Free antivirus software pioneer Avast, has received a $100 million (£64 million) investment from private equity firm Summit Partners to woo business users and open new offices around the globe.
Summit Partners managing director Scott Collins will get a seat on the Czech company’s board in return for its cash and will help the infused company to drive a strategy based around the ‘freemium’ software model.
Also used by European rivals such as AVG Software and Panda Security, freemium offers users a basic antivirus product at no cost in the hope that in time they will be willing to pay for a more featured product.
According to Avast, offering free antivirus since 2004 has allowed the company to claim a 100 million user base, an unknown number of whom pay for the upgraded paid-for product. The company and its new investor see potential to apply the same approach to business users.
“We are convinced that the freemium model is the wave of the future,” said Avast’s CEO, Vince Steckler, a US executive appointed to head the company in July 2009.
“This approach is already upsetting the traditional antivirus market. Instead of paying for advertising or installation on new computers, Avast continues to experience dramatic growth as fans of avast! recommend our products to their friends. The word-of-mouth of our large and loyal, satisfied customer base is certainly the most effective form of advertising,” he added.
In fact, it is more accurate to state that the freemium model has been around for some years and was considered more or less the only way for small, European antivirus companies to stand a chance against the huge marketing and partnering operations run by Symantec, McAfee and Trend Micro.
As it stands, Avast still has only one significant office, its Prague HQ, no history of hands-on support and even its large user base flatters to deceive. People flock to companies offering free antivirus because the bigger brands charge significant annual subscriptions for almost the same basic features.
Despite its sudden popularity as a buzz term, freemium’s biggest rival is probably not paid-for antivirus so much as totally free software along the lines of Microsoft’s Security Essentials. This is rated as basic in its feature set but is slowly acquiring more sophistication, including that added by a recent upgrade.
The commercial imperative is to get users to upgrade but means getting them to understand the purpose and value of the extra features. That might be easier to achieve with SME users as long as the price can beat the big three for value.
Avast is said to be profitable, but Summit Partners is likely to be after either an IPO – hinted at as a possibility during a conference call – or a sell out to a better known security brand. Venture capitalists don’t throw $100 million around these days without a good prospect of bettering their investment.