Salesforce to make money from AppExchange finally

6 months after posting about Mark Benioff's ("evil") plans to get rich from AppExchange, I learnt this week from a couple of companies on the Exchange that Salesforce will be introducing consolidated customer billing and simultaneously introducing a revenue rake off of what I understand to be 20%.

To my surprise, there hasn't been more comment about this and I am still searching the Salesforce site for the details of the arrangement. Nonetheless, it's beneficial for customers since they now only have one invoicing supplier to deal with rather than many.

As for developers, clearly handing over 20% when you didnt before may feel like a drawback, but I think the early days were simply the free trial and 20% still represents considerable benefit - think of the costs of selling outside of the AppExchange with its' prebuilt distribution channel.

I'm intrigued as to whether Salesforce will simply book the commission or take the whole 100% to top line revenues and show the 80% as a cost of sale. Much will depend on the presentational impact on the absolute values and the ratios in terms of the materiality of the change this introduces.

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posted by John Wilson @ 1:33 AM Permanent Link newsvine reddit


At 3:54 AM, Anonymous Dennis Howlett said...

This was announced before Christmas as part of a package of measures designed to provide a branded onramp for ISVs. The message I'm getting bakck is that 20 points is better than paying the estimated 45% required in traditional bag carrier sales enviornments. Personally, I believe SFdC is at risk of raping its own ecoystem. 20% is a tad high IMO - I'd be happier to see a sliding scale.

The updside is you only pay on results so there is a direct correlation between cost and sale. The question is who will make money off the exchange and who will fold.

At 9:57 AM, Blogger John Wilson said...

For distribution and billing, I think 20% is not unreasonable, but I do think the potential for Salesforce to up its' fees is very real given it's dominance in the relationship.

I think that making money in the AppExchange environment may be challenging though. It's likely to become an overcrowded market which may quickly commoditise things; you get to do very little marketing to enable you to stand out from the crowd; you have become more remote from the customer. Hence, relying solely on a salesforce environment is a risky strategy - there will undoubtedly be some hits, in which case Salesforce may just buy them but I anticipate may "ticking over" flops


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