How Microsoft Makes CRAZY Money From Github

Englishุงู„ุนุฑุจูŠุฉDeutschEspaรฑolFranรงaisเคนเคฟเคจเฅเคฆเฅ€Bahasa Indonesiaๆ—ฅๆœฌ่ชžํ•œ๊ตญ์–ดPortuguรชsะ ัƒััะบะธะนไธญๆ–‡
TThe Coding Koala
Computing/SoftwareBusiness NewsInternet Technology

Transcript

00:00:00For most developers, GitHub is just a free place where they can store their code.
00:00:04But in 2018, Microsoft looked at that free tool and paid $7.5 billion for it.
00:00:10And today, analysts are calling it one of the best acquisitions in tech history.
00:00:14So here's the question that should make you a little uncomfortable.
00:00:17What exactly are you giving them in return?
00:00:20And how is Microsoft earning from a free tool?
00:00:22GitHub was not originally developed by Microsoft.
00:00:25It was in 2018 when they bought GitHub for $7.5 billion.
00:00:30And even before it was acquired, GitHub was already widely adopted.
00:00:34All the big projects were stored in GitHub.
00:00:37Around 31 million developers used it every day.
00:00:40And there were already over 96 million repositories.
00:00:43Everything was good.
00:00:44But the big issue was that GitHub was not making money.
00:00:48And no matter how good a product is, you eventually need money to survive.
00:00:52And this is where Microsoft came in and offered to buy the whole company.
00:00:55But why would they buy a company that was not making money?
00:00:58And it's just brilliant how they planned the whole thing.
00:01:01Well, on paper, they bought a code hosting platform.
00:01:05But that's not how Microsoft saw it.
00:01:07The real business of Microsoft is their cloud platform.
00:01:10And cloud is a brutal market.
00:01:12Amazon had AWS, Google had its cloud, and Microsoft had Azure.
00:01:17All three were fighting for the same customers and gaining the most market capitalization.
00:01:22But here's the thing about cloud.
00:01:24The people who decide which cloud a company runs on, it's not the CFO, it's not the CEO.
00:01:30It's the developers.
00:01:31They pick the tools.
00:01:32They set up the infrastructure.
00:01:34And everyone else just pays the bill.
00:01:36Now think about your own workflow.
00:01:38You write code in VS Code.
00:01:40You push it to GitHub.
00:01:41You run your CI/CD through GitHub Actions.
00:01:44You review pull requests on GitHub.
00:01:47Your entire daily workflow is already living inside Microsoft's ecosystem.
00:01:53So when it comes time to deploy, what's the easiest option?
00:01:56It's the cloud platform of Microsoft itself.
00:01:59The one that's already connected and needs less setup.
00:02:02GitHub isn't just a code hosting platform for Microsoft.
00:02:05It's the top of their sales funnel.
00:02:07And most developer using it for free is a future Azure customer they didn't have to advertise to.
00:02:12That's what $7.5 billion actually bought.
00:02:15Not just millions of repositories and developers.
00:02:18They also got a sales funnel for their cloud platform.
00:02:21But there's one more interesting thing.
00:02:23The funnel I just talked about was just part of the plan.
00:02:27Think about what GitHub actually is at its core.
00:02:29It's 180 million developers pushing code every single day.
00:02:34Public repositories, open source projects, real production code written by real engineers,
00:02:40all sitting there for free for anyone to read.
00:02:43And Microsoft did what any company sitting on the world's largest data set would do.
00:02:48They trained an AI on it, which is now called GitHub Copilot.
00:02:53And now they charge you $10 a month to use it.
00:02:55Let that sink in.
00:02:57You wrote the code, you pushed it to GitHub for free, and Microsoft trained an AI on your code.
00:03:02And now that AI sits inside your editor, writing code for $10 a month.
00:03:07$19 if you're on a business plan.
00:03:09$39 if you're an enterprise.
00:03:12Copilot now has 4.7 million paid subscribers.
00:03:15It's used by 90% of Fortune 100 companies.
00:03:19It holds 42% of the entire AI coding tools market.
00:03:23The CEO of Microsoft itself confirmed that Copilot alone is now a bigger business than all of GitHub
00:03:30was when Microsoft bought it in 2018.
00:03:32They spent $7.5 billion on GitHub.
00:03:35And the AI they built on top of your code has already outgrown that investment.
00:03:40So it's fascinating to see how Microsoft used GitHub to grow their other businesses.
00:03:45And in case you don't know, GitHub works on freemium model.
00:03:49Most of the services are free, but if you need some extra, you need to pay.
00:03:53So they earn both directly and indirectly from the platform.
00:03:56Microsoft didn't bought a product.
00:03:58They bought the place where every developer lives,
00:04:01and then turned that address into a funnel for their cloud, AI, and enterprise contracts.
00:04:06The GitHub you use for free is the most expensive thing Microsoft has ever gotten for free.
00:04:12So GitHub is always free and probably always will be.
00:04:15That's because Microsoft can afford it.
00:04:17So that was all about how brilliantly Microsoft is using GitHub to earn money.
00:04:22If you found this video interesting, make sure to like, share, subscribe, and I'll see you in the next one.

Key Takeaway

Microsoft converted its $7.5 billion acquisition of the unprofitable GitHub platform into a highly lucrative ecosystem by using developer workflows to funnel clients into Azure cloud services and training a paid AI tool, GitHub Copilot, on public code repositories.

Highlights

  • Microsoft acquired the unprofitable GitHub platform in 2018 for $7.5 billion when it had 31 million daily active developers and 96 million repositories.

  • Developers dictate infrastructure decisions, making GitHub the top of the sales funnel to transition users to Microsoft Azure over competing cloud platforms like AWS and Google Cloud.

  • Microsoft built GitHub Copilot by training AI on public repositories contributed for free by 180 million developers.

  • GitHub Copilot charges subscription fees ranging from $10 a month for individuals to $19 for business plans and $39 for enterprises.

  • GitHub Copilot has 4.7 million paid subscribers, captures 42% of the AI coding tools market, and is used by 90% of Fortune 100 companies.

  • The revenue generated by GitHub Copilot alone now exceeds the total valuation of the entire GitHub platform at the time of its 2018 acquisition.

Timeline

The $7.5 Billion Acquisition of an Unprofitable Platform

  • Microsoft purchased GitHub for $7.5 billion in 2018 despite the platform generating no profit.
  • GitHub possessed a massive, active user base of 31 million daily developers and 96 million repositories before the acquisition.

Most developers view GitHub as a free repository for code storage. Prior to 2018, the platform hosted all major open-source projects and maintained massive engagement, but lacked a viable monetization strategy to survive independently. Microsoft recognized the value of this developer concentration and bought the entire company to integrate it into a broader corporate strategy.

Capturing the Cloud Market Through Developer Workflows

  • Developers, rather than corporate executives, decide which cloud infrastructure a company adopts.
  • GitHub serves as the primary sales funnel for Microsoft Azure by embedding itself into daily engineering workflows.

The cloud infrastructure market is a fierce competition between Amazon AWS, Google Cloud, and Microsoft Azure. Because developers design infrastructure and select tools, controlling their environment influences corporate purchasing. A standard workflow involving VS Code, GitHub repositories, and GitHub Actions CI/CD makes Azure the easiest, lowest-setup deployment option, converting free users into enterprise cloud customers without traditional advertising.

Monetizing Free Developer Data with AI

  • Microsoft trained the GitHub Copilot AI model using public code repositories uploaded by 180 million developers.
  • GitHub Copilot has grown into a larger business than the entire GitHub platform was in 2018.

GitHub contains the largest repository of production code and open-source data in the world. Microsoft leveraged this data asset to build an AI assistant that integrates directly back into user code editors. By charging user fees of $10 to $39 per month, Copilot achieved a 42% market share among AI coding tools and penetrated 90% of Fortune 100 companies, fully recouping the initial $7.5 billion investment while maintaining a freemium model to attract future customers.

Community Posts

No posts yet. Be the first to write about this video!

Write about this video