The New Open Source Business Model: Trading Code for Personal Data

How do companies make money with open source software? Increasingly, the answer is that they use open source programs to collect personal information from users. Here’s how this new open source business strategy is changing the channel.

For most of the thirty-three year history of free and open source software, companies that developed open code relied on a set of conventional business models. They revolved around strategies like “freemium” pricing, redistributing of open source software through channel partnerships, creating foundations and selling support services.

These are the strategies that sustained old-guard open source companies like Red Hat and Canonical. They allowed them to generate revenue from software that they gave away for free.

The New Open Source Business Model

There’s a new generation of companies that are investing in open source, and they’re migrating toward a new business model. They support open source development and give away software, then use that software to collect data valuable from users.

Take Google, for example. Google is a lead contributor to several important open source projects, from the Chromium Web browser to Kubernetes, a container orchestrator.

While not all of these open source programs directly feed Google’s data-collection initiatives, some of them (like Chromium, the basis for Google’s Chrome browser) do. And in general, there is little arguing that data collection is at the heart of Google’s business strategy. Much of the money that Google infuses into the open source ecosystem to support development is paid for with users’ private data.

Google’s not alone. Baidu, Google’s Chinese twin, is now doing something very similar. The search and cloud hosting company is releasing an open source driverless car platform with the goal of advancing data collection.

Even Canonical — which for most of its history has stuck with traditional open source revenue-generation strategies like selling support services — has experimented with a program that collects users’ data inside Ubuntu Linux. The company abandoned that strategy last year, but it’s evidence all the same of the idea that personal data can make freely redistributed software profitable.

It’s a safe bet that selling support services and other conventional business models will remain central to the open source world going forward. It’s perhaps only very large companies that stand to benefit from trading open code for users’ data.

But the latter trend is here to stay, too — which means open source will now have a new cost for many of its users.