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> What makes the software market so fascinating from an economic perspective is that the marginal cost of software is $0. I see this claim a lot. The marginal
by osteele 9y ago
> What makes the software market so fascinating from an economic perspective is that the marginal cost of software is $0.
I see this claim a lot.
The marginal cost of software is actually its support cost﹡.
If some customers bought the product without a support contract, then the marginal cost of the good that is sold to those customers is the (non-zero) cost for support staff to categorize them and turn them away.
If none of the license includes support, then the vendor doesn't need support staff or activities, and the marginal cost is indeed zero.
Only some software products — especially among commercial software products — don't include any support at any price point.
﹡ Also marginal increases in distribution costs. Also costs that stem from marginally greater exposure to product liability issues and claims.
- reacweb 9y agoHaving more users even on the free plan gives many benefits: - more testers means that bugs are detected earlier. This improves reliability. - it gives more opportunities to try to sell the support and convert them into paying customers - it increases the visibility of your product. It is free advertising. IMHO, the marginal cost is generally better than zero.
- slgeorge 9y agoIt's a trade-off. The benefit is "reach" which is beneficial for (a) marketing (b) OSS community (c) bugs and contributors. The cost are the (a) lower conversion to payment (b) costs from a 'shared' community e.g. community management and user support.