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Why Ubuntu’s creator still invests his fortune in an unprofitable company (ars technica)
Ars technica has posted a
lengthy look at the business side of Canonical. "What may
surprise some people is that Canonical could be profitable today if
Shuttleworth was willing to give up his dream of revolutionizing end user
computing and focus solely on business customers. Most people who know
Ubuntu are familiar with it because of the free desktop operating system,
but Canonical also has a respectable business delivering server software
and the OpenStack cloud infrastructure platform to data
centers. Canonical's clearest path to profitability would be dumping the
desktop and mobile businesses altogether and focusing on the data center
alone."
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Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 13:28 UTC (Tue) by hadrons123 (guest, #72126) [Link]
Its just mark's choice in what he believes in. He can afford it, is the biggest factor.
Whether canonical can become a successful in making money, only time will tell.
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 16, 2013 0:34 UTC (Fri) by mmarq (guest, #2332) [Link]
Why leave ? ... at least Canonical is in good company, exactly for the "mobile" part that the biased Arst seems to take issues... ARM and Imagination the leaders of mobile are there
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 15:43 UTC (Tue) by dakas (guest, #88146) [Link]
Shrug. Ubuntu's growing stronger than the part of Canonical sustaining it. That means that any scheme for capitalizing on its growth will be more effective in future than it is now.
As long as Shuttleworth can afford it, it's just good sense to delay significant moneymaking until it means less of a stint on the whole scope of the project while the project grows at a progressively larger rate than the means required to sustain it.
Everybody called Google fools for building a better search engine without a reasonable perspective for revenue. If you are driving a world-wide significant infrastructure, the money will come battering down your doors eventually for whatever reason.
I'm still not quite sure just how Google makes its money, but there is little doubt that it does so by now.
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 16:02 UTC (Tue) by Jonimus (subscriber, #89694) [Link]
Its not a question how google makes their money. Ads, they are an advertising agency and they make money selling their users to advertisers.
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 17:09 UTC (Tue) by jspaleta (subscriber, #50639) [Link]
You know if Canonical had a small employee headcount and was still exploring what business model I could agree with you. But Canonical has significant headcount now. They are not a startup any longer.
Google's history is absolutely a great contrast. But not for the reason you bring up. 3 years or so noodling around as an academic project running on university servers and taking up university bandwidth before it grows in popularity as a service to the point where the university band can't sustain it. 3 years of risk-free tinkering with the core user service with essentially no overhead cost.
Then 2 years as a start-up for profit business entity with less than 10 employees before introducing adwords as a revenue generator to sustain the business. And so more than a decade later Adwords as a revenue stream is still around, its still part of the business model. Google only took 2 years to hit on a business model that seemed to work and has stuck with it sense then.
So yeah Google makes a fabulous contrast to Canonical... but for all the wrong reasons.
-jef
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 18:02 UTC (Tue) by AlexHudson (subscriber, #41828) [Link]
I think Google is a poor example for a variety of reasons; taking many years to develop a profitable business model is not out of the ordinary. Amazon are a great example of a wonderfully unprofitable business (in a P&L sense) yet you won't find anyone sensible talking about their sustainability (they're an equally dreadful example as Google, too).
Building a business with $40MM revenues (let's say) is pretty good going, and although 500 is a relatively high headcount you certainly couldn't say they needed to diversify.
Three of Mark's statements didn't ring quite true for me, though:
* "Dell, HP, Lenovo, one of them will ship more than 20 percent of their volume globally with Ubuntu this year" - one of those companies will ship 20%+ of sales with Ubuntu? That's 1.8 million units minimum - where on earth are they all going? That should be a significant bump to the installed base (esp. if you believe the 22M number quoted), one onders if that's just a manufacturer installing a base server OS instead of shipping them naked though...
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 18:41 UTC (Tue) by maxiaojun (subscriber, #91482) [Link]
In the homeland of Lenovo, the last kingdom of IE6, when people buy a PC with Ubuntu or whatever Linux installed, they often comment like "Oh, it's Linux; took a little effort to get Windows installed. And the hardware is bad/okay/decent/excellent.".
I don't know whether this is relevant to your concern of first item, though.
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 19:36 UTC (Tue) by jspaleta (subscriber, #50639) [Link]
So remind me... during the first 4 or 5 years of Amazon's business plan... what was the expense growth. Sure its okay to go after a slow growth strategy, keeping your cash burn rate low and build up and to build or your core competency as a business. Amazon was very focused on executing its business strategy in that slow growth face building up its brand as an online retailer.
What did Canonical focus on for its first 5 years or slow grow? Was it the desktop? What it the enterprise server services? Was it web services? What see is Canonical just throwing darts at different things, without focus..without disipline and without executing a coherent gameplan at all.
Though with Shuttleworth's quotes in hand, I'm going to do my best to get anyone from Amazon to actually make a statement on the record coorborating that a revenue sharing arrangement is in place with Canonical for Ubuntu instances. If such an arrangement exists, its completely opaque from a pricing standpoint. I find it odd that Amazon would not pass on that sort of servicing cost on to a consumer in some fashion. Perhaps this is effectively a "Canonical tax" on all images in Amazon's pricing structure.
-jef
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 20:03 UTC (Tue) by AlexHudson (subscriber, #41828) [Link]
Look, the Amazon business plan really isn't the point, but to characterise the first four/five years as "slow growth" is tantamount insanity. They were in Bezos' garage in 1995, IPO'd in '97 and turned over almost $3B by 2000. Their cash burn was not low and they were not super-focused: by 2000 they had already bought IMDB, Alexa, PlanetAll, etc. etc. They were growing like knotweed. If that growth is "slow", I would love to know what is "aggressive growth". Bezos wanted to build the biggest company in the world from the get-go (nb. the name).
The point I was making about Amazon was totally different and not about start-up, though: that Amazon's individual business units are potentially high-profitable but that they rarely make an actual paper profit because they cross-subsidise the business units. Virtually everything they do makes a loss to begin with, sometimes large, and they only cut it loose once it's obvious they cannot make that unit a profit centre. Even now, in 2012 they posted a loss on a $61B revenue.
If Mark says that the company can be sliced up into potentially profitable sections, I believe that. I believe they could have a nicely profitable server-based/cloud business, quite easily. I'm certainly not suggesting that this is how most of their costs are paid, but I am suggesting that - again, like Amazon - they are willing to be misunderstood for a long period of time.
To say that Canonical are somehow unusual because they are burning cash at a high rate without generating a profit year after year is just wrong. If there is a difference, they are probably not as aggressively going after revenue growth as other businesses might, but I would say that their market positioning almost requires that approach. Would a VC firm fund this? Probably not, but then, that's not the point either, is it?
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 16:54 UTC (Tue) by rsidd (subscriber, #2582) [Link]
I am reminded of the line from Citizen Kane: when reminded that his strategy won't make money, Kane replies: (quoting from memory) "Yes, I will lose a million dollars this year, and I will probably lose a million dollars next year, and the year after that, and at this rate I will be bankrupt in sixty years." Shuttleworth probably figures, even if Ubuntu is never profitable, what better use can he make of the money? Hopefully, unlike Kane, he will retain his idealism and perspective.
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 21:07 UTC (Tue) by csigler (subscriber, #1224) [Link]
+1
Clemmitt
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 13, 2013 20:02 UTC (Tue) by hummassa (subscriber, #307) [Link]
Exactly how much money did Canonical bleed in the last fiscal year?
The more important question: Posted Aug 14, 2013 10:04 UTC (Wed) by HelloWorld (subscriber, #56129) [Link]
How can we make him stop?
The more important question: Posted Aug 14, 2013 11:00 UTC (Wed) by dgm (subscriber, #49227) [Link]
"Why should we make him stop?"
Fixed that for you. You're welcome.
The more important question: Posted Aug 14, 2013 18:20 UTC (Wed) by jspaleta (subscriber, #50639) [Link]
well... I could argue that his activity is actually predatory and violates some statues in some juridictions. Deliberately losing personal wealth to keep competitors from being able to enter the market. Equivalent to Walmart coming into town and deliberately selling products at a loss across the board for years to bleed local retailers dry of revenue until they close up shop. But that's a hard charge to make stick, as its a complicated dynamic, more so with software, doubly moreso with open software with very difficult to quantize production costs. But I could certainly argue the case in the court of navel gazing opinion making.
And even if its not strictly predatory, one could still argue that its warped the marketplace in a way that actually has been a net detriment to Canonical itself. I think Canonical has done such a really good job of making it hard for other business interests to compete with a linux consumer market( starting with the desktop and then the netbook) that they helped create the situation where Google, and only Google, could roll in and dominate mobile. I think Canonical's willinginess to lose money, created a situation where only another entity with a big cash pile could enter the consumer market with a linux offering. And that entity was Google. And Google is going to wipe the floor with Canonical in the consumer device space. Absolutely wipe the floor with them. So meh. I think Canonical reaps what they sow...and its a bitter harvest. A bitter, ashy harvest.
The more important question: Posted Aug 14, 2013 21:45 UTC (Wed) by dlang (✭ supporter ✭, #313) [Link]
so where do you draw the line between RedHat paying kernel developers to give their code away (which you say is good) and Shuttleworth paying people to prepare and ship a distro that they give away for free (which you say is evil)
and if 'loosing personal money' to help something continue is so evil, how big a donation to Debian would someone have to make to cross the line from "fabulous" to "evil"?
The more important question: Posted Aug 14, 2013 22:32 UTC (Wed) by jspaleta (subscriber, #50639) [Link]
I didn't say evil. I don't think sharks are evil but they certainly engage in predatory behavior. I don't consider all predatory behavior in the business world evil either. It's potentially damaging for the marketplace, but not classifiable as evil. I would caution you to stop equating all uses of the word predatory with the concept of evil. And I would ask that you to not put words in my mouth by making interpretive substitutions. Damaging marketplace activities by a business do not have to amount to evil, nor do they need to be done with evil intent. As for where to draw the line... as I said, its a very hard thing to make a actionable charge stick due to the nature of the software ecosystem.
And for the record, I really don't think of Canonical as evil. I think of the company as incompetent, well meaning, but incompetent. It's difficult not to like the people in the company as individuals.. so passionate and as far as I can tell authentically nice people..but collectively...incompetent.
My argument is that Canonical's actions are akin to predatory pricing and helped act as a barrier to entry to for other small business entities, with more intelligent and rational management teams, from entering into the consumer device OS space with a linux derived offering and competing without actually putting Canonical in a position of strength either in the space. And thus Google showed up at Computex when Canonical was showing off its pitiful Ubuntu for ARM progress and stole the hearts and minds of OEMs for mobile. Just swooped in, punched Canonical right in the face and stole the market that Canonical thought they were the only ones ready to play in. Meh. And now we suffer under the yoke of Google's mastery of the universe.
The more important question: Posted Aug 15, 2013 3:36 UTC (Thu) by dlang (✭ supporter ✭, #313) [Link]
I'll point out that your argument is sounding very similar to the arguments of groups like Microsoft and Apple who claim that Google giving Android away for free is unfair competition (and therefor Android should be banned from the marketplace)
along with those who have claimed that Open Source Software is unfair, illegal, or unconstitutional
If you accept that people are allowed to create and sponsor Open or Free software, I don't see how you can reasonably claim that anyone who does so is wrong.
The Model T "damaged the marketplace" for buggy whip manufacturers
Linux has been very "damaging" for the "marketplace" of selling Unix.
anything that is going to make a significant difference to the world is going to be damaging to some aspects of the marketplace that existed before it.
Think carefully about your argument here, do you really want a world where companies (or even companies above some size) are not allowed to contribute to Open Source/Free software because of the damage that it could do to their competition? Your arguments seem to be leading that way.
The more important question: Posted Aug 15, 2013 3:48 UTC (Thu) by jspaleta (subscriber, #50639) [Link]
For the 3rd time.. I'll re-iterate that it would very very difficult to make a legal case. I will also again reiterate that I believe that Canonical has primarily harmed its own business interest long term.
Hence why I say I think the company is run incompetently. They are engaging in arguable predatory pricing tactics...which should help them secure a dominate market position as a business...and it has not. They've created the precondition for Google to jump in and dominate..using similar predatory pricing tactics for ARM based devices. It's very amusing actually. More so after 2 tequila shots.
The more important question: Posted Aug 15, 2013 9:09 UTC (Thu) by AlexHudson (subscriber, #41828) [Link]
The legal case would be difficult largely because what they're doing isn't illegal :)
I find it fascinating that you rail against them for "predatory pricing" - selling stuff beneath cost, basically - but then also castigate them for not being strong enough to stand up to Google's mobile play at Computex. It's a tough argument to make, that they're simultaneously too competitive in price but not sufficiently competitive to take market share and beat Google.
Your thesis appears to be that if Canonical were less price-competitive, other people would come in the market and be stronger than they are. You're arguing hypothetical opportunity costs. I realise you're not exactly an unbiased observer, but is that really your rational argument, or just a rationalised one?
The real question: Posted Aug 15, 2013 12:13 UTC (Thu) by simosx (subscriber, #24338) [Link]
> My argument is that Canonical's actions are akin to predatory pricing and helped act as a barrier to entry to for other small business entities, with more intelligent and rational management teams, from entering into the consumer device OS space with a linux derived offering and competing without actually putting Canonical in a position of strength either in the space
> ... > And now we suffer under the yoke of Google's mastery of the universe.
This is some hardcore reality-bending. <i>Predatory pricing</i> in free software? Are there 50 shades of $0?
We tend to believe we live in a free-market economy, with competition for the best products. We strive to help positively the efforts that we believe are the most viable.
However, your attitude is a negative one; you prefer to attack Ubuntu and Canonical as a way of supporting your preferred effort.
Ideally, it would be great to join together all those small free software efforts into a single big one. Just like having GNU/Linux distributions merged together. For this to happen, we need to eliminate this <i>negative advocacy</i>. What I feel is that even if Mark Shuttleworth gave you a place in Heaven, you would still complain about the bad 3g coverage.
If you really want free software to go forward, act positively, not negatively.
The real question: Posted Aug 15, 2013 20:33 UTC (Thu) by misc (subscriber, #73730) [Link]
> This is some hardcore reality-bending. Predatory pricing in free
> software? Are there 50 shades of $0?
For one, Mandrakesoft stopped making MNF because unscrupulous company were taking the product ( a firewall distribution ) and started to sell it, being in concurrence with Mandrakesoft. So since they didn't have to pay for the development, they could invest more in sales, and so be more competitive then the original developpers.
That's not the first and only case I know, so I can only guess there is lots of similar one outside of France. While that's the rule of free software and some companies manage to get it right ( like RH by splitting Fedora from RHEL, or Suse ( opensuse/SLES )), I am not sure all do the same or can do the same.
The more important question: Posted Aug 15, 2013 10:46 UTC (Thu) by eischmann (subscriber, #88829) [Link]
"so where do you draw the line between RedHat paying kernel developers to give their code away (which you say is good) and Shuttleworth paying people to prepare and ship a distro that they give away for free"
I don't think it's a difference between good and evil, Canonical is IMO not evil, but there is a difference because every distribution can benefit from the work of kernel developers while it's only/mainly Ubuntu/Canonical who benefits from preparing and shipping Ubuntu.
The more important question: Posted Aug 15, 2013 21:17 UTC (Thu) by dlang (✭ supporter ✭, #313) [Link]
> ...while it's only/mainly Ubuntu/Canonical who benefits from preparing and shipping Ubuntu.
at least if you ignore the users, they don't count do they.
The more important question: Posted Aug 27, 2013 11:45 UTC (Tue) by niko (guest, #80138) [Link]
Do you mean their code is not GPL?
The more important question: Posted Aug 14, 2013 12:56 UTC (Wed) by hummassa (subscriber, #307) [Link]
Give him something better to do with his half billion, like changing the world... oh, wait!...
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 15, 2013 13:18 UTC (Thu) by dmitrij.ledkov (subscriber, #63320) [Link]
Who said it's unprofitable?! =))))
Why Ubuntu’s creator still invests his fortune in an unprofitable company (arstechnica) Posted Aug 15, 2013 18:31 UTC (Thu) by maxiaojun (subscriber, #91482) [Link]
Mark generally have a good mind. But at the end of day, Ubuntu desktop is still crappy (I can elaborate this if you want). This is especially obvious for "insiders" like readers here. Even though Canonical somehow still built a nice portfolio, trying to join the mobile "party".
Red Hat is nothing better. The radical division of EL and Fedora is the major source of Linux fragmentation so far. Red Hat backed projects, e.g., GNOME, IBus, etc. is all riddled with annoying Arch-ism/Fedora-ism, i.e., no one cares non-latest version of software. As a result, EL6 system administrators are struggling with how to install latest Chrome [1] and Firefox [2] properly, not to mention tons of FOSS applications out there that don't bother to provide Linux binaries at all. In the mean time, soon-to-die Windows XP has none of these issues. See also (even though it targets Ubuntu, EL is just even worse): [3]
I'd like to evaluate whether Ubuntu 12.04 LTS is good enough as an EL6 replacement.
I've also thought about what if Ubuntu just disappear. If so, I'd totally switch to OSX then, unless at some point Linux get serious hardware and ISV support.
1. http://listserv.fnal.gov/scripts/wa.exe?A2=ind1306&L=...
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