Open Source Software companies give the software away for free. They hope to make money by selling maintenance, support, training, and consulting. How many free users actually pay for service?
David Skok from Matrix Partners did a presentation at the Open Source Business Conference on the Open Source business model. David Skok has invested in several OSS companies including JBoss. He knows the business well.
According to Skok, business users of Open Source Software want professional customer support and are willing to pay for it. Consumer users are less likely to pay for support. On average about 3% of all OSS users pay for a support contract.
This correlates with my findings on "Freemium" conversion rates where the average conversion rate was also 3%. The Freemium model, popularized by Fred Wilson, is where a service is offered for "free" with additional "premium" services offered for a fee.
I remember many years ago talking to a bulk mail list company about response rates to targeted mailings...the same result...about 3%.
Maybe it is just a strange coincidence. Every product is different. The value propositions are different, the prices are very different, and the competitive environment is different. But, the results are strangely the same.