Opinions on software market commissions
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Opinions on software market commissions
I'm currently involved in a software market startup, building an upscale version of hotscripts / code-canyon and its ilk that allows developers to sell components / complete applications for web development (mostly framework oriented). We have some varying opinions on how much commission to charge developers for a sale, and we would very much appreciate any input from you guys.
Code canyon, for example, starts off at 50% commission (they changed it from 60% recently) and tails off at 30% commission for high selling developers.
Keep in mind what this kind of service provides -
* A marketable showcase for your application / components (if done right)
* A large source of traffic with intent to buy
* Handling of all legal aspects (including software license generation)
What are your thoughts?
Code canyon, for example, starts off at 50% commission (they changed it from 60% recently) and tails off at 30% commission for high selling developers.
Keep in mind what this kind of service provides -
* A marketable showcase for your application / components (if done right)
* A large source of traffic with intent to buy
* Handling of all legal aspects (including software license generation)
What are your thoughts?
Re: Opinions on software market commissions
depends on what kind of developers you're targeting. if it's the random junk you usually find, 60% is ok.
if we're talking about quality, I wouldn't accept being charged more than 5%.
probably not enough to make your business worthwhile though.
if we're talking about quality, I wouldn't accept being charged more than 5%.
probably not enough to make your business worthwhile though.
Re: Opinions on software market commissions
We are targeting high-end developers and components, with preference for framework-based, coding standards, testing etc.
Where did you come up with 5%? do you really believe that all the services I mentioned are worth only 5% of the purchase? bear in mind that most developers don't even bother putting their library of components up for sale (they just reuse it in their own projects). I would be interested in hearing on the logic behind that number
Where did you come up with 5%? do you really believe that all the services I mentioned are worth only 5% of the purchase? bear in mind that most developers don't even bother putting their library of components up for sale (they just reuse it in their own projects). I would be interested in hearing on the logic behind that number
Re: Opinions on software market commissions
well, from my perspective, my business runs well enough that I don't have to sell bits of my libraries. I would dare to claim that this will be the same with all professionals. charging a couple bucks for your library just won't cut it, so the price would have to be outrageously high.
for example, I have a library that contains 30 very helpful functions for handling arrays. all of them are optimized to the max, absolutely secure, whitesmith formatted and so on. I'd probably have to charge like... say 2500 bucks for a license to discourage amateurs to just absorb my expertise for a few bucks and then re-sell it to their customers as part of a project that is otherwise totally under-priced. now if you charge 50% of those 2500, that's 1250 bucks for just putting that script on your site, so I'd have to make the price 5000 bucks to compensate for your fee, which would make the whole thing totally over-priced.
I know there are developers who make a good living on programming and selling wordpress (or whatever) plugins to the masses... the question is how many of them produce quality code, which is something you need to get some numbers on.
for example, I have a library that contains 30 very helpful functions for handling arrays. all of them are optimized to the max, absolutely secure, whitesmith formatted and so on. I'd probably have to charge like... say 2500 bucks for a license to discourage amateurs to just absorb my expertise for a few bucks and then re-sell it to their customers as part of a project that is otherwise totally under-priced. now if you charge 50% of those 2500, that's 1250 bucks for just putting that script on your site, so I'd have to make the price 5000 bucks to compensate for your fee, which would make the whole thing totally over-priced.
I know there are developers who make a good living on programming and selling wordpress (or whatever) plugins to the masses... the question is how many of them produce quality code, which is something you need to get some numbers on.
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Re: Opinions on software market commissions
I haven't really though about it too much.. but I'd be comfortable with somewhere along the lines of a 30-40% commission, which is the general commission we give for various other services on our sales.
Some reasons why I would accept a high commission rate:
We do not have to sell our product.
We do not have to drive in targeted traffic.
We do not have to process the payments.
We do not have to handle the licensing.
Of course if I was generating significant revenue for your company, I would expect the commission to be closer to 15-20%.
Some reasons why I would accept a high commission rate:
We do not have to sell our product.
We do not have to drive in targeted traffic.
We do not have to process the payments.
We do not have to handle the licensing.
Of course if I was generating significant revenue for your company, I would expect the commission to be closer to 15-20%.
- AbraCadaver
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Re: Opinions on software market commissions
This will obviously vary by person and I don't have any logical rationale for determining what is acceptable, but for me, I would probably be happy with 50% as I don't pay unless I sell and if it is sold on your site then that's a sale that I probably wouldn't have had on my site. If I noticed that my overall sales didn't really increase or at least not much, but some or many were coming from your site, then I would figure I'm losing money, but I don't really see that happening. I don't use any type of license enforcement because it's a pain, but if you were offering it as part of the deal that would be a great bonus (if you're talking about "physical" enforcement, ioncube, zendguard, etc. type thing).
As for Gargoyle's comments, I don't get it. The purpose is to make money. If you're worried about people absorbing your expertise, then don't sell your code. That's the purpose, sell what you have done to make money. If you don't sell it now then you win with a commissioned sale no matter how little you charge. If you currently sell it on your site and sell 1 a year, then if you sell 1 on another site (minus commissions) then you made $1250. Unfortunately though, no matter how good your library is, it's probably not worth $2500. It may be if you developed it for a specific customer (hourly rate), or if you provide it as part of a large project (though normally not), but not resale for the general public. A library is probably not a good example and unless highly specialized (underwater terrain mapping, stock forecasting, etc.) is not going to sell at all with many professional free alternatives out there (I'm thinking general library, zend, etc.).
I also agree with John. Maybe a sliding scale. If you sell over $1000 a month then commission is 30% over $2500 20% etc. Just pulled those out of my butt.
As for Gargoyle's comments, I don't get it. The purpose is to make money. If you're worried about people absorbing your expertise, then don't sell your code. That's the purpose, sell what you have done to make money. If you don't sell it now then you win with a commissioned sale no matter how little you charge. If you currently sell it on your site and sell 1 a year, then if you sell 1 on another site (minus commissions) then you made $1250. Unfortunately though, no matter how good your library is, it's probably not worth $2500. It may be if you developed it for a specific customer (hourly rate), or if you provide it as part of a large project (though normally not), but not resale for the general public. A library is probably not a good example and unless highly specialized (underwater terrain mapping, stock forecasting, etc.) is not going to sell at all with many professional free alternatives out there (I'm thinking general library, zend, etc.).
I also agree with John. Maybe a sliding scale. If you sell over $1000 a month then commission is 30% over $2500 20% etc. Just pulled those out of my butt.
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Re: Opinions on software market commissions
I wrote a somewhat long reply to gargoyle comments before everyone else chipped in, so I'll post it anyway since I think it's generally relevant-
First, even if your business runs well enough, you'd avoid a potential source of income that only requires that you use existing code you have? we're hoping more business oriented developers can recognize the opportunity here. The very idea came from the fact that we have a store of very high quality components that we use in most of our projects, and even though we are doing quite well the idea of passive income is hard to pass on.
Second, we are hoping developers will not just sell their entire library as is. We are hoping they'll post smaller components that can be cherry picked and used as needed - each selling individually for a price around 50-100$. I hate to say it, but probably (almost) no one will pay 2500$ for your entire library as is without extensive proof that it is worth it. We will give a pricing guide on the platform when it launches.
Third, we know for a fact there is a very large market for this kind of business. The much maligned hotscripts and the somewhat upper scale code-canyon are very large and successful services. We are trying to find a niche in quality components for frameworks which is very sparse currently.
And last, you are completely discounting the actual expense of money and time required to seriously put up such components for sale. Drafting the legal documents, most importantly the software license itself, engaging in and paying for an extensive marketing and SEO campaign and building a sales platform that is designed by top professional designers.
For developers that can get all this set up on their own, I imagine we don't have much to offer - though, like affiliate programs, additional sources for sale never hurt. On the other hand, for those who would welcome such passive income - 60% (or whatever is left) of something is much more than zero - I think we have something to offer. I seriously hope such developers can comment in this thread so they might influence a platform they could benefit from.
@abra, @john
This is the range we are thinking of. Starting at around 40-50% commission, and improving the commission for top ranked / top selling developers (bottoming out at around 20-25%). I appreciate the input
First, even if your business runs well enough, you'd avoid a potential source of income that only requires that you use existing code you have? we're hoping more business oriented developers can recognize the opportunity here. The very idea came from the fact that we have a store of very high quality components that we use in most of our projects, and even though we are doing quite well the idea of passive income is hard to pass on.
Second, we are hoping developers will not just sell their entire library as is. We are hoping they'll post smaller components that can be cherry picked and used as needed - each selling individually for a price around 50-100$. I hate to say it, but probably (almost) no one will pay 2500$ for your entire library as is without extensive proof that it is worth it. We will give a pricing guide on the platform when it launches.
Third, we know for a fact there is a very large market for this kind of business. The much maligned hotscripts and the somewhat upper scale code-canyon are very large and successful services. We are trying to find a niche in quality components for frameworks which is very sparse currently.
And last, you are completely discounting the actual expense of money and time required to seriously put up such components for sale. Drafting the legal documents, most importantly the software license itself, engaging in and paying for an extensive marketing and SEO campaign and building a sales platform that is designed by top professional designers.
For developers that can get all this set up on their own, I imagine we don't have much to offer - though, like affiliate programs, additional sources for sale never hurt. On the other hand, for those who would welcome such passive income - 60% (or whatever is left) of something is much more than zero - I think we have something to offer. I seriously hope such developers can comment in this thread so they might influence a platform they could benefit from.
@abra, @john
This is the range we are thinking of. Starting at around 40-50% commission, and improving the commission for top ranked / top selling developers (bottoming out at around 20-25%). I appreciate the input
- AbraCadaver
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Re: Opinions on software market commissions
Another thing to think about is the varying licenses for types of use. It could be used for libraries, applicationss, etc. I use a Personal, Organizational and Professional licensing scheme with differing prices. These are for different uses but one license is valid for only one single install. You can also have an Unlimited/Developer license that allows the purchaser to use it as many times as they wish, which could be a much higher price.
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Re: Opinions on software market commissions
We worked with a copyright lawyer to create a commercial license generator that you can use to create licenses for each pricing option you use. Using questions in layman vocabulary for guidance, users have the option to compose any type of permissive / restrictive license that they want to use.
Re: Opinions on software market commissions
I've just spoken with one of the freelance programmers we're hiring regularly (Craig Logan, the guy who's running the blog I have linked here every now and then) and he agrees that he may be interested in putting something up for sale if the fees don't exceed 20 or 30%.
looks like there is a market for you, after all.
maybe I should go talk to the CEO... obviously I'm earning too much money.
looks like there is a market for you, after all.
maybe I should go talk to the CEO... obviously I'm earning too much money.
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alex.barylski
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Re: Opinions on software market commissions
I missed something, why would quality equate to less?if we're talking about quality, I wouldn't accept being charged more than 5%.
I like everything i have read thus far pytrin, I for one have tried selling full applications on hotscript, etc. Your competiting with so many amatuer developers but whom are more business savvy than myself, making a go of it very difficult. If the idea was quality (testing, consistency, conventions, memory footprint, etc) and you build a brand around that, I think I would certainly be better able to compete for potential client customers.First, even if your business runs well enough, you'd avoid a potential source of income that only requires that you use existing code you have? we're hoping more business oriented developers can recognize the opportunity here. The very idea came from the fact that we have a store of very high quality components that we use in most of our projects, and even though we are doing quite well the idea of passive income is hard to pass on.
Agreed. You can buy entire applications/frameworks for less than that, Qt comes to mind. :pno one will pay 2500$ for your entire library as is without extensive proof that it is worth it. We will give a pricing guide on the platform when it launches.
I see. I am planning on doing something similar for my own framework, one day. I have built the core architectural components and plan on making that OSS. However more specialized components, like Images, PDF, etc would be premium components.The much maligned hotscripts and the somewhat upper scale code-canyon are very large and successful services. We are trying to find a niche in quality components for frameworks which is very sparse currently.
If would absolutely post my components on a site like hotscripts, in fact I have in the past. Make sure you reserve me space for a premium ad banner, cuz their impossible to come by on hotscripts for all but the most useless software.
Any developer that doesn't appreciate the time that goes into making a business successful, has clearly never done it. I have tried dozens of times over the last 10 years and failed miserably each time. It's a lot of work and time and talent most developers don't have.And last, you are completely discounting the actual expense of money and time required to seriously put up such components for sale. Drafting the legal documents, most importantly the software license itself, engaging in and paying for an extensive marketing and SEO campaign and building a sales platform that is designed by top professional designers
Personally I wish more companies would do this, acting as almost managers do in the music industry. Software developers are not businessmen.
50% is a little high, IMO. Whenever I have entered into a business venture with someone I never accept less than 51%, but that is more for complete executive control over a project than financial reasons. Still I think 40% is a high, albeit realistic percentage.For developers that can get all this set up on their own, I imagine we don't have much to offer - though, like affiliate programs, additional sources for sale never hurt. On the other hand, for those who would welcome such passive income - 60% (or whatever is left) of something is much more than zero - I think we have something to offer. I seriously hope such developers can comment in this thread so they might influence a platform they could benefit from.
Cheers,
Alex
Re: Opinions on software market commissions
Thank for the input, Alex. We have discussed this internally in the team, and currently our mindset is starting out with 50% commission for complete newcomers, and using several parameters such as component rating (buyers can rate after purchase), total sales volume and other site actions (more community related - such as peer review) to give options for developers to improve their commission rate, bottoming out at 25%. We will continue to tinker with the system as we get feedback from the community and see how it affects component pricing on the site.
We are also considering lower commission rates for the launch phase of the service, while we are still building up traffic and affiliates and ironing out issues.
We are also considering lower commission rates for the launch phase of the service, while we are still building up traffic and affiliates and ironing out issues.
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alex.barylski
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Re: Opinions on software market commissions
It'll be interesting to see what you come up with. Keep us posted 
Cheers,
Alex
Cheers,
Alex
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Re: Opinions on software market commissions
Interesting concept. I'm sure there's a market for developers who want to resell their code, but is there a big enough market for buyers?
Re: Opinions on software market commissions
There is. Our largest competitors (hotscripts and code-canyon) are large entities with large revenue streams. Some of the sellers on code-canyon have sold over 100k US$ alone (granted, very few). We are targeting higher-end buyers who are shopping for quality-code and use frameworks and other modern platforms, so we expect item prices to be higher on our service as well.
One of our goals is also to expand the current market by reaching developers / agencies that wouldn't touch code found on hotscripts or code-canyon for several reasons. If the exploding market of wordpress templates is any indication, many people are happy to buy reasonably priced generic components instead of completely custom solutions. This relates to the question you asked about ready-solutions vs. custom code - in my opinion the two can co-exist symbiotically and help each other prosper.
One of our goals is also to expand the current market by reaching developers / agencies that wouldn't touch code found on hotscripts or code-canyon for several reasons. If the exploding market of wordpress templates is any indication, many people are happy to buy reasonably priced generic components instead of completely custom solutions. This relates to the question you asked about ready-solutions vs. custom code - in my opinion the two can co-exist symbiotically and help each other prosper.