started a site I'd get enough donations to cover the costs, but I don't think that's a realistic assumption (KoL does support itself through donations, however it gives rewards to those who donate).

The idea I'm having for a site (I won't tell you about it yet...ooh suspense! and no, it is not porn) allows users to create their own content. Ultimately I'd like to provide the tools for creative and high quality content.
Although the site itself is free (as in freedom), the content itself may not be - that's up to the content creator to decide. Should they choose to, the content creators may restrict access to their content except to those other users who want to pay for it. A source of revenue for the site would be to take a percentage of the money that content producers receive when they charge for their content.

Here is where the question of ethics comes in. Since the site is open source, it may be the case that other users would want to contribute in some way to the site, be it through code or documentation or whatever. Is it wrong to make profits off of this? Suppose somebody comes up with an idea for a sweet feature and codes it in and gives it to me, and it shoots profits through the roof. Is this unfair to the person with the sweet idea?
My answer would be no, provided the contributors know that the site does make profits. In that case it is fair for them to either not contribute, or to request some sort of compensation - either through money, or through privileged services through the site, or something.

For those few of you who actually read this blog, what do you think? Is this fair, or am I sounding like a douche in a suit?


Michael Mol said...

Personally, I don't see any problem with funding site operations using user-supplied content and code, as long as there is an understanding between the site and the users that that can happen.

For example, I run a website called Rosetta Code. I don't have any ads, I don't take donations and I don't sell any merchandise. It's completely run out of pocket at the moment. But when I decide the site needs to start paying for itself, I'll follow through on my plans of turning it into a book.

Now, in my case, I have no problem doing that because all content on the site is licensed under the GFDL, which has provisions for selling hardcopies through an on-demand publisher. Every time someone makes an edit on the site, they're shown a bit of text near the Submit button that indicates that by submitting their changes, they're agreeing to license (and that they have the authority to license) their changes under the site-wide license, the GFDL.

So there is a defined agreement between RC and its users that means, yes, the site might eventually make a few dollars off of their work.

(As a bonus...if they want to financially support the site, they can just buy a copy of the book. :-) )

I haven't done it yet primarily because I don't want to deal with the hassles of keeping track of the taxes involved...

Guillaume Theoret said...

Well the idea is to collaboratively develop the website right? So if some feature comes along as makes profits shoot through the roof, since you're taking a percentage, it'll also pay all the content creators a lot more who should theoretically be the ones with the motive for adding these features or users who like the site but need like better search or something to make their experience more enjoyable.

Seems like win-win-win to me.

Ryan Kohn said...

First off, whether or not it's ethical, the precedent has already been set by companies like Canonical and Red Hat. While they do sponsor a certain amount of the development (and you might consider doing the same), a lot of the contributions have been made on a volunteer basis. In general, I would say open-source developers don't expect to be paid for their work. Programmers probably even have their own motives that go beyond getting paid. As long as no one that writes code for your application -- webtop or desktop -- is getting paid for their work, I don't think there's an ethical problem (though a profit-sharing model of commits might actually be interesting).

Second, if your competitive advantage doesn't come from the code, then your profit technically isn't coming from the code either.

Rob Britton said...

You guys make some great points, and a lot of it is echoing things that I've had in the back of my mind.

So the way I see it, it's acceptable to make profits off of user-generated content and user submissions of code/features provided everyone is aware that the site would make profits. Also keep in mind that we're talking profits here, not just enough cash to fund the site operations. Given the revenue models described it is possible that the money that comes in could exceed operating costs, potentially by a large margin (haven't done the research to find out).
But yeah, I think it's fair to say that programmers contributing to an open-source project don't really care all that much about getting anything in return except for a bit of recognition and a better product. At least that's all I'd expect.

@Michael: Forgot about taxes, I wonder how that would work. Damn!

@Guillaume: Yeah it'd definitely pay the content creators a larger percentage. I'd have to do some number crunching to see exact numbers but the site wouldn't be taking a large amount. I'm not a record company.
Your comment made me think more about incentives for companies to join the site and help it. They'd win because I'd be handling stuff like hosting and scalability and junk like that, and they'd be able to just focus on creating content. I could even see them hiring a coder or two to help build up content-creation tools or other things, as it would be in their interest to improve the site.

@Ryan: I think there is a little bit of competitive advantage in the code. If the site sucks for creating the content and someone else takes it, makes it better and starts their own site, there is some competition there (although making a better product is definitely a good part of competition). Other than that though, user and content bases are things that would be a great advantage.
Your commit-based profit sharing idea is quite interesting although as Michael mentioned there are taxes. That could get messy real quick, especially if there are commits coming in from all across the world.