Calculating the True Price of Software
Subject:   Interesting. Marketing at play as well, however.
Date:   2010-01-15 12:22:35
From:   Bspencer11
I found this article, as well as the follow up discussion to be very good reading material. As a first year finance student, it's interesting to see valuation at play in a discussion of open source/free software. I think, however, that in using the framework of finance to explore the implications of free software distribution, this article underplays the significance of marketing strategy.

Often, free software comes with limited features. In this case, the "free ware" is something akin to a movie trailer. After all, a trailer can be entertaining in and of itself - but it is only the tip of the iceberg. It's advertisement. And since when has advertisement been anything other than capitalistic?

That aside, I think there may be an easier/more realistic way to look at/derive the value of (free ware + support) as a package, if one wanted to continue an exploration of the subject. For example, it may be the case that, in distributing a free software product, a company may impact the sales of competitors. Perhaps the company in question is a small start up, and the sales of a larger scale enterprise software operation suffers as a result of their actions. It is probable that this company will be purchased, and support for the freeware will be discontinued. In this scenario, valuing the "free ware" is simple. How much was the smaller company purchased for? Alternatively, how much did revenue of the larger company suffer as a result of the smaller's actions?

Does this make any sense? I'm only beginning to study finance, but it seems to me that this is an easy way to demonstrate that free ware has value.

My homepage ( .