Economic Impact of Open Source on Small
Business: A Case Study
Mike Hendrickson
Roger Magoulas
Tim O'Reilly
Published by O’Reilly Media
Preface
This report was inspired by a conversation between Tim O’Reilly and Hari Ravichandran of Endurance International Group (EIG). Hari remarked that his web hosting business had been enabled by open source software, and that he wished he could find more ways to give back to the communities that have made his success possible. Tim suggested that a novel way to give back would be to work together on a study making clear just how much of a role open source software plays in the hosting industry, and by extension, in enabling the web presence of millions of small businesses.
Hari graciously agreed to provide data collected by EIG’s Bluehost division as the basis for this study. What we have tried to do here is to help broaden the discussion of open source software’s impact beyond "the usual suspects" like Red Hat, MySQL, and other pure-play open source
companies, and instead to focus on how open source has been a direct enabler not only of Internet companies, but of any business that enjoys an Internet presence.
One of our sayings at O’Reilly is "Create More Value Than You Capture." Open source software is one of the great examples of that principle. Rather than measuring the value captured by
companies that provide open source software or services based on that software, this report tries to hint at how value is instead captured downstream by users of that software.
Open source developers are unsung heroes of our economy. It is not always the business titans, who have managed to extract a significant fraction of the value they have created, whom we should celebrate as the wellspring of economic growth. Those who have put their work into the commons, enriching the soil from which other businesses can grow, have an untold economic impact.
This study is an attempt to initiate a deeper conversation about hidden sources of value creation in our society. In a time when traditional ways of doing business have resulted in economic chaos, as financial companies focused more on extracting value from the economy rather than on
creating it, it is worthwhile to reflect on what open source software can teach us about how to build a world in which, as Eric Liu and Nick Hanauer say in their book Gardens of Democracy,
Chapter 1. Executive Summary
Because the Internet’s infrastructure is largely dependent on open source software and open
protocols, it’s fair to say that open source has played a significant role in the economic impact of the Internet. This impact is both direct—in the revenues of Internet companies themselves—and indirect, in the increased revenues attributable to businesses because of increased visibility, efficiencies, or commerce on the Internet. But because open source software is not monetized directly by most of those benefiting from its use, it tends to disappear from economic analysis.
Web hosting shows how open source software impacts the economy: web hosting companies rely on open source software to provide the infrastructure required to generate monthly subscription fees, small and medium sized businesses (SMBs) get low cost access to the Web and the open source tools to build a web presence—extending access to customers and transactions for existing companies, and creating a new breed of company that could not exist without the Web.
In this report, we use a unique data set, as well as survey data, provided by the Bluehost division of Endurance International Group, a web hosting company that provides hosting services to over 2 million customers, most of them small and medium sized businesses. There are areas where we believe Bluehost’s data provides a reasonable proxy for the SMB hosting market. The Bluehost data is used to analyze the actual software used by their customers, estimating the cost savings provided by open source software. We project the total economic impact of open source software as an enabler of the web hosting market as well as the economic impact on the SMBs who make up its customers. Bluehost offer customers a web infrastructure and programming tools rich with open source
components like PowerDNS, Linux, Apache, and MySQL, and open source programming languages like PHP, JavaScript, Perl, Python, and Ruby. Bluehost also offers open source tools like Content Management Systems (CMSs), dominated by WordPress, and e-commerce tools like osCommerce, Magento, and PrestaShop.
While offering open source software via web hosting and domain name registration is a multi-billion dollar business, we show how open source generates even greater economic impact by creating a platform fostering the increased success of the small and medium sized businesses that make up the majority of web hosting customers.
Here is some of what we learned from the Bluehost data and follow-on research:
60% of web hosting usage is by SMBs, 71% if you include non-profits. Only 22% of hosted sites are for personal use.
75% of customers build their own site using simple site-builder tools. Another 6% have it built by a family member. Only 13% use professional web developers.
The majority of the websites are informational; only 14% have an online store (including non-profits that take donations online).
Nonetheless, nearly 20% of businesses in the survey say they derive more than 50% of their revenue from their website.
The majority of hosted businesses are very small. Only 15% have revenues in excess of $50,000/year, yet collectively, we believe these businesses represent a trillion dollars of economic output.
2:1.
WordPress is a far more important open source product than most people give it credit for. In the SMB hosting market, it is as widely used as MySQL and PHP, far ahead of Joomla and Drupal, the other leading CMSs.
Languages commonly used by high-tech startups, such as Ruby and Python, have little usage in the SMB hosting market, which is dominated by PHP for server-side scripting and JavaScript for client-side scripting.
Chapter 2. Introduction
By most traditional measures, pure-play open source companies appear to have had a relatively modest economic impact. Red Hat, the largest open source software company, had revenues of $1.13 billion for the fiscal year ending February 29, 2012, and a market capitalization of $10.8 billion as of June 2012. MySQL was sold for $1 billion to Sun Microsystems in 2008. After the sale of Sun to Oracle, MySQL has estimated revenues in the range of $171 million, and MySQL ecosystem revenue is expected to grow at a CAGR of 40% to reach $664 million by 2015 [1]. There are many smaller
companies that directly monetize open source software programs, but none have achieved the scale of either of these market leaders.
Yet there is no question that open source software has had a profound economic impact that belies these numbers. Companies like Google, Amazon, Facebook, and Twitter are built on open source platforms. All of them run on Linux, make heavy use of open source databases and languages, and contribute to the open source communities they rely on. They have built a proprietary layer on top of the open source stack, analogous to the way Microsoft builds applications on top of Windows, or Apple creates operating systems and applications for its various devices from a common platform. Even Apple bases many of its platforms and products on open source software and offers many Open Source languages, databases and other tools for developers.
And the economic impact is clear: Google had 2011 revenues of $37.9 billion and market
capitalization of $189 billion. Facebook had 2011 revenues of $3.8 billion and market cap of $82 billion, and Amazon had 2011 revenues of $51 billion and a market cap of $103 billion.
It is difficult, however, to apportion the value of the Open Source databases, programming languages, tools and Web software infrastructure in creating the success of companies like Google, Amazon and Facebook, as they all mix Open Source components with proprietary software.
Fortunately, we know another market where we can more directly tie value to Open Source software: the Internet Service Providers (ISPs), domain name registrars and web hosting companies that rely heavily on Open Source components to provide access to web services for their customers.
According to IBIS Research, the total size of the Internet service provider market in 2011 was $79 billion. [2] ISPs typically provide both a data pipe and a set of basic Internet services, including email
and web access. They may also provide web hosting, and with it, domain name registration services. It is difficult to allocate the value provided to customers of an ISP between "the dumb pipe", or access to free (but not open source) services such as Google, Facebook, YouTube, Twitter, and millions of websites, versus use of open source email and web tools, but there’s no question that without the existence of the free and open source software of the Internet, this huge and profitable market would not exist.
In the case of the domain registry market, the allocation of value to open source software is simple. Domain name registration is essentially a service business based on the open source Berkeley Internet Name Daemon, or BIND, which (along with a few related programs, like PowerDNS) provides the Internet’s Domain Naming System, or DNS. It is fairly reasonable to ascribe the entire size of this market to open source software. Many domain name registrars also offer web hosting services based on Linux, Apache, MySQL, and a variety of other open source tools. We estimate the domain
reported revenue (before going private), and on estimated market share for the top providers, including GoDaddy, Endurance International Group (EI), Enom, Network Solutions and 1&1.
These direct Internet businesses are just the tip of the iceberg. According to a recent McKinsey study, Internet-related businesses now represent approximately 3.4% of GDP in 13 countries they studied (including the US), and 21% of GDP growth over the past five years in mature economies. [3] The
report also notes that 75% of the Internet’s economic impact comes from tradtional business; that SMBs get a 10% productivity boost from internet usage; and, that SMB’s with heavy investment in web technologies grow twice as fast as those with little or no web presence.
Because the Internet’s infrastructure is largely dependent on open source software and open
protocols, it’s fair to say that open source has played a significant role in this economic boom. But because open source software is not always tied directly to revenue, it tends to disappear from economic analysis.
In 1975, environmentalist Steve Baer described in his book Sunspots (Zomeworks) this kind of indirect economic impact by way of an analogy he referred to as the "Clothesline Paradox": If you take down your clothesline and buy an electric clothes dryer, the electric consumption of the nation rises slightly. If you go in the other direction and remove the electric clothes dryer and install a
clothesline, the consumption of electricity drops slightly, but there is no credit given anywhere on the charts and graphs to solar energy, which is now drying the clothes.
So too it is for the Web and for open source software. Tim Berners-Lee put the Web into the public domain, the most open of all open source licenses; as a result, like the ecosystem services provided by the sun, the open source software that makes the web possible disappears from our accounting. (In an interesting example of the Clothesline Paradox, it’s worth noting that while Internet users are often accused of enjoying free content, and being unwilling to pay for what they receive, they in fact typically pay substantial sums to their ISPs as a monthly subscription for access to these "free"
services. Simply by comparing the economics for the Cable companies and other ISPs for consumers who use Internet services to those who watch television, you can see that it is the ISP, not the
consumer, who is getting the free ride. On the television side, the Cable company must pay for content; on the Internet side, the Cable company gets content for free, with much of it created by the very customers who are paying them for access.)
Web hosting shows how open source software software impacts the economy: web hosting
companies rely on open source software to provide the infrastructure required to generate monhtly subscription fees, small and medium sized businesses (SMBs) get low cost access to the web and the open source tools to build a web presence - extending access to customers and transactions for
existing companies, and creating a new breed of company that could not exist without the web. Web hosting firms (including the web hosting component of Internet Service Providers) effectively provide access not only to a web server but also to domain name registration, programming
languages, content management systems, e-commerce apps and other software components for which there are both proprietary and open source alternatives. However, they overwhelmingly provide open source software as their first alternative. According to Netcraft, 85% of all websites are hosted on open source web servers, including Apache, nginx, and Google Web Server.
largest hosting company in the world. They provide hosting services for over 2 million accounts and 7 million domains, most of them SMBs. This data contains statistics and usage data from both
Bluehost and other affiliated EIG companies. Due to the size and the diversity of this data set, we believe that Bluehost’s data provides a reasonable proxy for the hosting market as a whole.
In this report, we use the Bluehost data to analyze the actual software used by their customers,
estimating the cost savings provided by open source software. We project the total economic impact of open source software as an enabler of the web hosting market as well as the economic impact on the SMBs who make up its primary customer base.
[1] Matthew Aslett 451 Research
[2] Internet Service Providers in the US: Market Research Report, April 2012
[3] Internet Matters: The Net’s Sweeping Impact on Growth, Jobs and Prosperity, by Matthieu Pelissie du Rausas, James Manyika, Eric
Chapter 3. Bluehost Customer Analysis
Web hosting firms typically provide a variety of services to their customers: one or more named domains, data storage and file transfer, email, and software for building a site. They may also offer ancillary services such as web design. Prices start as low as $4.95 a month.
EIG and its Bluehost subsidiary host over 7 million domains for more than 2 million customer accounts, most of them SMBs. For our analysis, Bluehost provided us with anonymized data from more than 1 million accounts, plus the results from a survey of approximately 4,000 customers. Based on our Bluehost domain analysis, we see an average of about 2.5 domains per customer. Domains have been active for roughly 35 months at an average rate of $7.49 per month. Of the
domains created, roughly 73% point to the registered name, 12% are redirected to a separate site, and 15% are parked.
More than 77% of the hosting plans have a relational database system installed (almost entirely
MySQL), averaging roughly 3.8 databases (i.e., schemas) per system. Multiple databases on a system show companies engaging in, and capturing some form of customer interaction, whether a guest book, product list, product information, transactions or some other dynamically served/captured content. About 32% of users have email addresses hosted, with an average of 7 mailboxes per user.
As far as web applications go, WordPress dominates in the Content Management category with a 55% share; the next closest is Joomla at 9%.
The average hosting fee has decreased more than $1 on average in the previous two years. This is a function of economies of scale that Bluehost has achieved, but may also represent increasing
competition in the SMB hosting market in the face of tough economic times. This pricing decrease may also be contributing to the growth of new users in the last couple of years.
continues to add new customers. Having fewer domains per customer may simply be a sign of the down economy, and may indicate less of a sense that multiple domains are necessary to protect a brand. Despite ICANN’s introduction of new top-level domains, the era of domain name speculation may be slowly starting to wane as well.
Customer Sophistication
Bluehost’s simple site builder tools allows 75% of users to build their own website, including 50% of those respondents who called themselves "Beginners" and more than 80% of respondents self-identified as "Intermediate" - clearly, building a web site on Bluehost does not require a high level of technical sophistication.
Roughly 25% had someone else build their site, 6% had it built by a friend or relative, 6% had someone in their organization build it, and 13% paid a third party to design and create the website.
Reason for Having a Website
Some customers have a website for purely personal reasons. Long before the advent of social
networking sites like Facebook, a blog or simple website was the easiest way to do social sharing on the Internet. However, many customers who wanted only this kind of personal Internet sharing were likely hosted directly on a blogging platform like wordpress.com or blogger.com. Today, most
businesses realize they need a strong web presence in addition to any social media efforts they make on Facebook or Twitter. Bluehost’s customer base is dominated by small and medium sized
businesses. Even those too small to have their own IT department find that they need a web presence to support their business.
The typical customer, representing roughly 48% of survey respondents, use hosted services for their business without a shopping cart. This is a site to provide information to customers rather than commerce. The next most frequent purpose is a site for personal use, representing about 22% of the user base. The third most frequent purpose is a business with an online store, i.e., supporting online transactions, payments and e-commerce, about 12% of respondents. Eleven percent are informational sites for non-profits. An additional 2% are non-profits with online donations or e-commerce.
The chart below shows the survey results to the question "What role does your website play in your business or organization?" The number one response, roughly 23% of the respondents, to provide more information to their prospective or existing customers. Roughly 20% built a website to help build their brand and add to their credibility as a business. The third most common reason to have a website was to generate leads for new members or customers.
Slightly more than a third of the customers use their website for a full-time business. About a third have a part-time business. Slightly less than a third declined to answer, most likely indicating they do not use their site for business purposes.
Company Size of Survey Respondents
The annual revenue of the Bluehost customers who filled out the survey is shown in the chart below. Only 4% of the respondents indicate that they have annual revenues of more than $1 million USD, suggesting that the businesses represented in this study tend to lie on the smaller end of the spectrum.
Percentage of Revenue Derived Online
business (i.e., the percentage of revenue derived from your website)? Select the figure that’s closest to the actual percentage; guesstimates are fine. The question elicited the following responses:
Percent of Business from Online Number of Respondents
05% 256
Slightly less than half the respondents didn’t get any revenue from their website; nearly 20% got more than half their revenue from their website, and almost 10% got 90% or more of their revenue from their website.
Just how reliant SMBs are on their website is evident from the answers to the question If my website went offline tomorrow … We see that roughly 28% (19% significant + 9% lose their business) of the respondents would be significantly impacted by losing their web presence.
Payment Methods
The following chart shows methods for collecting payment. Fifty-three percent of survey respondents accept PayPal, 26% accept a credit card via an online form, 12% accept payment by check or money order, and 9% accept credit cards over the phone.
kinds of products they offer, location, contact information, and opening hours. Restaurants might also offer menus, and, if they offer reservation services, it is more likely to be through external services like OpenTable than through an online form.
We also note that even when SMBs offer products for sale on their website, they may not be using a full-function e-commerce tool. For example, SMBs with a limited number of products and don’t need a sophisticated commerce platform.
When thinking about commerce and SMBs, keep in mind that companies like Etsy, eBay and Amazon make it easy to use a hosted site for displaying information and then move the transactions to these other platforms for purchase. This federated approach to e-commerce contributes to growth of SMBs and what Etsy refers to as rebuilding human-scale economies around the world. Etsy reports that there are more than 15 million buyers and creative businesses in their vibrant community. The UN Global Compact Report, eBay Inc. Communication of Progress [4] indicates that more than 25 million
entrepreneurs and small business owners are doing business on eBay.com. eBay’s purchase of the company behind the Magento eCommerce platform may help accelerate SMB usage of eBay as a sales platform. Amazon has 17 different categories in which individuals and small businesses can market their own items through the Amazon store, and a web services platform designed to make it easy for third parties to sell Amazon items through their own sites and have the orders fulfilled by Amazon.
In addition, many small business websites make money from Google AdWords, Facebook ads, and other mechanisms that generates revenue. Later in this report, we will look more closely at the role Google Adwords may have on SMBs as a proxy for estimating the overall economic impact of having a website.
Browsers and Operating Systems
Seventy-seven percent of the our survey respondents use a typical desktop browser, and 23% used a mobile browser. Firefox and Chrome are the two top browsers - survey respondants are actively installing these altenative browsers and not passively using Internet Explorer on Windows or Safari on Mac.
Browser and client operating system information were captured when users completed the survey. The following chart is a bit surprising in that it is heavily dominated by Firefox. The dominant
Equally interesting is how many iOS users there are. In the Browser chart above, you’ll notice that Mobile Safari has the third largest browser share.
The chart below indicates the client platform being used by the respondents to the survey.
Mac and iOS users show up surprisingly often for these predominantly SMB respondents, e.g., 24% of respondents were on Macs compared to Apple’s 12% retail platform market share [5].
Chapter 4. Software Used By Bluehost
Customers
Bluehost offers one-click installation for more than 70 different software packages and services that users can select from when signing up for a hosting plan. There are 26 categories of software and services, including Backups, Blogs, Business Tools, Classifieds, Client Management, Content Management, eCommerce, Education, Forms and Surveys, Forums, Guestbooks, Help Center, Live Chat, Mailing Lists, Photo Galleries, Product Sourcing, Project Management, RSS, Security, Social Networking, Statistics, Utilities, Webmail, Website Builders, Website Design, and Wiki. In addition, customers are able to upload software to their account on their own.
Far and away the most common applications selected by customers are Content Management Systems such as WordPress, Drupal, and Joomla. We also took a close look at e-commerce systems such as Magento, osCommerce, and Prestashop.
The Open Source Software Stack
These applications in turn typically run on an open source software stack consisting of Linux, Apache, and MySQL. (Bluehost also offers PostgresQL, but few users choose it, as MySQL is the default database installed with most of the applications that rely on databases.) Domain name services are managed by PowerDNS.
Bluehost does have a small number of users running on Windows and SQL Server, but they are legacy customers from an acquisition, and did not feature in our analysis.
Bluehost is thus slightly more skewed to open source than the overall Internet population. According to Netcraft’s July 2012 web surver survey [6], 61.45% of known websites are hosted on Apache,
14.62% on Microsoft servers, 11.09% on nginx, and 3.44% on Google Web Server. The Web thus runs on approximately 85% open source web servers, while almost all of Bluehost’s customers are on Linux and Apache.
The choice of database and language is often driven by the choice of a higher level website
management tool such as WordPress. WordPress was built as a big instance of PHP and MySQL, so users tend to use those same tools: PHP on the back end, and JavaScript on the front end. At the time this paper was being readied for press, Bluehost was the top provider listed on hosting tab of the WordPress.org web site.
The chart below shows the number of sites that had just one instance of MySQL running, those with more than one, and those with more than ten. The ones with more than ten represent a fairly
sophisticated user. Users who understand that they need more database instances, and not just more
tables in their database, have some interesting dynamics going on with their website. Those with two or more instances, roughly 55% of all MySQL users, may be using more instances for business, or experimenting, or truly need more than one database as they scale. They may also simply have installed multiple apps, each of which carried along with it its own MySQL instance. At the SMB level, though, we think it is fair to say that those with more than ten databases are heavy users, which is 7% of all Bluehost MySQL users.
CMS and E-commerce Tools
Bluehost users are offered an array of software packages to use with their hosted platform. The most common choices are a CMS such as WordPress, Joomla, or Drupal. A small percentage of users host their own e-commerce capabilities. A small percentage do their own programming in various open source languages.
The following tables represent the number of SMBs who use a particular tool. The total population of accounts that have tools installed rather than a pure HTML site is roughly 504,831 users out of the 1+ million users in the Bluehost data.
CMS Number of users % Share of All Tool Installs
WordPress 189,913 38%
Joomla 53,324 11%
Drupal 18,510 4%
Now let’s look at the same data for e-commerce. You can see that osCommerce is by far the largest installed tool for doing e-commerce on a Bluehost account. However, it is still a tiny proportion overall. Note, however, that the CMS platforms themselves have e-commerce plugins. For example, the Cashie plugin for WordPress makes it simple to turn WordPress into an e-commerce platform, and the Ubercart and Drupal Commerce modules do the same for Drupal. Our measurements don’t include these e-commerce platforms.
E-commerce Number of users % Share of All Tool Installs
Magento 6,032 1%
osCommerce 10,627 2%
Prestashop 1,857 0%
Analysis of the CMS Tools
The big three CMSs are WordPress, Joomla, and Drupal. Whether you look at job postings, Google Trends, or Bluehost user data, WordPress is the leading CMS tool. For many SMBs, WordPress is all they need to engage their customers, and even do some rudimentary sales by putting a phone number on the website to call/order and taking a credit card directly via the phone. This was not measured in any of our data sets other than the customer survey, but it is quite common in practice.
The Water&Stone 2011 Open Source CMS Market Share Report [7] surveyed more than 2,500
respondents. Twenty percent were single-person businesses, and 33% had between two and ten employees.
Total installs reported by Water&Stone for WordPress are about 4.3 million compared to 1.7 million for Joomla. But in Weekly Downloads, WordPress is now about a factor of eight times that of
Joomla, the next closest competitor in the small business market. This study corroborates the dominance of WordPress that we find in the Bluehost data.
summary of cost components that may make the platforms more palatable for a SMB.
What WordPress Joomla Drupal
Cost to set up $250-$15,000 $5,000 - $50,000 $2,000 - $20,000
Avg Monthly Maintenance $250 $1,500 $500
Number of Plugins 14,629 8,039 7,609
Number of Themes 1,392 885 54-100 [a]
Monthly Visits to Main Site 50,000,000 55,700 59,600
[a] ThemePartner
Programming Languages
The chart below shows the programming languages used by Bluehost customers. PHP and JavaScript combined account for roughly 80% of the language activity on Bluehost. The only other language with a double-digit representation is Perl.
The chart below shows a logarithmic view of the programming languages and their growth among Bluehost customers for the years between January 2001 and June 2012. The most notable spike was in 2004 when Python and Ruby both suddenly burst up the scale. Python grew by a magnitude of 10 during the first few months and Javascript kept doubling its size every couple of months. Perl, Ruby, ASP, and Python seem to have hit a wall around 2007 and has been flat or on a slight trend down since. Note, however, that this chart does not truly reflect underlying language trends in the broader market, as it is significantly affected by changes in EIG support for various languages.
[6] Netcraft July 2012 Web Server Survey
[7] Water&Stone 2011 Open Source CMS Market Share Report (Nov. 11)
Chapter 5. Economic Impact of Open Source
for SMBs
Constant downward cost pressures during the last 15 years from open source projects has made having a web presence affordable, and the business opportunities that a web presence provides are now more reachable for more if not all SMBs, including the growing home-based business (HBB) segment.
For SMBs, a web/online presence pays off immensely. According to a 2011 McKinsey study, SMBs that invest most heavily in web technologies were shown to grow fastest, more than twice as fast as companies who make the lowest level of investments. [9] McKinsey found that the increased
productivity of the SMB market in mature economies had a significant impact on overall GNP growth in those countries.
In this section, we’ll look at some of the factors leading to this pay off. We’ll estimate the total revenues of the businesses hosted on Bluehost, and by extension, by the entire hosting market. We’ll also show a methodology for determining the cost savings to business from the open source platform, and will explore one way that having a web presence makes such a significant difference to small businesses.
Economic Activity Attributable to Hosting Industry Customers
According to the customer survey described in Chapter 2, 71% of customers are using their site for business purposes, including non-profits. Customers reported that their businesses ranged in size from under $10,000 in annual revenue (clearly a home-based or supplementary income business) to $5 million or more.
If we make the assumption that survey respondents are representative of the Bluehost customer base as a whole, we can apply these percentages to project the overall economic activity represented by the SMBs in the Bluehost customer base, as shown in the following table. We first assume that the total SMB population is 71% of the 1 million customers in the data set, or 710,000. (22% of surveyed customers reported that their website was for personal use; another 3% reported that it was for a group or association; and 4% reported "Other.")
Then we apply the percentages for each revenue size segment to derive an approximate number of customers in that segment, and multiply by the median from that revenue range to derive an aggregate revenue value. (In the case of the top range, $5 million or more, we used $5 million for our
calculations.) These calculations may underweight the size of the businesses in the sample, because those with revenues over $5 million could be considerably larger.
Using these very rough assumptions, we see that the Bluehost customer base has aggregate revenue of about $124 billion, as shown in the table below.
Reported Revenue % of Respondents No of Firms in Segment Segment Revenue
More than $5 million 0.94% 6674 $33 billion
$500,000-$999,000 2.83% 20093 $15 billion
$250,000-$499,000 3.81% 27051 $10 billion
$100,000-$249,000 8.22% 58362 $10 billion
$50,000-$99,000 9.16% 65036 $4.8 billion
$10,000-49,000 16.31% 115801 $2.9 billion
Less than $10,000 31.93% 226703 $1.1 billion
Prefer not to answer/don’t know 24.18% 171678 NA
Total 709929 $124 billion
We estimate that Bluehost represents about 10% of the hosting market. By extension, then, assuming that the size distribution of companies in Bluehost’s customer base is representative of the industry as a whole, we can estimate that businesses who rely on hosting/domain name providers for their web presence represent a trillion dollar market. While these businesses are on the low end of the SMB market, their collective economic impact is huge.
These numbers are an extremely rough estimate, but they give a sense of the order-of-magnitude
benefit that we can attribute to having a web presence, and by extension, because that web presence is made possible by open source software, the hidden contribution of open source software to small business in the US economy.
Open Source Cost Differential
The price for a web presence has been driven down for more than a decade by a number of factors, including resource sharing, enabled by virtualization, Moore’s Law lowering the cost and increasing the power of computer resources, data center economies of scale, and, as we cover below, the
availability and adoption of no-cost/low-cost open source projects as key web presence components. These lower costs have made a web presence, and all the benefits that a web presence provides, available to a wide swath of SMBs, including the growing HBB segment.
Open source projects and vendors provide low-cost/no-cost options for business consumers, and, often, help keep the price of competing commercial products in check. For some of the tools that are relevant to SMBs, for example ecommerce and CMS, open source projects and vendors dominate the market.
For tech savvy SMBs, open source offers other benefits in addition to low cost: access to the source code, including the ability to make changes specific to your business, and access to community-based support. There are many stories of open source tool users posting a problem to an online forum and having the developer who wrote the code respond with a fix.
or via a hosting or cloud vendor. Later in this report, we talk about the impact of the large selling platforms and their potential impact on SMBs.
Open Source Cost Differential Model
We set out to build a model to help quantify the open source savings differential for infrastructure software like operating systems and databases—the type of infrastructure that undergirds most applications. To access a proxy of prices for roughly comparable open source and commercial
components, we turn to Amazon’s EC2 hosted platform pricing, with its open source (Linux, MySQL) and commercial (Microsoft Windows and SQL Server) options running on the same hardware
platforms in the same data centers with the same tiered pricing options. We use an analysis of
Bluehost’s business customers' tool usage to help us determine the share of SMB users likely to need a large database—an extra cost item on the proprietary side but not on the open source side—based on their use of SMB applications like e-commerce and CMSs.
Our model shows that for a proxy of the SMB market, the price differential for hardware/software platforms running commercial software is about 2, i.e., SMBs would pay about double for the hardware/software infrastructure they need to operate online to run on commercial platforms. For smaller SMBs, who either don’t need a database or can use free commercial options, like SQL Server Express, the differential is about 1.5.
For the software component of the server platform alone, the price differential is likely higher. In any case, the savings created by open source options likely make a web presence, from a simple information website to full-blown e-stores, accessible to more SMBs.
Here’s the high-level view of the model:
Share of SMB customers with full access db * full access db price differential + share of SMB customers with web access db * web access db price differential + share of SMB customers with no db * no db price differential
At a high level, the model looks at the share of SMBs that need the various levels of database support available for Windows platforms on EC2 and multiplies that by the price differential between
Windows and Linux pricing for the types of EC2 instances appropriate for the SMB’s web presence. You can find more detail about the methodology and the assumptions used to develop the model in the Appendix.
We focus on the infrastructure components of operating systems and databases as they are commonly required for a web presence, managing content, and online stores, and they require similar
administration and operating expense loads. For more complex applications, researchers have found more of a mixed picture regarding savings from open source applications. Tellingly, for the types of applications most SMBs need for a web presence (CMSs and ecommerce apps), open source options dominate the low-end of the market—all the leading applications operate on both Linux and
Windows, and most of the leading CMSs run on both MySQL and SQL Server.
For additional context on SMB tool usage, we compare tool usage for Bluehost business customers with data compiled by W3Techs from Alexa and Google Analytics [10]. The chart below shows that
users tilting towards WordPress and the other apps shows that SMBs prefer simpler apps and Bluehost’s easy installation process due to less access to technically sophisticated resources.
Benefits of a Web Presence
There are many benefits for SMBs with a web presence: ready and mobile access to information about your business, online advertising, print advertising, email marketing, ecommerce stores, social network marketing and commerce, and others. It’s worth emphasizing that having a web presence helps expand an SMB’s potential customer base to cover the entire world. Twenty years ago, an average SMB would be hard-pressed to get customers outside of their own geographic region, let alone their own town. A web presence today breaks down those geographical boundaries. In any event, we know that SMBs are a growing part of the Internet economy, and, from the McKinsey study, that those SMBs most heavily invested in web technology grow the fastest.
It is difficult to quantify every aspect of this benefit. However, following the lead of Google’s report on the economic benefit of Google Adwords [11], it is possible to use Google Adwords online
advertising as a kind of proxy for economic impact.
It’s a safe assumption that SMBs uses Google AdWords to help boost their revenue. We know that spending on Google AdWords works best if users go to a landing page with a clear call to action. In addition, having a website allows SMB owners to conduct simple A/B tests to increase conversion rates. Assuming that the average SMB owner who controls their own landing pages is able to meet Google’s conservative estimate ( 8 * (what you spend on AdWords) ). So what does this mean when you aggregate all SMBs that have a web presence, or more importantly, those that do not have a presence are losing potential huge revenue gains. So let’s look at a formula that could help us get more insight into the revenue gains or losses due to a web presence. Note that we are not covering the 70% of SMB online ad spend not used for Google Adwords—clearly, SMBs get some value for these investments that increase the economic impact beyond the calculations we show below.
(Total online ad spending by SMBs) $5.4 billion * (share of ad spending on Google AdWords) ⇒
37% (online search) * 80% (Google share) * 8 (this is the Google multiplier: $1 of ad spending ⇒
$8 revenue) = Economic impact of Google AdWords = $12.8 billion
Next we create a blunt estimate of the dollars that could have gone to SMBs that don’t have a
website. We use the US census count of SMBs [12], and an amalgam of estimates of how many SMBs
have no web presence [13]:
US SMBs (2010): 5,300,000 est SMBs offline: 30%
(# of SMBs without a website ) 1,590,000 * ( EconImp_Goog_SMB / # of SMBs with a website ) ( $12.8 billion / 3,710,000) = (AdWords economic impact left on the table) = $5.5 billion
This is an estimate, because we are assuming that EconImp_Goog_SMB came solely from SMBs with websites. (You still can use AdWords even if you don’t have a website, but you probably need to be able to optimize your landing pages to maximize conversion and get to the 8 multiple from Google.) We know that SMBs have access to niche and specialized promotional platforms. From the
(centered around knitting sites and forums like ravelry.com), and that she doesn’t need paid search ads to reach new customers - an example of the hidden economy at work, no money changing hands and great value from a web presence, sitting on an Open Source platform, and a niche online
community. For folks running SMBs who lack technical knowledge, creating an Open Source online presence operates like a Higgs field, an invisible force that they can leverage even if they don’t complete understand what it is.
In Conclusion
The SMBs who rely on hosting services for their web presence collectively represent more than a trillion dollars of economic output. Given McKinsey’s assertion that companies with a web presence outperform those without, the contribution of the open source software offered by web hosting
companies has an economic impact far more significant than direct monetization of that software. Using Google’s methodology for estimating the economic impact of Google Adwords - an impact that is only available if you have a website - we estimate that the total US SMB market received an
economic impact of $12.8 billion from Adwords. This is obviously a small fraction of the overall benefit from having a web presence.
[9] Internet Matters: The Net’s Sweeping Impact on Growth, Jobs and Prosperity, by Matthieu Pelissie du Rausas, James Manyika, Eric
Hazan, Jacques Bughin, Michael Chui, and Remi Said; May 2011
[10] w3techs.com
[11] Google’s Economic Impact: Where we get the numbers
Chapter 6. Open Source and Small Business in
Practice
Does open source make it easier for a SMB to get going? We are going to show examples in practice. The first small business relies on a mix of Open Source and commercial software; the second is
almost solely dependent on Open Source. The economics of the businesses are noticeably different. The first example is of someone with no intention to go big but rather do something she loved, and decided to make some money doing it. There were no patent attorneys, trademark lawyers, big events in San Francisco or New York. She seems very happy with where her business is today and where she is going with it. And happiness is one part of the metrics game that does not show up on a balance sheet. The second example is a couple who wanted to start their own business, looked around for something they could try to make a go of, and found a unique niche. They would like to get big but understand that they need to take steps to get there.
In both cases, it is hard to imagine these companies trying to start up 20 years ago, when you could barely reach new customer outside of your own town, let alone reach international customers, or change their offerings quickly (remember brochures), or build their own marketing list rather than renting strangers' names.
Case Study of a SMB #1
We recently spoke with Julie Weisenberger, who owns Coco Knits (CocoKnits.com). She started wanting to put some knitting patterns on the web and didn’t intend to create a self-sustaining business. But for the past five years, Julie’s main business has been selling knitting products online. She sells both hard copies of knitting patterns and downloadable PDFs of the patterns. She also sells knitting supplies.
Her customers come from around the world. The majority from the US, but she also has customers in Canada, Australia, Finland, Denmark, Germany, UK, Japan, South Africa, Saudi Arabia, and China. This highlights one of the major benefits of a web presence: it allows a small business, especially one who sells digital goods, as CocoKnits does, to become an exporter, as well as selling locally. CocoKnits gets most of its revenue from downloaded patterns, however, hard copy patterns have become an increasing share of her businesss. Her average monthly revenues run about $4k-$5k directly through her online shopping cart, made up of both PDF downloads and product sales. Her business has two main components. The first component is selling physical knitting patterns that she wholesales to knitting shops. For the physical products, her warehouse is in Southern California and her distributor is in Oregon. The second is her online store that we will describe below.
Unlike many startups who know they need a fast transaction system, or one that handles creating multiple accounts quickly, or has secure file transfer, most SMB startups do not use technology to fashion their business. Rather, they use whatever they can to accomplish what they need to keep
moving forward. If you are a startup with some investment, you will wisely choose the pieces of your stack to make the most of what your investors have entrusted with you. However, if you are building a web based business, or you have an existing business and want to have a web presence, you may choose the minimal viable stack to get going. This is often a hosted site with a few packages or add-ons included. We think it is fair to say that these owners often do not choose the tech for their
business, but rather fall into it through a variety of factors. If they choose a hosting service, those services come with different plans representing tech stacks. What we have found in talking with SMB owners and looking through all the data we have collected, analyzed, and reported, is that WordPress represents the smallest investment in tech knowledge and therefore may be the best ROI for a SMB. When asked about her technology stack, things got a little fuzzy. It was clear that Julie knew what her site needed and that it was good enough. There was no expectation of using the optimal technology stack, improving speed for her PDF downloads, etc. She has a business that is working to her satisfaction. Most of the programming and tech setup is done by a contractor who does both design work and also writes code. The contractor tends not to use standard packages but rather develops custom plugins or packages. On second thought, she later said the contractor uses the tech
infrastructure provided and adds onto it. Sounds a little like she is not really sure what he does, but her site works, looks good, and makes her a nice revenue stream.
SMB #1’s technology stack
CocoKnits' technology has to support a 24 hours per day uptime, as customers hit the site every hour of every day from around the world. Here are the components of the minimal tech stack that she uses to run her business.
She uses a hosting service provider with a Linux base.
e-Commerce is handled by BigCommerce which is a proprietary commerce solution.
Content management is handled by WordPress with a few plugins tuned to her particular needs. Email marketing/newsletter fulfillment is handled by MailChimp.
Custom programming is provided by a local contractor
Online sales
She uses BigCommerce for her shopping cart (switched over from Junkie about a year ago). E-Junkie was $18 a month when her business started out but quickly outgrew the service because of too many products. Julie finds that BigCommerce can be very frustrating to use as a business owner. She’s not sure what e-commerce platform sits underneath her online shopping cart. We suspect she is not much different than other SMB owners. Looking at the BigCommerce website, they offer a
RESTful API and have sample code available in PHP, cURL, and Node.js. Following is a look at what her online store does for her overall business.
Area 2011 2012 YTD
Revenue $34,622 $27,100
Order Completed 3,955 2,405
Conversion Rate 1.14% 1.58%
Programming languages and tools
When asked about whether her contractor was using PHP or MySQL, her response was that she had no idea what was being used. Her developer could answer that question but she could not. A quick inspection (view source) of her website revealed that both JavaScript and PHP are being used.
CMS
The entire website is laid out using WordPress. She says it is in two main parts. Half is in information served to visitors and the other is in serving products that are purchasable and goes through Big-Commerce.
Marketing and sales
Julie uses an email marketing engine to build her customer names. She currently sends email to about 9,000 unique addresses who have opted-in to her newsletter. She used to run through GoDaddy’s email marketing engine, but recently switched to MailChimp. Before using MailChimp, the GoDaddy email marketing tool provided demographics, and now she needs to go in and look at a log file to see why people signed up for her newsletter. When she first started her business, much of her traffic came from ravelry.com, which is like a Facebook for knitters. But lately she has not needed to advertise or jockey for a top placement on ravelry. She currently does not use AdWords or any SEO or marketing tools. She is going to be purchasing an advertisement spot on a knitting site soon.
How do you manage the costs?
Her contractor uses the hosting infrastructures provided by WordPress and BigCommerce to keep costs low, while still being able to customize the look, behavior, and capabilities of the online store and site. The only thing she has spent money on is the fonts used on the site. When asked about
spending $1 on Google AdWords to produce $8 in return, she was intrigued but not ready to jump. She has not felt the need to put together all her costs to determine what level of profit she is making or if there are potential opportunities to scale.
To start she paid her contractor about $5k to get things up and running. She now estimates that she spends, as a back of the envelope estimation, $500 per month to run her business online. She
indicated that if she had been presented with more substantial start-up costs, and a web designer who told her to purchase this and that, she would have been scared off and not started her business.
She now has these as her cost of doing business:
This means that Julie spends approximately $1,020 per month to generate $4,000 to $5,000 in return. Remember this is a person who enjoys what she is doing and started her business out of her passion for knitting.
Case Study of a SMB #2
Now let’s look at another SMB that has taken a little less expensive route (a full open source solution) in their costs to run a website.
In our second dicsussion with a SMB, the husband and wife team of Nicole and Brian Sidwar formed
Castlechat.com in March of 2012. They are located outside of Orlando, Florida.
Brian and Nicole wanted to start their own business. They were on vacation at Disney World in Orlando and began thinking about what kind of business they could start that would be somehow related to the Disney properties. Their idea was to create a place for other small businesses to advertise. They discovered that there were numerous other sites in the same space, but that most of the existing sites would only take one advertiser from each industry category. Also, their competitors offered information only on their sites, so Brian and Nicole took it a step further and set up a full-service travel agency to assist people in booking vacations.
They saw an opportunity to create a site that was everything about Disney. They offer unbiased news, information, and reviews of the Disney properties: user-contributed content that will help customers to evaluate restaurants and other local services, or help them to do research to plan a better vacation. Neither Brian nor Nicole have any programming experience, yet they have been able to do everything themselves. Brian mentioned that when they want to install a plugin or something similar, they go on the Web to forums or websites and get detailed and oftentimes tailored instructions on how to
accomplish what they need to do.
Since they just started their business in March of 2012, their revenues are not something they want to share at this time. However, they are averaging about 7,100 unique visitors per month and are on track to see that move to 10,000 per month soon. They plan to provide either data reports from iPage analytics to their advertisers or when they get Google Analytics running they may supply that to their partners.
They have not looked at their geographical distribution of customers yet, but they are big fans of the
their content to their specific customers. Sounds like a sound plan.
Different type of start-up
Nicole and Brian represent a slightly different type of SMB startup. They are rolling up their sleeves and building their site component by component. They are using the Web to learn enough to change and modify their site. They are doing incremental changes, but in a thoughtful way that does not break other aspects of what they offer. They have one order form at this time for their Castle Connection where you can sign up for a personalized package of more than 20 items that will provide you with a better vacation experience. The form uses PayPal when you check out.
SMBs #2’s technology stack
This SMB uses a Linux-based hosting option with three domains attached. They have a few mailboxes installed for correspondence with their customers. They have four MySQL instances installed and a bunch of PHP and JavaScript files on their site. Brian mentioned that they do pretty much everything with WordPress. They will research a plugin extensively and find detailed explanations of how to install it before they move forward with a change like that.
Hosting base is Linux.
Databases are run by MySQL.
Plenty of PHP on their site and they only change pieces they know won’t break other things. JavaScript on their site and they only change pieces they know won’t break other things. WordPress is used to manage all their content and serve pages to their customers.
Online sales
As mentioned earlier, there is a link to PayPal from a PHP form built with WordPress. The form takes you to a PayPal checkout that is written in JavaScript. This may change as their business grows and when the day comes that they sell merchandise as well as the packages they now offer. CastleChat also has opportunities for third-party advertisers, and they expect this to be a growing area of their business.
Programming languages and tools
Again, the site is mostly run by WordPress, but there is plenty of evidence of PHP and JavaScript. Brian has an infectous attitude of can do, and we are sure he will do what he needs to to run his site. He is gung-ho about learning any programming he needs to evolve his website. It really is refreshing to listen to small business entrepreneurs with so much passion for learning more so they can build and improve their business.
CMS
As much of this report shows, WordPress is the key tool. It has the lowest investment in time, money, and learning curve; it absolutely is the best ROI for a SMB. Brian did report that he and Nicole
evaluated other CMS solutions and WordPress was the most suitable because of ease of use, plugin availability, and public support on the Web, specifically in forums discussing installation and
maintenance issues.
Nicole and Brian have a pretty smart strategy for getting their start-up going. They have saved lots of money with their choice in hosting services, maintenance costs, and add-ons, so they are investing in SEO services from their hosting provider. Think about that. While you are starting out, you need more customers, not whizbang technology. SEO will help increase their reach and will build their customer base. Brian certainly seems like he will learn the basics of SEO quickly and will be running the show soon. They were not aware of the spend $1 and get $8 back in the Google AdWords promise, but I am sure they will evaluate that too. The two owners plan to advertise on other sites that will generate more traffic and customers for themselves. I am sure they will use the same analytical approach to finding the best sites to advertise with.
How do you manage the costs?
Costs? Wow, so here is a major difference in these two case studies. Brian and Nicole have a three-year plan that is less than $5 a month for hosting. They use WordPress to deliver their content and PayPal to securely book sales. So all this amounts to under around $44 a month. This is so low they can afford to add the SEO package on now while they ramp up. But the SEO package is not a fixed cost; it’s a variable cost each month that can be assigned to a marketing cost. When you add that on to their package they still come out at $544 per month to run their SMB. Let’s take a little deeper look at the economics of an open source approach versus a mix of open and proprietary.
Return on investment comparison
Open source customer does nothing with the savings and keeps more than $11k otherwise spent on a technology stack.
$976 * 12 = *$11,712* per-year
Scenario two:
Open source customer goes with SEO Package to increase customer acquisition and awarness of their company.
Monthly SEO cost = $500 Monthly savings = $976 - (monthly SEO cost) = $476
[ $476 + $500 * ( 2 * 0.7 * 5) * (m) ] * 12 = $16,212 per-year
The factor (2 * 0.7 * 5) ⇒ is from Google.
Scenario three:
Open source customer continues on with SEO Package, AND invests rest of savings into AdWords
[ $476 * 8 + $500 * ( 2 * 0.7 * 5) * (m) ] * 12 = $49,896 per-year
8 is the AdWords multiplier
m = multiplier (effectiveness of SEO relative to Google), in this case m = 0.1 (given the AdWords campaigns in place, (we make a conservative assumption that SEO is one-tenth as effective)
Google AdWords multiplier: "… for every $1 a business spends on AdWords, they receive $8 in profit through Google Search and AdWords"
So with a back-of-the-envelope calculation you can see that scenario 3 of investing in AdWords and SEO could generate two-thirds more revenue than scenario 2 and more than four times as much
Chapter 7. In Conclusion
While it is widely recognized that major Internet sites are built on an open source platform, and that much of the Internet’s infrastructure is based on open source software, there has been little attention paid to the economic impact of open source. In much the same way that solar energy and other
"ecosystem services" are ignored in our economic accounting, open source and the open protocols of the Internet are taken for granted.
It is easy to discount the value of open source software in the success of sophisticated Internet
applications such as Google or Facebook; after all, it is their proprietary services that allow them to derive outsized revenues and stock market valuations. In the case of Internet Service Providers,
which should properly be considered subscription resellers not just of bandwidth but also of services based on open source software, it is clear that a more significant part of the revenue should be
attributed to that software.
But the argument is clearest in the case of the $5 billion/year domain name registry and domain hosting industry. Here, the majority of what is being sold is subscription access to open source software. Yes, there are bandwith and data center costs, but the service being sold is access to that software.
Most compellingly, though, the economic impact of open source software is seen "downstream," in the increased revenues of the Small and Medium Sized Businesses who, because of ready access to open source software platforms via web hosting businesses such as Bluehost, are able to advertise their business on the internet, and if they actually sell products online, to expand their customer base far beyond local markets, reaching customers around the world.
We estimate that Bluehost customers alone experience a $12.4 billion dollar economic impact on their business.
Given that SMBs are widely thought to generate as much as 50% of GDP, the productivity gains to the economy as a whole that can be attributed to open source software are significant. The most important open source programs contributing to this expansion of opportunity for small businesses include
Chapter 8. Appendix
AdWords Impact Model
Assumptions used to build the model:
1. Total ad spending by SMBs ⇒ average of these two $5.4 billion in 2010, according to this
article [14] from BIA/Kelsey.
$2,300 * # of SMBs in 2011. This survey estimates online ad spend at $2,300 per SMB in 2011.
2. Share of ad spending on Google AdWords ~29%. This is a product of the numbers below. By 2010, 37% of online ad spending will go to paid search. [15]
Google owns 80% of ad spend on paid search. [16]
37% * 80% = 29.6%
3. Google multiplier = 8. [17] We conservatively estimate that for every $1 a business spends on
AdWords, it receives $8 in revenue through Google Search and AdWords. Thus, to derive the economic value received by advertisers, we multiply our AdWords revenue on Google.com search results in 2011—what advertisers spent—by 8.
Google owns 80% of ad spend on paid search. [18]
Model '(Total online ad spending by SMBs) $5.4 billion * (share of ad spending on Google
AdWords) ⇒ 37% (online search) * 80% (Google share) * 8 (this is the Google multiplier: $1 of ad
spending ⇒ $8 revenue) = Economic impact of Google AdWords = $12.8 billion
US Census Data for SMBs in 2010 [19]:
5.3 million
We looked at a number of sources to estimate the share of SMBs who are off-line. The most creditable, up-to-date source estimated that 30% of SMBs were offline [20]
SMBs offline = 5,300,000 * 30% = 1,590,000 SMBs online = 5,300,000 * 70% = 3,710,000
(# of SMBs without a website ) 1,590,000 * ( EconImp_Goog_SMB / # of SMBs with a website ) ( $12.8 billion / 3,710,000 ) = (AdWords economic impact left on the table) = $5.5 billion
This is an estimate, because we are assuming that EconImp_Goog_SMB came solely from SMBs with websites. (You still can use AdWords even if you don’t have a website, but you probably need to be able to optimize your landing pages to maximize conversion and get to the 8x multiple from Google.)
Open Source Cost Differential Model
The assumptions, methodology and equations used to build the Open Source Cost Differential model Assumptions used to build the model
Amazon is equally adept at negotiating with their Open Source and commercial providers
We chose specific pricing options that reflect typical choices for SMB customers, knowing that there is no typical SMBs and that their online needs vary widely:
One-year term
“Medium Utilization Reserved Instances” - providing a reserved instance and balancing upfront costs with lower hourly costs for a 1 yr term
— Average of Small (Default) and Medium pricing within the “Medium Utilization” tier The price differential between open source and commercial instances drops as usage/volume rises; these changes have a small effect on the model
To calculate the cost differential, we allocate upfront costs by month and assume hourly fees for 18 hours of usage per day in a month
EC2 pricing includes the hardware, system administration, network, HVAC, real estate and other costs required to run a network connected server instance
Database pricing
MySQL is included with the Linux option pricing
— Three combinations of usage and price options are offered for SQL Server SQL Server Express - free for up to 10 Gb
SQL Server (Web) - for work loads typical of web sites running a CMS
SQL Server (Full) - full access loads and function typical of transaction systems like ecommerce and finance apps
Ecommerce systems require full database access CMS systems require web database access
— The mix of Bluehost business customers use of ecommerce apps, CMS apps and simple web presence represents a reasonable proxy for the US SMB market:
7.4% have an ecommerce system (all have a web presence, many have CMS) 70% use a CMS to manage content, but no ecommerce system
23% have a web presence only, i.e., no ecommerce or CMS instances — Many SMBs generate low data volumes, we assume:
50% of SMBs with an ecommerce have small enough data volumes to use free SQL Server Express
50% of SMBs with a CMS have small enough data volumes to use free SQL Server Express Our model combines the usage patterns based on the Bluehost SMB business user data with the price differentials between the various options to determine an overall open source / commercial price differential.
Adjusted ecommerce share (adj_ecomm)
7.4% of SMBs w/ ecommerce * 50% of SMBs too big for free comm’l database: 3.7% Adjusted CMS share (adj_cms)
70% of SMBs w/ CMS * 50% of SMBs too big for free comm’l database: 35% Web Presence (web_pres)
61%
General price differential formula price
components
upfront price per month (upfront_price_mo)= upfront_price / 12
hourly rate per month (hr_price_mo) = hourly_rate * 18 hrs/day * 30 days upfront_share = upfront_price_mo / (upfront_price_mo + hr_price_mo) price = upfront_price_mo * upfront_share + hr_price_mo * (1 - upfront_share) price differential = 1 + ( (avg(windows_price) - avg(linux_price) / avg(linux_price) Full access database price differential (fulldb_diff): 9.83
Web access database price differential (webdb_diff): 2.15 No database price differential (nodb_diff): 1.57
Formula
(adj_ecomm * fulldb_diff) + (adj_cms * webdb_diff) + (web_pres * nodb_diff) = (2.7% * 9.83) + (35% * 2.15) + (61% * 1.57) = 2.05
[14] BIA/Kelsey [15] eMarketer
[16] ADV Media
[17] Google
[18] ADV Media
Chapter 9. Programming Language Trends
At O’Reilly Media, we have a data mart containing six years of job posting data from
SimplyHired.com, a job posting site that aggregates most of the online job postings in the US. Below, we take a look at job posting trends involving computer languages over the past three years. This data provides context for the Bluehost data.
You will notice that in each of these charts there is a light green area plotted behind the bars. Those green areas show the peaks and valleys of all job postings, not just technology jobs or postings for the specific language. This way you get a sense if the whole US economy is trending up or down and does the language mirror that trend.
Note that the scale of these charts is not the absolute number of job postings, but is normalized
relative to the number in January 2009, which is set at 100. A value of 200 thus means that there has been a 100% increase in the number of postings since January 2009.
Trends
JavaScript seems to be a close proxy to what is happening in the overall market. There are few monthly instances where JavaScript is counter to the overall market. March 2009 is an easy anomaly to spot. Pay attention to the scale as the other languages are not quite as big, so the charts may look similar, but scale is important.
The next chart is for Perl. There was a slowing in job postings starting in 2007 which is not evident in this view. As you can see, Perl is still a widely used language, partially because of its alleged
PHP is on the same scale as Perl but has twenty weeks higher than 200 (so does JavaScript) on the X axis whereas Perl had two. PHP is dominant in the Bluehost data partially due to the fact that so many of the popular web tools are written in PHP, and those tools tend to drive language adoption. Also, PHP is a good general-purpose web programming language that lets you get data in and out of a MySQL table without a steep learning curve.
Python is measured on a higher scale than PHP and Perl, and is consistently above the 200 threshold. Python’s job posting trend is very consistently going up at a average rate of 28% for the period
When you look at job postings and growth, Ruby surprised us with 8 weeks higher than the 400
threshold for job postings per week. None of the languages measured here even have one week above 400 postings. So there is considerable action with Ruby and that could be attributed to Rails being a hot web framework for web developers. There is probably a loose correlation with start-ups quickly prototyping with Rails and Ruby makes sense as the driving language Job advertisements. Ruby does not show up at all in the Bluehost data.
ASP is also a surprise that is is as low as reflected in the chart below. It does follow the seasonal patterns of the overall job market, but has only three weeks above 200. Makes us speculate that PHP and JavaScript are continuing to eat into the ASP market.
Analysis
When looking at these languages there are a couple of points that stand out. First, they are not all targeted for Web Programming. C# and to a lesser extent Python are general purpose languages.
