In the book, Free: The Future of Radical Price, Chris Anderson, the editor-in-chief of Wired magazine, wrote that “every industry that becomes digital, eventually becomes free” because of the development of the internet economy. The cost of reaching customers is becoming really cheap, rapidly moving towards a new kind of free-dom.
This has very quickly become the norm in the antivirus industry.
The age of the freebies began with Avast, which, in 2001, disrupted the market by taking the risk of offering the full version of its flagship antivirus software for free. “Avast’s business model is built on freemium,” says Ondrej Vlcek, EVP and CTO at Avast. “This decision paid off, as we quickly gained millions of users who enjoy free protection from digital threats.”
The world quickly started to follow Avast’s footsteps. In China, Qihoo 360—a local internet security company founded in 2005—had great success in the retail antivirus market by offering its antivirus software for free. As per US-based cybersecurity firm Opswat’s latest global market share report for July, Avast stood at the top with a 17.23% share, of which 14% came from Avast free antivirus.
Opswat does not include Microsoft in its report because they feel that its “products do not accurately represent the user’s product of choice as they come pre-installed on many Windows systems and cannot be removed.”
“This changed the entire market in China, and everyone moved from paid to freeware solutions,” says the marketing manager of a leading antivirus software company. He requested not to be named as he is not allowed to talk with the media.
Qihoo made its antivirus solutions free in 2008. Within a few years, it became the top antivirus software vendor in the Chinese retail segment based on the number of their monthly active users (MAUs), which stood at over 460 million.
As the market became increasingly reliant on this free antivirus solution, the retail market in China collapsed around 2014-15, he says. This, he adds, wasn’t just limited to the B2C segment but also crept into the B2B space.
But how commercially viable is the freemium model? Quite. Apparently, viability can be achieved in two basic ways. 1) By getting people to upgrade from the basic product to the premium product like Avast, or 2) Through online advertising and internet value-based services like Qihoo.
Vlcek says that today, around 75% of consumers use a freemium antivirus solution on their PC. “Avast’s 2017 revenue numbers were $780 million, with the major source of income being paid product sales. Out of our user base, about 4% use our paid products, which is a high amount given we have more than 400 million users,” he adds.
Here lies the gamble with this approach. You capture a humongous user base and hope that even a small percentage of that enormous set will pay for premium services. The large user base also throws up another advantage—lots of free data. This helps security firms stay ahead of the bad guys. “This is key to the success of our artificial intelligence/machine learning technology,” Vlcek says.
Last year, Russian internet security giant Kaspersky joined the bandwagon and released a basic version of its antivirus software. Microsoft, too, has begun bundling its homegrown Windows Defender Antivirus with its latest operating system, Windows 10.
Quick Heal also faces a massive freemium threat in the mobile security segment, a nascent market where Quick Heal sees huge future opportunity, and which, at present, contributes just 0.75% to its revenue. Reliance Jio, a company that seems intent on disrupting each and every sector in India, has entered this space. It has partnered with Norton, an antivirus program manufactured by American software firm Symantec, to provide a mobile security software called JioSecurity to its users. This will instantly get Jio a huge market share in the space, with Jio accounting for over 18% of India’s cellphone users.
Quick Heal feels that with the mobile security market being practically non-existent, the launch of JioSecurity doesn’t really impact the market share. Katkar remains defiant that the freemium threat does not spell doom for Quick Heal. He says that freeware does not provide the same level of advanced security that paid products do, and the growing awareness about the need for cybersecurity among Indian users makes them more likely to opt for a paid product. The same, he says, applies to the mobile security market.