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Freeware

Brian MajerusNovember 22, 2013

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What is it?

• Software that is available free of charge

• What’s the catch?– There isn’t always one, but…– Advertising– Account upgrades– Premium content– Privacy

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Free Software vs. Freeware

• The “free” in “free software” refers to the license terms– Often open-source– Users may study, modify, and redistribute– Price ≥ $0

• The “free” in “freeware” refers simply to its purchase price of $0

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Software Engineering

• Software Engineering isn’t just coding• It also includes:– Business models• Making money

– Economics• How do consumers select a product?

– Philosophy• Working with purpose

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WHY DEVELOPERS VOLUNTEER

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Motivation

• 2003 MIT study• Survey of 684 developers– Volunteer contributors to projects

Motivation % of volunteers

Code for project is intellectually stimulating to write 46.1

Improve programming skills 45.8

Code needed for non-work user need 37.0

Believe that source code should be open 34.8

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Altruism

• Software developers have skills others need

• Help out a friend• Support a group or charity• Help mankind– LibreOffice

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Personal Improvement

• Résumé padding• Networking• Name recognition• Learn new technologies• Try out new ideas• “Stick it to the man”• Do something fun!

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Abandonware

• No longer supported commercial software– Not profitable to pursue copyright violators– Original developers gone– Relicensed or transferred to public domain

• Often old games kept alive by cult following– SimCity2000 (1994)– Wolfenstein 3D (1992)

• Maintained by passionate fans

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Donationware

• Fully functional software• Development supported by user donations• No cost of anti-piracy efforts• Developers paid for hobby• E.g. Notepad++

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HOW TO GO “FREE” WITH PROFIT IN MIND

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Adware

• Maker profits from advertising in software• Nearly any software which connects to the

web can be ad supported– Websites– Mobile Apps– Even standalone software

• Google AdSense

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Adware Cont’d

• Ad-free version often offered for a fee• Concerns– Intrusive advertising– Privacy– Malware

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Freemium

• Free software with paid, premium features• Examples– After-install purchases• Microtransactions

– Extended features• E.g. Skype’s three way calling

• Concerns– Surprise fees– “Pay2Win”

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Promotion of Other Products

• Microsoft’s Internet Explorer• Adobe’s Acrobat Reader– Standardization of PDF

• Google’s Android

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Beta Software

• Free access to incomplete software• Users perform testing• Developers get free marketing• Final release no longer freeware• Common in gaming industry

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Research

• Study user habits with widely used freeware• Use “big data” to make decisions– Target advertising– Optimize systems– Learn user tendencies

• Sell data to other corporations

• E.g. Google, Facebook

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WHY DOES THE FREEWARE BUSINESS MODEL WORK?

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Cost of Distribution

• Physical media is expensive• High up-front costs deter potential buyers• Anti-piracy is expensive and ineffective• People aren’t paying for software anymore• Support is time consuming

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App Math

• Smartphones– $200 Facebook machines?– Users are hesitant to pay for apps

• App Pricing– 1$ - “Maybe”– 4$ - “Seems a little pricey”– 10$ - “Outrageous!”

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App Math

• Top 100 grossing apps– Apple App Store: 87% free– Google Play: 99% free

• Why?– Median software developer salary: $85,000– Profit split for developers in app stores: 70%– At 1$/app, earning a median salary requires

121,000 purchases/year!

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App Math

• Paid apps are less popular and less profitable• Follow the leaders– DLC– Premium Content– Advertising

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WHERE THE FREEWARE MODEL DOESN’T WORK

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Critical Software

• Freeware use in corporate world risky– Licensing of freeware varies• For profit development using freeware• Distributing 3rd party solutions

– Minimal or nonexistent support– Free solutions lack “a throat to choke”

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Consistent User Experience

• Freeware usually targets a single market• Proprietary software often bundled• Some users prefer a consistent experience• Good alternatives can be hard to find

Proprietary Free

Microsoft Windows Linux

Microsoft Office OpenOffice, LibreOffice

Internet Explorer Google Chrome, Mozilla Firefox

Windows Media Player VLC, Winamp

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Conforming to Standards

• Freeware fighting established standards• PDF standardized by Adobe• DOC and XLS standardized by Microsoft• Simplicity for users– “It just works”

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The Search

• One commercial product may have many free alternatives– Good, bad, and ugly

• Sifting through the options can be challenging• Choosing incorrectly can be dangerous• Consumers fall back to most familiar product

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Perception of Quality

• Many see freeware as inferior product• Does cost correlate to quality?– Yes or no, some certainly think it does

• Users may choose familiar paid option over finding best, free alternative

• Antivirus is common example– Products subject to perceptions– Malware victims feel less at fault when a paid

product fails

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Summary

• Volunteering your skills

• Freeware is profitable (if you want it to be)

• Consumer behavior

• Drawbacks of freeware

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What are your questions?

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References• Niculescu, Marius Florin and Wu, D. J., Economics of Free Under Perpetual Licensing:

Implications for the Software Industry (September 13, 2013). http://ssrn.com/abstract=1853603

• Pujol, Nicolas, Challenges Specific to Freemium and Two-Sided Markets (December 4, 2011). http://ssrn.com/abstract=1968307

• Bessen, James E., Open Source Software: Free Provision Of Complex Public Goods (July 2005). http://ssrn.com/abstract=588763

• Lakhani, Karim and Wolf, Robert G., Why Hackers Do What They Do: Understanding Motivation and Effort in Free/Open Source Software Projects (September 2003). MIT Sloan Working Paper No. 4425-03. http://ssrn.com/abstract=443040

• Beuscart, Jean-samuel and Mellet, Kevin, Business Models of the Web 2.0: Advertising or the Tale of Two Stories (April 7, 2009). Communications & Strategies, Special Issue, November 2008. http://ssrn.com/abstract=1374448