How Do Linux Distros Make Money? Strategies Explained!

Let’s look at the Linux Distros from a business perspective and analyze some of the strategies that companies use to monetize their products in this article.

Linux is an open-source project and as such anyone is free to use the code available online to make their own distros. But the development of any professional software needs a lot of time and effort.

Do the developers who work on these Linux distros do it purely for fun?

How are these open-source projects supported?

Is it possible to make money through Linux distros?

If yes then how?

Can Linux and open source products compete with commercial products from Microsoft and Apple?

This article tries to answer the above questions and takes a look at the entire open source ecosystem from a business perspective to see the future of it against the might of commercial solutions from tech giants like Microsoft and Apple.

So let’s begin

Some Popular Linux Distros And How They Make Money

Let’s start our discussion by looking at some of the most successful and popular Linux distros in the market and their business model behind the success of the product, then later look at what we can learn from them and how us individual developers can contribute to the open-source arena and be successful.

Successful Linux Distro#1: RedHat Enterprise Linux

RedHat Embedded Linux (RHEL) is one of the most successful businesses built around the open-source philosophy. Let’s see the strategies it employs for the monetization of this distro.

Monetization Strategy#1: Selling distros, services, and subscriptions

Yes, you read it right. RedHat sells their Linux distros and it is perfectly legal to do so. Linux distros are under the GPL license which basically means that you are free to sell it.

There is a famous saying about the Free Software Foundation, which goes like this

“free” as in “free talk” and not “free lunch

What this license basically means is you are free to distribute it free of cost, sell it, improve it and do anything with it as long as you give out the source code along with the executable software packages. (or at least make it easily available for download)

So basically the source code is available in the open, so what stops anyone from forking it to make their own copy of RHEL? The answer is, it is being done that way and the major distro that does it is the Cent OS.

So the next logical question that comes to mind is

Why buy RHEL when you can get a free copy without paying a dime?

The answer to that question is Support. RedHat provides online support for dealing with any issues you might have and you are paying for that and not the software itself. 

Companies whose entire businesses depend on RedHat would not mind paying a few extra bucks for getting the expert support from the makers of the software themselves.

Also, updates are faster as copies like Cent OS can only prepare update packages after they see the updates in the RHEL repository while RedHat has the insider’s advantage when it comes to updates.

Monetization Strategy#2: Training and certifications

There are several big organizations that are running RedHat Linux as their main operating system for their web server and cloud needs. The most efficient solutions are often the most complex ones with lots of options and features. This is because having these many options helps makes it more efficient for a wide variety of customers.

With complexity comes the need for specialized training to work with such technologies. This is where training and certifications from RedHat comes in. Who better learn from on how to use RedHat Linux than RedHat itself?

Assume you are a hiring manager and you need someone to be an admin to your organization’s server running RHEL, and you have 2 applicants, one of them is RedHat certified and the other isn’t. You will obviously favor the one with the certification!

Thus RedHat makes money by providing these training and certifications, which accomplishes 3 things for RedHat

  1. It helps the customers to learn, understand and make efficient use of RHEL, which means they are unlikely to switch to another version.
  2. It gives RedHat a revenue stream and 
  3. It improves the credibility of RedHat as a brand in the tech market.

Monetization Strategy#3: Being the top contributor

Even though RedHat Linux is a community project, since RedHat organization is the top contributor to that project, they enjoy the power of choosing the direction of the future developments of the project. This lets them prioritize features that they feel are important for their clients and choose how to implement them. This keeps their product on the top of the pile when it comes to meeting customer requirements.

Monetization Strategy#4: Have a vibrant community following

Even though RedHat is the top contributor to this project, it also has a good community following.

Redhat gets this community going through its Fedora distro, which has all the latest developments to keep the spirit of “making better software” alive. Apart from Fedora, RedHat also conducts community events like conferences and with the main goal of making the product better. Through these events, they encourage engineers and hackers to come up with ideas to improve RHEL all the time.

The companies will normally have a better trust and credibility toward any software if the support is good.

When it comes to RHEL, the companies in need of support have 2 options.

  1. Post their question in one of the online forums and get a quick answer to their questions
  2. If the issue is a big one, they can always hire support from RedHat to solve it for them.

Thus there is no need for the companies to hire RedHat for every small issue as the online community is very good to help. This strategy has worked great for RedHat as we can see from their revenue figures, which is continuously growing on a quarterly basis for the past 16 years..!!

Successful Linux Distro#3: Google’s Android OS

Android might not be a typical Linux distro, but it uses the same open-source philosophy and uses lots of Linux code and hence it’s a perfect candidate for our discussions. Let’s see the strategies Google’s Android OS employs to monetize its open-source mobile operating system.

Monetization Strategy#1: Play store

This is a simple one, whenever you make any purchases through the Google Play store, google takes a cut from that purchase. It’s their charge for curating and maintaining the apps there. There are other PlayStore like the Amazon android app store, but a typical user is likely to trust and use the store maintained by the maker of the OS and not by any third party.

Monetization Strategy#2: Ads on free apps

This is another way Google makes money through its app store. Application developers have the option to let Google place ads on their apps and if they chose to do so, then part of the money from the ads goes to the developer and google takes a cut from that too.

Monetization Strategy#3: Selling Hardware

There are hundreds of brands selling Android smartphones in the market since OEMs don’t have to pay anything to use the Android OS on their phones. But if you ask any android user the question “what are the best brands in the industry?”, they will surely include google’s pixel line up in their top 3 list. 

This is mainly because the customers believe that google is the best bet when it comes to giving them a “pure Android experience” as they are the makers of the OS, and they can make the most efficient device. Also, there is a longer chance of getting software support and updates if you buy from google than from other hardware manufacturers.

Monetization Strategy#4: Google ecosystem (google search engine as default, youtube)and more ads

This is another strategy that google employs with its Android OS, which is promoting its own products through its open-source Operating system. Think about it, all the android devices all over the world have Google as their default search engine, chrome as their default browser, youtube, and Playstore, google drive and Gmail preinstalled, and you need to set up your android device with a Google account.

So just by giving the operating system for free, google is able to keep their existing customers in their ecosystems and acquire new customers all the time, so that whenever someone buys an android device they become a google customer by default!

Monetization Strategy#5: Data collection: helps make their products better

Google collects anonymous data all the time to make their products more efficient and better. Whenever we type something into the Google search engine, google takes that data and uses it to give more personalized ads. If you go to amazon and search for a product and come back to visit some other website, then Google will place ads on that website to try and sell you the products you have searched in Amazon.

This strategy extends to flight tickets, web hosting services and pretty much anything that you can buy online.

Also, I would like to point out that Google uses our data not only to give us ads but also to make our lives easier. They do this through their services like free online storage through google drive, maps, voice searches, etc. Any good company’s primary goal should be to keep their customers happy and Google is good at doing that through the plethora of free apps and services, while they get their money through bigger organization’s pockets.

An Experimental Linux Distro by Google: Chrome OS

Chrome OS is the lightweight Linux distro by Google. The specialty of this distro is that it only has a chrome browser running and nothing else. The trend these days is moving more towards is cloud processing and cloud storage. Back up everything online, play games online and do everything online and Chrome OS is addressing this growing market need with an operating system which is also just a browser!

Monetization Strategy#1: Cloud Services 

With the advent of high-speed internet, whose speed is expected to get more faster in the coming years, it’s a good idea to use our computing devices as just a front end and do all the processing in the cloud.

Assume you have an ultra-slim laptop and you wish to edit and render videos on a regular basis. You basically have 2 options

  1. Get a super heavy gaming laptop and do it there
  2. Get a desktop PC and a powerful graphics card to go with it

But what if there is an option 3? wouldn’t it be easier to just upload your video to the cloud and do the editing through a browser? Given the internet speeds we are looking to have in the near future, it would certainly be the better option!

This is just one example where cloud-based services are useful. Assume storing all your files on the cloud so that you don’t have to think about which computer/mobile/tablet/laptop each of your notes, documents and files are.

All you need to do is sign into your account on the browser and you can get any of your files.  This is already being done by several companies like Dropbox and google drive.

Thus cloud computing is the future and Chrome OS is Google’s strategy at dominating this field.

Monetization Strategy#2: Hardware

Google gets to sell the Chromebook hardware based on its Chrome OS. Even though anybody can make a laptop and install chrome OS on it and sell it, in an average consumer’s eyes Google is more credible than any of these other manufacturers.

Monetization Strategy#3: Apps

Google’s Chrome browser has its own app store and on top of that google has ported android apps to work on Chrome OS and hence the end-user has access to the apps in the Playstore too and thus more sales they make, the more revenue they generate.

Monetization Strategy#4: Reviving Obsolete hardware

Since Chrome OS is lightweight it can be used in old hardware. This means instead of throwing away your old PC, you can install Chrome OS and use it as a browsing PC. This will get you ready for the future as the more you get more accustomed to the OS, the more likely you are to stay with it.

Top 5 Strategies To Monetize Linux Distros

So what can we learn from all these companies?

Strategy#1: Keep it free and keep the monetization as unobtrusive as possible

As you can see, almost all the above strategy never targets the typical consumer directly (except for the apps, but at least that’s just the price of lunch, which most people don’t mind paying)

Strategy#2: Have a vibrant community following

If you are the only player developing a distro, the odds are if you go bankrupt, so does all the organizations that depend upon the distro. But having a vibrant community will increase the credibility of the company.

Strategy#3: Tie open source software with some hardware

Tie your software with some hardware, as hardware is something you just need to pay for. Have a look at Apple and Samsung. They both sell products with similar hardware specifications at a similar price point. But when you look at the software side, Samsung enjoys the open source android, while Apple has its own closed source software.  Hence less effort for Samsung, which means less money spent on software development and more profits.

Strategy#4: Tie open source software with some customer requirements

All these products we saw above meets this idea, that is they are extremely useful for the end customer and each of them addresses a very important market need.

Strategy#5: Tie open source software with some of your other products

This has always been google’s strategy. At the end of the day, Google is an advertisement company. Youtube, android, chrome OS, everything helps them keep more users on the Google platform, which means more people see their ads and more revenue they can get. Thus they keep the open-source software in the center of their ecosystem.

The same goes for RedHat’s Linux distros, and their services, subscriptions, and certifications.

These are the strategies the big companies like RedHat and Google use to monetize their Linux distros. In the next article let’s see if you, as an individual, can actually make your own distro and make money from doing that, and will that endeavor be profitable.

Alright, I hope you guys enjoyed this article and learned something useful. 

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