Avast: 'Freemium' is very profitable

Czech antivirus software maker's CEO dismisses retail and OEM partnerships, says large user base derived from free model helps company cut marketing and support costs.
Written by Vivian Yeo, Contributor

SINGAPORE--Free antivirus is the way to go, and Avast intends to keep its focus in that direction, its CEO Vincent Steckler said in an interview.

According to Steckler, Avast has reaped the benefits of a free model in the form of a vibrant global community. While the company can barely compete with other vendors such as Symantec and McAfee from a revenue perspective, it is one of the biggest--if not the biggest--in terms of user base, he told ZDNet Asia last week during a visit to Singapore.

Some 110 million users in 19 countries have to date downloaded the company's free security product. Avast added about 30 million new users last year, and expects another 30 to 40 million downloads in 2010, he said.

The large community of users worldwide will not only help to recommend the product, which saves the company marketing costs, but also help one another via an online support forum, said Steckler. The community also helps out, "Wiki-style", with language translations for Avast's products.

"Free users cost us almost nothing to support and yet provide a lot of value," he pointed out, adding that each user who downloads the free version costs 2 cents a year to support.

Another advantage of having a large user base is that suspicious activity or samples are spotted faster and more easily with automated collection of opt-in threat data, said Steckler.

Malware detection in cloud: part hype, part reality
The "massive amounts" of threat intelligence that Avast receives from its user base also reduce the need to build a cloud around malware detection and mitigation, even though some vendors have taken this route, Steckler noted.

"If you have only 10 or 12 million users and they tend to be concentrated in the English-speaking or Russian-speaking world...you are not getting enough suspicious files," he explained. "A long time may lapse between when a new threat gets on the Internet and when you see it.

"We see [threats] pretty much instantly."

Vendors may also be inclined to tap the cloud because their client products are "big and slow". Putting the detection work in the cloud, instead of in the client, speeds up the process, he pointed out.

Another step the company won't take in the foreseeable future is embarking on partnerships with retailers and OEMs (original equipment manufacturers), Steckler added. Such tie-ups burden the vendor with significant middleman costs, he said, citing analysts who have spoken out on costs associated with distribution via OEMs. In addition, retailers typically stake claims to all of the revenue from the first year of partnership.

The free model has been "fantastic" for Avast and "very profitable", said Steckler. According to him, the free product is also a "very, very complete product" and provides the "same malware protection" as the paid version. One difference, however, is that the paid Internet security product has a two-way firewall and is geared to protect online banking transactions.

Avast's paid subscribers amount to about 5 million globally. That part of the business is also growing rapidly, Steckler reported. The number of paid users doubled in 2009 and again in the first quarter of 2010, with a correspondingly increase in revenue.

Sales of commercial software has grown 80 percent to 100 percent over the last several years, he said, but "it's [obviously] still not in the category of a Symantec".

Asia expansion
Avast's 110 employees are all based in its headquarters in the Czech Republic, but the company may establish its own presence in Asia, said Steckler.

He added that Avast has a "good size community" in the region. Japan is its fifth biggest market globally for paid products, and is home to about 4 million free users. China has about 4 million users for its free software, but there are an estimated 10 million users of pirated versions of Avast's paid product, noted Steckler.

The antivirus software maker is also working to avail its products in more languages. Having just added Vietnamese language support to its software, it will be including Thai next, followed by other Asian language capabilities such as Hindi and Bahasa Indonesian.

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