The blogosphere is covered with posts that would have us believe that desktop applications and software are already dead (cloud, mobile, SaaS); however, retail sales for desktop applications and software are a multi-billion dollar industry. In April 2009, the NPD Group reported that PC software retail sales were around $3.4B per year and holding steady. The major change, however, is the impact the web is having on how desktop applications and software are distributed. According to NPD, web application and software distribution has increased from 11.5% to 17% in the last 4 years.
Following I explain how the web has influenced software bundling. I start with a brief background of OEM software bundling. Next I discuss a new type of software distribution that we call recommendation based distribution, and conclude with answers to frequently asked questions regarding recommendation based distribution.
Software Bundling
Software providers (OEM – original equipment manufacturer) for decades leveraged value-added resellers (VARs) for driving sales of their software as part of a hardware/software package. These marketing partnerships result in what is often referred to as a “bundle” due to the fact that complementary services are bundled together.
A common example is a new computer that includes Microsoft Windows®. A few other applications routinely bundled include Office®, security, internet browser, and toolbar applications.
This type of distribution is big business. Here are a few examples:
- HP & WildTangent – WildTangent became an immediate force in the casual game world because of the huge bundle distribution agreements that they signed.
- Storage devices bundled with back-up software such as Carbonite with Seagate and Memeo with Western Digital Technologies.
User acceptance over the practice varies based on the type of users a VAR sells to as well as the quality and quantity of applications that they bundle. The two primary concerns raised by consumers are system performance and the nuisance of removing unwanted software.
Recommendation Based Distribution
Is software bundling fundamentally flawed? Do users want to receive a more affordable package by having additional software marketed to them?
Now that many users are connected to the web, software can be merchandised effectively without preloading on the users’ systems in advance. W3i research showed that software bundling is not fundamentally flawed. Users are however, most receptive to receiving software offers if they are involved in the application selection process. Users can see recommendations for other applications when they first run a new computer, attach a new external device, or download an application from the web. The recommendations can call out to the web to retrieve the files required for presenting the recommendations, downloading, and installing.
W3i to facilitate this process created its own proprietary technology, InstallIQ, which supports a fully web-capable solution allowing us to create a software distribution experience that resembles an online shopping experience.
Here is an example of a website, Wallpapers.com, that runs InstallIQ during installation:
Note the consistency between the initial website and continued branding through the installation process. We call this feature installer skinning. By leveraging the website’s brand equity and style in the installer we create a transparent and consistent experience that enhances usability and increases conversions (see our post Creating Consistency to Increase Conversions).
The same flexible technology is used to improve the presentation of software to users:
Notice above that the user has a clear and consistent navigation experience. This navigation style was influenced by a case study, published by TRUSTe, as well as improvements such as a shopping cart feature that was added based on user feedback. The cart shows specifically what applications were accepted followed by a check-out process where the user can review all of their selected applications and change their selections before the process is completed.
Some providers struggle with clear and consistent navigation because it is challenging working with their existing installation packaging technologies. Their user navigation requires very different buttoning when a recommendation is presented. This is something I like to call “opt-irritating”.
In summary, the web is enabling an evolution in software distribution and software bundling. It is so different from how VARs bundled in the past that we feel a more appropriate category descriptor, for this methodology is recommendation based distribution.
Frequently asked questions
- Is this business model right for my software? How will my users respond?
Software with a low propensity for users to purchase have the most to gain. Frequently, developers are experimenting with multiple business models and a hybrid approach wins out. For example, a leading security application offers a free light version which gets heavy downloads, generates revenue from advertising using installer recommendations, and later pitches premium paid services to its users.
The response by users vary greatly from one implementation to another. A software or application provider’s reputation is highly influenced by the quality of software they provide. Distribute high quality software which is monetized through a high quality bundle experience and users can and will be very satisfied.
W3i has an experienced staff that works closely with software providers to define the solution which best suits their needs, including support on decisions such as the:
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- Customizable look and feel
- Select which, and how many, applications you want to recommend
- Determine when you want to present the recommendations, whether it is with new installations or with special upgrades
- Data-driven recommendations for optimization
- Who should I form a marketing partnership with?
Most consumers and developers are in agreement that security and trustworthiness are key when choosing a marketing partner. Users’ trust is earned by providers who define, educate, and simplify the process so users can effectively take control.
There are a few techniques you might consider when selecting marketing partners. How recognized are their brands? How useful is their software to your users? What comments, reviews, or ratings have been written about them? Ask your users what they think about the partner or think about how your user persona would most likely respond. What commitment do they make in educating users about their practices and policies? Do they have any third party validation and monitoring in place such as certification in the TRUSTe Trusted Download program?
Brands continue to play a key role. Partners should stand behind their practices with full disclosure and branding. They should proudly make visible who their marketing partners are instead of burying themselves in a privacy policy or by engineering their technology so it cannot be distinguished on its own. Be cautious of providers with little or no reputation or experience. If very few people say something positive or negative about them and they have significant distribution volumes, it says something about their commitment to creating awareness with their users.
- How many additional offers should I present in any single installation?
W3i conducted a test where 0, 1, 2, 3, 4, and 5 offers were tested. The results showed that the quantity had a minimal impact and that the relevancy of the offers was more important. Relevancy impacts whether the user will complete the installation of the software, keep and use the software, and whether they will accept offers.
Be sure to consider not only how many offers you distribute but whether or not you will allow the offers to include other offers in their updates or a subsequent run process. W3i’s policy, which it enforces, prohibits advertisers from promoting additional offers. Some companies say they only distribute one offer but they do not have policies against what their advertisers distribute and so in reality, users that accept a single offer actually end up getting pitched more than one offer, often within moments of downloading and installing.
As you can see online recommendation based distribution borrows from but also significantly enhances software bundling to make it more appealing to users. The solution continues to evolve but the basics laid out above are the foundation for successful online software distribution.
By mastering recommendation based distribution, your applications can leverage a proven model that enables you to be relevant through effective distribution and monetization.
Get more in-depth information about software or application distribution through W3i’s blog, newsletter, or reaching out to us directly.
Ryan Weber, Vice President of Corporate Strategy & Co-Founder, W3i, LLC
Entrepreneur and pioneer of Internet marketing focusing on increasing revenue and distribution for digital downloads.
Archive for January, 2010
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