Posted by: ahmedashfaque | July 24, 2015

business model for software products which are offered to be used for free


In this era of social networking websites, software vendors invest money to develop these websites and offer their users to use their software product (in form of these websites) for free. Why a software vendor like Twitter or Facebook will spend millions of dollars to develop their software product and then allow their users to use their software products for free? How they earn their money so that they get a good return on their investment? Let us learn about how this business model works?

These software vendors earn their money from many sources. For example Twitter allows its customers to have a business account. Using a business account, a customer can tweet about their products and services and these tweets are visible throughout the entire community of twitter account holders. This is in contrast to the tweets which are made from twitter accounts which are not business accounts. Here a tweet is visible only to the followers of that twitter account. Thus having a business account on twitter is a good way to advertise your products and services to millions of people.

Facebook has a different business model. It allows its users to advertise on its website free of cost. It charges the customer who has placed its advertisement when any user clicks on the advertisement.

The most important consideration for these software vendors is the number of users who use their software product. If number of users for their software product is very limited then their business model will not work. For example if a software product has only some thousand users then any advertisement on their web pages will be seen by only these thousands odd people. This will not result in good sales for the advertiser. But if number of users of a software product number in millions then defnitely an advertisement will result in good sales for the advertiser.

So number of users matter for this type of business model. If a software vendor is not able to make its software product popular among its users then the software vendor will never be able to make any money from its software product. On the other hand popular software vendors like Faceook are minting money to the tune of billions of dollars annually.

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