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Freemium, Conversion Rates and More: AVG CEO J.R. Smith (Part 7)

Posted on Wednesday, Apr 18th 2012

Sramana: Where do you see AVG going from here?

J.R. Smith: Moving forward, we have to figure out how to increase monetization of our users without charging them a dime. Our mantra is to ensure everyone is protected, paid user or free users. The more we move toward indirect monetization, the more we will be able to give away.

Sramana: I completely disagree with the philosophy of giving value away free. Your company and others have been instrumental in building bad habits in consumers. There are huge costs in developing good products. Who is going to pay for all of this?

J.R. Smith: The paid customers can help subsidize the free customers. As long as you have good balance, it works.

Sramana: Why should a paid customer subsidize a free customer? Everyone should pay for the value he or she is getting.

J.R. Smith: I actually agree. I can’t turn back the hands of time and change decisions that were made before I joined the company.

Sramana: I understand that, I am just expressing what I believe. The Internet is crumbling under free-riders.

J.R. Smith: That phenomenon is forcing companies to think of ways to monetize users indirectly.

Sramana: There are going to be thousands of companies that go out of business because they can’t give away their product. The number of companies out there providing value for free is very large.

J.R. Smith: Unfortunately, people think it is their right. It is no longer an obligation, it’s a right.

Sramana: All of this is going to come to a halt. Companies cannot sustain this model. They cannot provide this value for free.

J.R. Smith: I think they guys that are already there and are doing it will be OK. There will be huge difficulties for upstarts.

Sramana: There was a period where freemium businesses were funded by VCs. That is slowing down now. The sustaining infrastructure of ‘free stuff’ is going away.

J.R. Smith: I would agree. I think that was one of the major causes of the Internet bust. People were investing in error. They invested in free, in bubbles. They invested in hope.

Sramana: At least the public market does not buy that crap anymore. It is in the private market now.

J.R. Smith: You must have a very compelling product with a massive user base. Otherwise you are sunk.

Sramana: Developing a large user base is not an easy thing.

J.R. Smith: It took us 20 years. There is cost involved with that.

Sramana: The notion of freemium needs a complete re-evaluation.

J.R. Smith: If you don’t have the right product and a large user base you do not have a chance anymore.

Sramana: Its very interesting to see a European company hit its stride on the global market. Hopefully in the next round that is coming we will see interesting companies emerge worldwide. Thanks for sharing the story, it has been very interesting.

This segment is part 7 in the series : Freemium, Conversion Rates and More: AVG CEO J.R. Smith
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Ah ha, now I understand why AVG business Anti Virus keeps pushing out the AVG toolbar to corporate users and changing the default search to AVG, so businesses can fund the free version of AVG.

As of writing (and verified by your UK staff – drop me an email and I can give your their details) you are now not able to deploy AVG in a corporate environment without the AVG Search toolbar that changes all search options to send traffic to AVG.

Please can you stop this habit, it's not good to have You Tube and Face Book etc. as distractions in employee's browser windows.

Rob Lee Tuesday, May 8, 2012 at 10:34 AM PT

Freemium models are here to stay, and I think AVG has been very pragmatic in structuring it well. I think as more and more businesses will adopt it, I think people will start to see them as marketing costs that needs to be baked into the business model. Not as something extra to be dolled out to the customers.

umakant Monday, May 14, 2012 at 4:14 AM PT

@Umakant, I think you miss the point, the advertising is being added to a paid for corporate license.

Pushing free users to adverts is one thing, diverting the traffic of staff in corporations who have paid for your product is another.

Rob Lee Monday, May 14, 2012 at 6:32 AM PT