How do open source projects come up with their sponsorship prices?

Question

I have an open-source project that gets ~15K views and ~2K downloads per week. I just got an email from a company willing to be a sponsor for the project. The email says "What's your sponsoring price?"

I never thought about offering sponsorships but I would love it if I was able to gather enough sponsors to work on my open source full time.

My first thought was to treat it as another contract and say "My rate is X/hr, how many hours per month do you want to sponsor?" but then I thought it might not be handled this way.

How is this usually done? How do open-source projects come up with their sponsorship prices?

Answer 1

Creating a price based on your hourly rate is certainly a valid one and the one that most groups that maintain open-source projects take. However, instead of asking them how many hours they'd like to sponsor, I'd suggest using a tiered pricing model and asking what level they'd like to contribute at.

Why tiered pricing? It allows companies to choose from a limited range of options, making it easier for a sponsor to make a choice (four choices, as opposed to "Do we want to sponsor 25 or 26 hours?"). Their marketing department can also put a name to their level of commitment. For example, which sounds better from their point of view:

• "We're a proud sponsor of Library X", or
• "We're a proud diamond-level sponsor of Library X"?

You can determine the pricing of the tiers based on your hourly rate (as you suggest). Of course, higher tier levels beget higher visibility on the site. Your highest-level sponsors might get prime page estate and influence on any dynamic content (such as blog posts or the like), while your bronze-level sponsors might just get a nice mention on your Thank You page.

As for determining the rate, I do suggest basing it off of an hourly rate. It can be something like this (assuming $50/hr):

• Bronze: $100/month, or 2 hours
• Silver: $200/month, or 4 hours
• Gold: $500/month, or 10 hours
• Platinum: $1000/month, or 20 hours
• Diamond: $2500/month, or 50 hours

By breaking down each tier into a number of hours, you'll be able to track when it becomes worth it to work on your project full-time.

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Examples of tiered pricing in action:

• The Perl Foundation (Donor Prospectus)
• pgRouting

Answer 2

It's hard to say exactly, but here is what I'd do if it's a SaaS app.

Try to determine their customer lifetime value. That is, how much is each customer worth from day one to cancellation. Then apply a formula based on the amount of customers you think will be created.

For example:

If their average monthly price is $89 and on average, a customer is a paying customer for 2 years, then the lifetime value is $89 X 24 months = $2136.

Now, estimate how many of your users will convert to customers. 8,000 (downloads per month) X .01 = 80 new customers.

So, at a 1% conversion rate, they will earn 80 x $2136 = $170,880 Or at a .05% conversion rate, they will earn 40 x $2136 = $85,440

Now, these are all estimates. But, with a little research, you can probably get in the ballpark.

Next, what is their current customer acquisition cost? Again, use your best judgement. Look at Google Adwords and try to estimate what comparable traffic would cost them.

If, on average, they spend $600 to acquire a new customer, you should charge accordingly.

So, how much should you charge? Well, if you're creating $170,880 of customer value then you should charge accordingly.

Keep in mind, these companies HAVE TO pay for their users. They are looking at your project as a marketing opportunity. Charge accordingly :)