It’s time for a confession. I experimented with Adware. That’s right, I drank the Kool-Aid, and I’m sorry I did.
But, before I tell you why, let’s step back. For the last couple years, our team has been developing Connectify Hotspot, far and away the most popular software for turning a Windows computer into a WiFi hotspot. Like a lot of startups, we’ve settled on a “freemium” model for our product: there’s a free, limited-functionality Lite version, as well as a value-added PRO version.
Ever since we launched, I’ve been getting calls and emails from companies offering to help us integrate ads into the Connectify install experience. Opt-out installer ads have become the norm, even for big companies like Adobe, so I figured it was worth a shot.
Opt-out installer ads have become the norm, even for big companies like Adobe, so I figured it was worth a shot.
At first blush it didn’t sound so terrible: you let the nice people advertise some related products in your installer, and you get extra revenue. Maybe your customers learn about some interesting new app, and you’ve got a spiffy dashboard for up-to-the-minute stats. Also, you get extra revenue.
If the return was good enough, I figured it might even be worth it to drop the whole freemium model altogether. If we gave Connectify Hotspot PRO features to everyone, in exchange for tolerating the installer ads, it could be a win-win for the company and our users.
Like most things I do these days, I decided to approach advertising in our software’s installer with a series of A/B tests. I gave some of our users the version with ads, while maintaining a control group that installed Connectify without seeing ads during the install process. That way, I’d really be able to see if these opt-out advertisements were actually making us money, or just scaring away potential paying customers.
What did I see?
- Ad revenue isn’t all it’s cracked up to be: Connectify Hotspot PRO gets hundreds of thousands of installs each week, and I figured with all those eyeballs on our installer, ad revenue would be at least somewhat favorable. Turns out, we make 3x per install, by upselling the PRO version of our own software, instead of taking ad revenue on a third-party install.
- Not-so-favorable payment terms: Our ecommerce partner, FastSpring pays within days for software sales, but the advertising business seems to be built around monthly billing periods and 30 to 45 day payment terms. For a lean startup like Connectify, this is a long time.
- Compromise user experience, and lose users: We saw 40% less in-app sales of Connectify PRO from the group of users that had seen the installer ads. When I drilled down on the data, I found that a good chunk of that came from users that disappeared and abandoned the installation when confronted with the installer ads.
- Potential to get flagged as adware/malware by antivirus software: Actually, in hindsight this wasn’t so bad. ESET always complained, but the bigger antivirus companies were all pretty quiet. On the other hand, I’ve seen some major issues with ad networks being flagged by ubiquitous antivirus suites like Microsoft Security Essentials, and that would be nothing short of a PR nightmare.
- Makes your brand untrustworthy: This is 100% true. I got calls from friends asking for help with the registry tuning software that I had recommended to them. It took me a couple seconds to realize what they were talking about, and just what I had done.
Then I pulled the plug.
So I’m done with installer ads in Connectify. Obviously, we still run in-app messaging that encourages Lite users to upgrade and take advantage of our awesome PRO features. But, Connectify is, once again, free of any third-party advertising.
Connectify is, once again, free of any third-party advertising.
I realize there’s a small chance that I’m reading this wrong: maybe, just maybe, if all the features that are currently behind my PRO-only paywall became totally free, downloads and installs would explode by orders of magnitude. Who knows, maybe offering all of Connectify Hotspot for free would get me 10x times as many users or more, and the ad revenue might eclipse even our considerable PRO sales. If that were the case, everyone would win: I’d make enough off the ads to continue to fund development, and more people would get to enjoy the fully-featured functionality of Connectify Hotspot PRO. But, that outcome doesn’t quite jive when I look back at our historical data. When we introduced the PRO offering a few years ago, we didn’t see any kind of dip in our overall install rate (if anything, adoption of Connectify is continuing to grow with our premium products in-the-mix). So, there’s really nothing there to suggest that reverting to a fully free, ad-supported product would ramp up our installs significantly.
I’ve drawn a line in the sand. Connectify Hotspot is staying freemium. It has no third-party ads, no adware, and no spyware. Of course, this means that Connectify isn’t becoming totally free either. But, after collecting and analyzing the data from our A/B tests, I believe that the pure freemium model works best for the majority of our Lite and PRO users.