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Is an advertising-supported model the way forward for the software industry?

Are we having a recession yet? Ask and ye shall receive. If the bad news keeps rolling in from Wall Street, coded phrases like "economic downturn" won't stop companies from acting as if the recession is already here.

No wonder pundits are predicting boom times for SaaS, cloud computing, and other, subscription-oriented software offerings. Who wants to sink cash into software as a fixed asset when returns from short- and long-term investments are drifting into the red?

To suggest that the death of traditional desktop software is imminent, however, would be premature. Too many of the current online offerings are too immature, too insecure, or too unreliable for mission-critical use. Still, that doesn't do much to dispel the grim but very real spectre now haunting the software industry: How in the hell are we going to make money?

Some claim the answer is that last refuge of scoundrels: advertising. A growing roster of top-ranked IT companies -- from Google to Microsoft, Mozilla to Symantec -- have been boosting the bottom lines of their products with cross-branding and marketing deals. But will it really work, or is it just another house of cards?

Sun's gambit

I've spent a lot of breath knocking Sun and its business model lately, but I have to give Jonathan Schwartz and company some credit. Viewed in hindsight, Sun's move toward a 100 percent open source, subscription-support model was a preemptive strike against just this kind of market eventuality.

If you don't want to pay for Sun's software, don't. Go ahead and use it anyway. But if you need world-class support to maximize the efficiency of your business infrastructure, Sun's operators are standing by.

But while Sun's open source business model -- like Red Hat's -- works well when the products are complex, mission-critical enterprise information systems, it's not a good match for consumer desktop software. In the consumer realm, user-friendliness is king. And when the app is user-friendly enough -- in other words, when the developers have done their jobs -- the customer doesn't need support. (Little wonder that Red Hat got out of the consumer desktop Linux business.)

That's OK, Sun's CEO says, because users who don't pay can be profitable, too. As Schwartz blogged earlier this month, Sun sees each free download as a channel opened to a user; and that channel, he says, can be monetized through co-branding and marketing deals with other companies. If he can be believed, the marketing channel to Java's audience is already the major revenue source for Sun's Java efforts, and he's currently auctioning off co-branding opportunities in the OpenOffice.org suite, too.

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Neil McAllister

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