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The Business of “Open”
                November 2009



              SANGKI HAN, Ph.D.

                   Professor
      Graduate School of Culture Technology
                    KAIST
Commons-based Peer
   Production
• Yochai Benkler @ Harvard Law
  School and Berkman Center for
  Internet & Society
• A socio-economic system of
  production that is emerging in the
  digitally networked environment


                    2
Peer Production and
      Sharing
        Since 2005, over 5000
        individual developers
        from nearly 500
        different companies
        have contributed to the
        kernel.

                                      GNU
Linux




                                  3
Who Writes Linux?
 Linux Kernel Development




                                                                                  [Linux Foundation, Aug. 2009]


 WHO IS SPONSORING THE WORK

 The Linux kernel is a resource which is used by a large variety of companies. Many of those
 companies never participate in the development of the kernel; they are content with the software
                                                  4
 as it is and do not feel the need to help drive its development in any particular direction. But,
 as can be seen in the table above, an increasing number of companies are working toward the
}
            Business Model for                            2008/2009 ANNUAL PLAN
                                                                                                                                                                                                                                                       [




             Peer Production
                                                          This year’s Annual Plan includes increased spending on technical infrastructure to keep pace with Wikipe  -
                                                          dia’s growing audience, the establishment of the Wikimedia Foundation’s first fundraising team, and the
                                                          hiring of additional software developers and staff with responsibility for public outreach and partnerships.
                                                          The Annual Plan anticipates increased revenues, due to the establishment of the dedicated fundraising
                                                          team. All figures in thousands of dollars.

                                                                                                               [[2008/2009 Budget]]
                                                                                           Wikimania $96K [7]                                   Board $130K [1]

                                                                                               Legal $357K [6]
• Licensing and Professional Service                                           Programs $595K [5]
                                                                                                                                                                 Office of the
                                                                                                                                                                 Executive Director $472K [2]




   - GPL for GNU and Free Software                     Finance & Admin. $1,619K [4]                                                                                               Technology $2,705K [3]




       ✓ As of August 2007, the GPL accounted for
         nearly 65% of the 43,442 free software                                                                              Total $5,974,000
                                                    [1] Includes board meeting expenses, D&O insurance. [2] Includes salaries for                admin staff, audit fees, fundraising expenses, office rent, office supplies, bank fees, etc.

         projects listed on Freshmeat               Executive Director and Deputy Director; some fundraising and travel expenses; consul-
                                                    tants and contractors; staff and volunteer development. [3] Includes salaries for techni-
                                                    cal staff, servers, bandwidth and contractor expenses. [4] Includes salaries for finance/
                                                                                                                                                 [5] Includes salaries for program staff, public outreach expenses, communications expenses.
                                                                                                                                                 [6] Includes salary for General Counsel, and external counsel and consultant fees, filing fees, etc.
                                                                                                                                                 [7] Includes travel for board, advisory board and staff.




       ✓ Dual Licensing / Distribution & Service                                                [[2008/2009 Projected Revenue]]
         Model/ The Ecosystem Strategy / Dual                                   Other Revenue $24K [4]
                                                                                                                                         In-Kind Revenue $500K [5]



         Product Model / The Web-Based Ad Model                       Earned Income $811K [3]




• Donation                                              Community Gifts $3,000K [2]                                                                                              Major Gifts and Grants $3,000K* [1]




• Selling manuals, t-shirts, stickers, mugs, etc.                                                                            Total $7,335,000
                                                    [1] Donations of more than 10K *Includes 1M from Sloan Foundation. [2] Donations             [4] Includes income from sponsorships, interest, and foreign exchange gains.
                                                    less than 10K. [3] Income from live feed deals, trademark deals, etc.                        [5] In-kind donations.



                                                                                                           [source: Wikimedia Foundation]
                                             5
Mass Innovation




                  By Tony Hall from Flickr
                          under




       6
Open Ecosystem

          • Connectivity
          • Collaboration
          • Access
          • Transparency



      7
Open Platform
• A software system which has
  published external
  programming interfaces (API)
  that allow using the software
  to function in other ways
  than the original programmer
  intended, without requiring
  modification of the source
  code

                       8
Open Standard vs.
          Open Source
Open Standards vs. Open Source



Attribute               Open Standards                      Open Source

Nature                  Set of specifications                Software code

Openness of interface   By definition                        By design
Interoperability        Enabled                             Cannot be assumed

Licensing               Various types                       Various types (GPL, BSD, etc)
Development model       Collaborative                       Collaborative
                                            [Source: Roadmap for Open ICT Ecosystems by Berkman Center]




                                        9
Service Orientation
Facebook Platform




        10
The Power of FB Connect

• High traffic services like Disqus, Digg, and WordPress began using
  Facebook Connect
• 15,000 sites since December 2008




                                  11
Success in Ecosystem: Twitter
       Over 11,000 registered Twitter
          application by July 2009




                     12
Freeeconomic by Chris Anderson




              13
Webmail Windfall
Since each page of webmail comes with ads, more users means more revenue.




                                           Chart: Steven Leckart; Chart design: Nicholas Felton @ WIRED



                                 14
How Can a CD Be Free?




               Chart: Steven Leckart;
               Chart design: Nicholas
               Felton @WIRED; Sources:
               Daily Mail, O2 Arena




          15
Free Business Models
                                    From: “Free! Why $0.00 Is the Future of Business” by Chris Anderson @ WIRED


• Freemium
   - Coined by Fred Wilson
   - Flickr
• Advertising
• Cross-subsidies
   - Cell phones, ‘free lunch’
• Zero marginal cost
   - Online music -- Some artists give away their music online as a way of marketing
     concerts, merchandise, licensing, and other paid fare
• Labor exchange
   - Rating stories on Digg, voting on Yahoo Answers, or using Google's 411 service
• Gift Economy
   - Altruism



                                            16
thank you and meet me at
    Facebook: stevehan
     Twitter: steve3034
     me2day: steve3001
socialcomputing.tistory.com



             17

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How to 오픈비즈니스 세미나 - 키노트(한상기교수)

  • 1. The Business of “Open” November 2009 SANGKI HAN, Ph.D. Professor Graduate School of Culture Technology KAIST
  • 2. Commons-based Peer Production • Yochai Benkler @ Harvard Law School and Berkman Center for Internet & Society • A socio-economic system of production that is emerging in the digitally networked environment 2
  • 3. Peer Production and Sharing Since 2005, over 5000 individual developers from nearly 500 different companies have contributed to the kernel. GNU Linux 3
  • 4. Who Writes Linux? Linux Kernel Development [Linux Foundation, Aug. 2009] WHO IS SPONSORING THE WORK The Linux kernel is a resource which is used by a large variety of companies. Many of those companies never participate in the development of the kernel; they are content with the software 4 as it is and do not feel the need to help drive its development in any particular direction. But, as can be seen in the table above, an increasing number of companies are working toward the
  • 5. } Business Model for 2008/2009 ANNUAL PLAN [ Peer Production This year’s Annual Plan includes increased spending on technical infrastructure to keep pace with Wikipe - dia’s growing audience, the establishment of the Wikimedia Foundation’s first fundraising team, and the hiring of additional software developers and staff with responsibility for public outreach and partnerships. The Annual Plan anticipates increased revenues, due to the establishment of the dedicated fundraising team. All figures in thousands of dollars. [[2008/2009 Budget]] Wikimania $96K [7] Board $130K [1] Legal $357K [6] • Licensing and Professional Service Programs $595K [5] Office of the Executive Director $472K [2] - GPL for GNU and Free Software Finance & Admin. $1,619K [4] Technology $2,705K [3] ✓ As of August 2007, the GPL accounted for nearly 65% of the 43,442 free software Total $5,974,000 [1] Includes board meeting expenses, D&O insurance. [2] Includes salaries for admin staff, audit fees, fundraising expenses, office rent, office supplies, bank fees, etc. projects listed on Freshmeat Executive Director and Deputy Director; some fundraising and travel expenses; consul- tants and contractors; staff and volunteer development. [3] Includes salaries for techni- cal staff, servers, bandwidth and contractor expenses. [4] Includes salaries for finance/ [5] Includes salaries for program staff, public outreach expenses, communications expenses. [6] Includes salary for General Counsel, and external counsel and consultant fees, filing fees, etc. [7] Includes travel for board, advisory board and staff. ✓ Dual Licensing / Distribution & Service [[2008/2009 Projected Revenue]] Model/ The Ecosystem Strategy / Dual Other Revenue $24K [4] In-Kind Revenue $500K [5] Product Model / The Web-Based Ad Model Earned Income $811K [3] • Donation Community Gifts $3,000K [2] Major Gifts and Grants $3,000K* [1] • Selling manuals, t-shirts, stickers, mugs, etc. Total $7,335,000 [1] Donations of more than 10K *Includes 1M from Sloan Foundation. [2] Donations [4] Includes income from sponsorships, interest, and foreign exchange gains. less than 10K. [3] Income from live feed deals, trademark deals, etc. [5] In-kind donations. [source: Wikimedia Foundation] 5
  • 6. Mass Innovation By Tony Hall from Flickr under 6
  • 7. Open Ecosystem • Connectivity • Collaboration • Access • Transparency 7
  • 8. Open Platform • A software system which has published external programming interfaces (API) that allow using the software to function in other ways than the original programmer intended, without requiring modification of the source code 8
  • 9. Open Standard vs. Open Source Open Standards vs. Open Source Attribute Open Standards Open Source Nature Set of specifications Software code Openness of interface By definition By design Interoperability Enabled Cannot be assumed Licensing Various types Various types (GPL, BSD, etc) Development model Collaborative Collaborative [Source: Roadmap for Open ICT Ecosystems by Berkman Center] 9 Service Orientation
  • 11. The Power of FB Connect • High traffic services like Disqus, Digg, and WordPress began using Facebook Connect • 15,000 sites since December 2008 11
  • 12. Success in Ecosystem: Twitter Over 11,000 registered Twitter application by July 2009 12
  • 13. Freeeconomic by Chris Anderson 13
  • 14. Webmail Windfall Since each page of webmail comes with ads, more users means more revenue. Chart: Steven Leckart; Chart design: Nicholas Felton @ WIRED 14
  • 15. How Can a CD Be Free? Chart: Steven Leckart; Chart design: Nicholas Felton @WIRED; Sources: Daily Mail, O2 Arena 15
  • 16. Free Business Models From: “Free! Why $0.00 Is the Future of Business” by Chris Anderson @ WIRED • Freemium - Coined by Fred Wilson - Flickr • Advertising • Cross-subsidies - Cell phones, ‘free lunch’ • Zero marginal cost - Online music -- Some artists give away their music online as a way of marketing concerts, merchandise, licensing, and other paid fare • Labor exchange - Rating stories on Digg, voting on Yahoo Answers, or using Google's 411 service • Gift Economy - Altruism 16
  • 17. thank you and meet me at Facebook: stevehan Twitter: steve3034 me2day: steve3001 socialcomputing.tistory.com 17