Well, let the naysayers howl because downloaded software is alive and kicking, and smartphones and tablets are actually adding to the software industry. So if you are a software developer pay attention to changes in the market. Take advantage of these changes in order to disrupt your own business before someone else does!

Best Buy: Check for Shipping

Ten years ago, people talked about the death of software in retail stores due to the emergence of affordable high speed internet access at home. TechCrunch even published a story on the death of packaged software (and inherently the rise of the digital download) as recently as November 2008. Although we can agree that retail boxed software is a declining market in 2012, it still isn’t dead as evidenced by Best Buy’s online store selling software where you can “Check Shipping and Availability.”

So if you don’t believe me that digital downloads are going to be around for a while, here’s my case for you:

Tablets Adding to Market Size

Forrester released a research report last year titled “The Products That Lose When Tablets Win” which included a section on how different age brackets use their iPad/tablet devices in situations when a consumer has both a tablet and a desktop/laptop computer. The graph below indicates that although a healthy percentage (30%) of people are using their tablet more than their laptop when both are available, only a relatively small percentage of users bought their iPad/Tablet as a replacement for their laptop or eReader.

Tablet and Laptop Use Comparison

This trend may accelerate over time as tablets increase in sophistication and function through innovation, as pointed out in this article from Fast Company. But I doubt that within the next five years businesses will replace a meaningful percentage of laptops or desktops for their employees. For any readers that have worked at organizations with an IT department, think about how rapidly new technology gets adopted.

On the consumer side, I would argue that this trend is a more likely phenomenon. In the next few years there will be a greater number of people that never owned a laptop or desktop for personal use, but they will own tablets and smartphones. If the total number of hardware devices in the market is increasing, then software programs, whether digital download or app or SaaS are also going to increase.

App Sales Adding to Software Market

Forrester also estimated the growth of the app sales market from 2010 through 2015 in a report titled “Mobile App Internet Recasts The Software And Services Landscape.”

Tablet and Phone App Revenues 2010-2015

Apps have received lots of media attention the last few years. Apple and Android may each have over 500,000 apps in their marketplaces with more and more people buying apps at $0.99 up to $9.99.

But can a $5 app on your tablet or phone really do the same thing as that $199 PDF creator on your laptop?  Unlikely.

Sure there will be some products that are unnecessary on a tablet, but there’s also going to be a new market of software apps that are not relevant to a laptop and desktop crowd.

Apps like Tripit and Dropbox are not true apps in that those products exist on non-tablet and phone devices. These programs are really SaaS services, but does anyone doubt that there will be innovation in apps where someone will find a product to attract 5 million paid users?  I don’t. Note that Forrester predicts this market will be valued at $19 billion by 2013.

SaaS Products Adding to Software Market

Many people are touting the virtues of companies like Salesforce.com (CRM) and Zendesk (Support) as the death knell for software. Salesforce’s website even has the cute “No Software” icon to indicate that people shouldn’t be downloading software anymore – only use cloud based software. Unfortunately for Salesforce, while cloud hosted software does have many virtues, it is not right for every single organization in every situation.

Software Market Estimate

Forrester’s report “Which Software Markets Will SaaS Disrupt,” beautifully outlines the markets that SaaS has disrupted, likely will disrupt, may disrupt and won’t disrupt both in 2010 and by 2013.

Digging into the data a bit, SaaS has already disrupted some software categories (webconferencing, talent management and recruitment management), will likely disrupt other software categories by 2013 (content security, time and attendance, and expense reporting) and will leave still other categories virtually untouched by 2013 (core business intelligence, office productivity software and electronic design automation).

Furthermore, as you can see from the graphic, while SaaS is not only growing as a percentage of the software market, the software market itself is growing by almost 35 percent. So SaaS may be taking a bigger piece of the pie, it’s still only 17 percent and the overall pie is growing fast.

Conclusion

Take a $350+ billion perpetual license market, add $35+ billion SaaS market and $19 billion App market and what do you have? A growing diversity in the software market that is tied to the perpetual license model for a long time to come. Does that mean that you should ignore a SaaS business model for your products or explore debundling your product for the Apps market? I wouldn’t!

As Mark Twain once said, “The reports of my death have been greatly exaggerated.” Well, ten years after the obituaries where written for packaged retail software it is still hanging on. So don’t count out the downloaded perpetual license market anytime soon.

Keystone: The software market, despite cries from many directions, is growing larger and larger. If you don’t adapt your software business to the technological changes, your business can be readily disrupted even with the overall market growing for years to come.

P.S. Gartner predicts that worldwide PC shipments will grow 4.4 percent in 2012. Here’s a link to the article that explains emerging markets are the near future of PC growth due to an existing lack of penetration, but that’s an article for another time.

A Forrester report from early 2011 states that 49 percent of online retailers are planning to re-platform their e-commerce solution within the next two years. If a typical technology cycle lasts three years, and it takes two years to choose, implement, and fine-tune a suitable alternative to your current platform, it’s safe to say that companies are perpetually in a re-platforming mode.

If you have decided to do a re-platforming project, prepare not only for customizing the e-commerce platform to your needs, but also to measure the results of the new platform against the old one.

Too frequently when performing an e-commerce re-platforming, there’s a six to nine month project spent identifying the right vendor with which to work, followed by a six to nine month project to implement the platform. Why leave all of that work to chance when the new platform is launched because revenue changed in an unknown way, both up or down? In order to prepare yourself for flipping the switch, make sure to monitor these seven data points for 30 days before and 30 days after the launch of a new e-commerce platform.

1. Traffic – It may seem obvious, but the moment that you flip the switch, usually at an off-hour, your traffic goes from platform A to platform B. Of course, at that moment, the traffic is likely not changing in any significant way, but when you have to report on revenue for the first 30 days against the previous 30 days, there are many factors that can influence the traffic reaching your site, some under your control, some not. You need to compare apples to apples as much as possible, so keep changes that affect traffic generation at a minimum.

2. Traffic profile – Measure your traffic sources to see if there are any significant changes. You should have an understanding of the revenue per visitor from different channels. What if your overall revenue drops by 20% or you see a channel that had a 50% higher revenue per visitor suddenly had 80% less traffic? How would you explain a significant revenue decrease?

I once read a case study of a company that experienced a severe decrease in revenue following a platform migration. They analyzed their traffic profile and, as it turns out, their PPC campaigns had been shut down prior to the migration to the new platform. Anyone that knows about PPC knows that it’s a high converting part of the traffic profile, so by keeping track of these changes before and after re-platforming, you have a better chance at nipping these problems in the bud.

Traffic Profiles Before Migration

Traffic Profiles After Migration

3. Exits – Another common mistake that goes unnoticed is changing the flow of your checkout process so that it increases or decreases by a number of steps. This change may contribute to either an increase or a decrease in the conversion rate for the entire platform or potentially for a specific channel. If you previously required a customer to visit three pages to go from home page to cart but now require only two pages, be certain to closely investigate at what point visitors are exiting your site.

4. Conversion rate – Your macro conversion rate, as we discussed in a previous article, may be misleading. Instead, you want to focus on conversion rates for specific products and specific countries. For example, if you typically have a product or a region that brings in 70% of your revenue, another that brings in 25% and a third product that brings in 5%, you want to focus, not on overall conversion rates, but on each stream

5. Revenue per visitor – The wise e-commerce manager knows that in addition to overall traffic and conversion rates, they must look at the revenue per visitor. It’s not enough to increase traffic if that increase isn’t accompanied by a growth in revenue. If your traffic doubles, so should your revenue. If it doesn’t, you need to look into what factors are causing a decrease in conversions despite an increase in traffic. Something is attracting the wrong kind of visitor, the window shopper. But what you want are quality visitors – people who are interested in your service or product and didn’t just land there through a wrongly worded or poorly placed PPC advertisement.

6. PPC – In addition to measuring how much money you are spending on PPC before and after the migration, you also need to think about where you are sending that traffic. In fact, for the period prior to and after migration, PPC spending should remain steady so you can identify clearly if traffic profiles have truly changed. Again, the goal is to monitor the strength of the new platform, so keep changes like PPC spending and traffic at a minimum.

7. Email campaigns – Unlike PPC campaigns, where you want things to remain relatively steady before and after a re-platforming project, you may want to stop sending out email campaigns for the few weeks prior to migration. Unless you include redirects for an already active cart, stragglers who open up an old email after the migration may find themselves looking at an empty cart. Remember that email is one of the strongest marketing channels around. Don’t make the mistake of misguiding customers because of your re-platforming project.

Keystone: You must measure, report and explain changes in these seven areas during your e-commerce re-platforming, or else all the meticulous work that went into researching and implementing the new platform will be wasted.

Contrary to popular belief, recruiting a new affiliate is relatively easy. Getting them to produce sales is a far more difficult task. Your acceptance email is the first step to what should be a long and prosperous relationship, and it should enable your affiliates to start promoting your products immediately. Think of this email as a quick reference guide for affiliates to start marketing your product.

This list of eight vital elements for affiliate acceptance emails will motivate your affiliates to drop everything and start advertising your product on their website right away.

1. Make your email personal. Include the affiliate’s name in the greeting, such as “Welcome MajorGeeks!” or “Hi Chris.” Greetings vary from region to region, so it’s best to keep it simple and professional – but still friendly. In automatically generated emails, you should be able to apply a placeholder to input the affiliate’s name which you will already have from the application process.
2. Remind the affiliate of your program’s specific offerings. Oftentimes, an affiliate website will apply for multiple programs in a single day, so the acceptance email must make your product stand out amongst all the other products the affiliate encounters. Not every company name signifies the type of products it sells, so it’s beneficial to briefly explain the type of products you sell.
3. Include the contact information for your affiliate manager. Provide email address, Skype name, phone number, etc., their regular office hours and the time zone in which they reside. Each affiliate prefers a particular method of communication, so make it as easy as possible for the affiliate to get in touch with you.
4. Include straightforward steps on how to get started. A login link to your affiliate portal is fundamental in your affiliate acceptance email. Make it even easier on an affiliate and include a buy link within the approval email. The affiliate can then simply copy and paste this link to their website for immediate use. Then include instructions on how to insert the affiliate’s unique ID. If your affiliate platform has a placeholder to insert the affiliate’s ID automatically, use it. Again, you want to make it as simple as possible for the affiliate to start selling your product. Let them know that additional links and banners are available through the affiliate interface. If you have the capability, emphasize that your team is available to create additional banners, landing pages, or custom coupons upon request. Next, clarify how your affiliate program tracks referred sales. For example, if you track by cookies, include the cookie lifespan. If affiliates are permitted to add additional tracking parameters to links, include steps on how to implement them. Or better yet, link out to documentation.
5. List your top products and the prices. Make sure to include your commonly used currencies, such as USD, EUR, GBP, JPY, etc. Providing unique selling propositions can really help affiliates, especially smaller affiliates who do not have a team of copywriters on hand.
6. Give a free product to new affiliates. In my experience, the content-driven websites will want to test out your product first, especially if they are rating or recommending it to their faithful visitors. By using the product, the affiliate will gain a complete understanding and become a true brand advocate, which makes them more likely to create meaningful content that influences a purchase.
7. Outline your typical promotion schedule for the year. For example, maybe you send emails every month about new promotions or specials, or possibly only once per year. This is completely at your discretion, and the dates do not necessarily need to be given at this point, but it’s a good idea to give affiliates advance notice, so they are ready to push these promotions when the time comes.
8. Offer performance-based incentives for participating in your affiliate program. For example, list the commission structure for affiliates to earn more if they reach a selling threshold. Another option is to give a cash bonus if they refer a first sale within seven days (or 30 days, etc).  This creates a sense of urgency to get the links up in a timely manner. If the user does not refer a sale within a set amount of time, I recommend a follow-up email to be sure the affiliate was able to successfully setup links.
   

Finally, you need to test, test, test! Go through the process yourself: sign up as an affiliate, approve yourself, and then double check the acceptance email. Be sure to answer the questions “who, what, why and how?” Remember that this message is not set in stone; it can be changed at any time to accommodate for new frequently asked questions.

Keystone: Recruiting new affiliates is only half the battle. The affiliate acceptance message is essential in motivating them to start selling.

What do you consider the important elements in your affiliate approval emails?

What techniques do you use to motivate affiliates to start selling your product?

 Jessie Kleino contributed to this blog post.

It’s all about accounting

A fundamental principle of revenue recognition states that money is considered revenue only if a product or service has been fully and completely delivered.

Immediate Delivery

NitroPDF produces and sells software that creates and edits PDF files. A customer can submit payment and have the product fully delivered instantaneously. According to the AICPA Statement of Position (SOP) No. 97-2 on Software Revenue Recognition, this type of exchange deserves revenue recognition because:

1. Two parties agreed to the exchange
2. A price was set
3. Payment was collected
4. Delivery was completed

Levels of complexity

However, things become cloudier when differentiating between a product where payment and delivery are simultaneous and a product or service in which there is a lag between payment and delivery.

Delivery Over Time

You will notice that Nitro also offers an upgrade service for 12 months. With this service, “delivery” can potentially occur anytime within the next 12 months.

Does this require the software manufacturer to amortize the revenue over a certain period of time?

You need to consult your own professional accountant, but based on our previous understanding that revenue recognition is dependent on complete fulfillment and the fact that Nitro collects money for a service whose performance is delayed, I suspect that the International Accounting Standards Board (IASB) probably would want this type of revenue amortized over the time period.

So what happens when I sell software that is fully delivered and a service whose delivery is delayed in the same transaction? Welcome to alligator infested waters, mate!

The topic is too complex to treat fully in one post, but it’s important to note that when products and services are sold together, it results in changes to revenue recognition requirements. Here are some types of sales that you need to coordinate with your accounting department on:

• Subscriptions
• SaaS products
• Software and customization (if significant enough, even non-refundable up-front payments for the software license do not allow up-front revenue recognition)
• Software and services (installation, training, customization and modification)
• Software and physical products

Handling revenue recognition in e-commerce

From a practical standpoint, revenue recognition in e-commerce abides by the same rules as sales made through other channels. Finance leads the project to decide how a company wants to apply the revenue recognition rules to the products sold.

Generally, an external auditing firm is consulted for advice before any decisions are made. Within the company’s accounting system, the products are configured with the necessary revenue recognition values. As orders are submitted from the field, the accounting system should sync with the transaction information.

From an e-commerce perspective, the important part is to ensure that the products in the e-commerce system are configured properly so that when a sale is made the transaction is reported back to the accounting system with the correct link.

Keystone: Guidance from your accounting team is required for correct revenue recognition in e-commerce transactions. Ensure that your e-commerce system is integrated tightly and correctly with your accounting system so that you don’t have a nasty surprise from auditors later.

What is your advice to others about handling revenue recognition in e-commerce transactions? Are there any gotchas that you’ve learned?

We all know the obvious cost of fraud: A payment is processed, the product is delivered and the charge is disputed. However, maximizing accepted orders is just as important as minimizing fraud. If you only have your eye on minimizing fraud you may be leaving a lot of money on the table.

There are also other hidden costs to anti-fraud such as the cost of anti-fraud employees, the cost of decreased customer satisfaction by delaying orders in manual review (especially if they expect instant electronic delivery), the cost of rejecting a valid customer who seems suspicious but is in fact valid, and the direct and indirect costs of lost chargebacks.

This can be particularly insidious, because rates over 1% can result in large fines from Visa or Mastercard in the short term, and lost merchant accounts in the long term.

Different Anti-Fraud Strategies for Different Delivery Methods

Fraudulent orders for physically delivered products incur additional costs associated with the loss of the product and the price of shipping, along with the somewhat higher tendency towards “friendly fraud” (customers claiming the product never arrived in the mail).

This leads to the next important point: creating an anti-fraud strategy to minimize cost and maximize revenue depends on the type of product you sell. Products delivered electronically tend to have different fraud than products delivered physically.

E-commerce merchants who deal mostly in electronic delivery may tolerate somewhat more fraud because there are minimal shipping losses while physical merchants with expensive products may be more risk-averse by necessity.

In terms of preventing fraud, SaaS products fall somewhere between electronic and physical products. While there are no shipping costs, there still may be costs involved in making the product available to the end-customer. For example, an e-commerce business that sells domains must pay to register the domain.

Best Practices for Fraud Prevention

With all this in mind, we bring you some best practices that cover all three types of products and are essential for successfully preventing fraud.

One basic, yet often overlooked best practice is to avoid “black and white rules” for your manual review team.

For example, less than a decade ago, a customer ordering in Malaysia with an American credit card was a sure recipe for a chargeback. But now the world is becoming a smaller place and Malaysia tends to be a reliable country.

A good anti-fraud specialist tries to find a plausible story for such “inconsistencies” in the data rather than memorizing and reacting to patterns such as “no American cards on orders with Malaysian IPs.”

Additionally, all e-commerce businesses with in-house anti-fraud solutions should be analyzing, modifying and re-analyzing. While there are some fraud issues that hit all merchants, many issues will be specific to your business.

A specialist that looks directly at which aspects of an order lead most often to reports of fraud or chargebacks and takes action against future orders of those types will do the most to optimize your bottom line. Of course, after any changes, be sure to follow up and measure how effective your changes were on both your fraud rate and false positive rate.

Lastly, all e-commerce businesses that deliver electronically should cut off access to the product as soon as they are notified of the fraud.

Companies that deactivate licenses / products / access rights immediately are a lot less attractive to thieves because they will only profit for a maximum of a few weeks before the fraud is reported. This will drive your fraudsters to competitor products that are less protected and keep them from coming back to you repeatedly for the long-term.

In-House vs. Outsourced

With all the different kinds of costs related to anti-fraud, the difficulty of maintaining state-of-the-art fraud tools and the necessity of an up-to-date anti-fraud team, many e-commerce businesses opt to outsource their anti-fraud.

However, all anti-fraud providers are not created equal. If you are thinking about outsourcing your anti-fraud you have some important questions to ask.

Firstly, what kind of experience in e-commerce and anti-fraud do the team members have? It is vital that team members have a year’s experience in e-commerce and/or anti-fraud at the bare minimum. Some companies employ fraud specialists with no previous experience in the e-commerce or fraud industries. This is critical because these people make the decisions about your money.

Secondly, what kind of transparency do they provide if you have questions about an anti-fraud decision? Of course, trade secrets for anti-fraud are highly confidential to ensure their continued effectiveness, but your partner should be able to answer questions to a level that it inspires your trust in their decisions.

Some anti-fraud teams will also answer fraud and manual review related questions directly from customers. This saves you time and ensures that customers are as satisfied as possible without feeling as if they are being accused of a wrong-doing.

Some questions you should include a checklist when researching an anti-fraud team include:

• Does the provider have a wide range of anti-fraud tools and negative lists?
• How often do they update their tools?
• Do they actively analyze their chargebacks and fraud notifications to keep up with the growing sophistication in fraud techniques?

Keystone: Whether you do your anti-fraud in-house or outsource it, there are many things to consider. But an effective anti-fraud strategy will increase your bottom line and your customer satisfaction.

Questions? Comments? Critiques? Let us know what you think in the comment section below. Or engage the Building Keystones team on Twitter or Facebook. We look forward to hearing from you!

Tabitha Stang contributed to this week’s post

Each Magic Quadrant identifies companies within that specific field as leaders, challengers, visionaries, or niche players. These designations are based on those companies’ “completeness of vision” and “ability to execute”. People use the Magic Quadrant as a benchmark and an input for making decisions about their e-commerce needs.

Once a year, Gartner publishes the Magic Quadrant for E-commerce that covers a topic near and dear to this blogger’s heart and it is that time again for 2011!

cleverbridge is currently offering this report, valued at $5,000, as a free download. Learn how Gartner views the e-commerce market by downloading your copy today.

But reviewing your business’ monthly or even quarterly performance is one of the most important ingredients for improving business performance. And who doesn’t want to improve business performance?

Surprisingly, many companies, large and small, do not actually conduct monthly or quarterly review meetings. When they do, the meetings are disorganized and unfocused.

In this post, we provide some effective ways to not only prepare and schedule a review meeting, but also how to properly conduct one.

Preparing for Review Meetings

The first step in measuring performance is deciding which metrics to review. Don’t try to review every little detail of the company or department; it is impossible and counterproductive.

A recommended range is between five and ten crucial metrics that you see as key performance indicators (KPIs). This number is manageable, and after a few review meetings, you may decide to change some of the metrics as the business shifts or opens up to new market opportunities.

Your KPIs define how your company measures success. Once they are chosen, it is time to set goals for the KPIs. To ensure that your goals are relevant, make them correspond to the SMART method. That means that your goals should be specific, measurable, attainable, relevant and time-based.          

As a company that globally sells software online, you want to think beyond traditional “revenue” and “units sold” measurements. For example, don’t just say, “I want to increase conversion rates.” It is not specific enough. Instead, say, “I want to increase conversion rates in under-performing regions next quarter.”

This goal is:

• Specific -  It tells you exactly what you want to happen (“increase conversion rates in under-performing regions”).

• Measurable -  You can measure the amount of unique visitors from a certain country against their sales to identify under-performing regions. Then you can enact changes and see if the conversion rate improves.

• Attainable  – Your goal may be reached through new marketing tactics, offering local currencies or payment methods, and split testing carts.

• Relevant – Setting this type of goal lets you know what helps make you successful and what is ineffective. Increasing conversion rates also has numerous additional benefits to your business and your bottom line.

• Time-Based – Your goal has a specific timeline (“next quarter”) in which you can implement changes and measure their success.

The final step in preparing for business reviews is to set a regular review schedule in advance and stick to it. Do not wait for a break in your busy schedule to conduct these reviews.

If you wait, you will push it off. Remember to choose a time frame that works for you. If, based on your business sales cycles, a monthly review is too often, then do a quarterly review.

Conducting the Review Meeting

Once the review has been scheduled and you have attendees in place, don’t just read the numbers out loud. Review the results against your goals by creating graphs and data tables to help tell the story of how your goals stack up against the results:

Next, you need to identify opportunities for improvement. Finding the opportunities to improve is easy; it is the area between your goals and your actual performance.

Some call this “Continuous Improvement” or “Performance Improvement”, but the name doesn’t matter as long as you can quantify the gap between the goal and the result, and then set your sights on next steps.

Periodic business reviews are also great opportunities to celebrate good performances. Besides boosting morale, you also emphasize the importance of those practices that led to success. Focus on what worked and apply those lessons to other areas of your business.

Now that you have identified areas for improvement it is important to create an action plan to help you organize and execute further improvements. There are four simple steps to developing an action plan.

1. Brainstorm all the possible solutions.
2. Prioritize these solutions based on greatest impact.
3. Assign/delegate solutions and schedule follow-up dates.
4. Follow-up as scheduled and make necessary adjustments.

Following up in between your regular review meetings is the most important detail of this process. It gives you the ability to adjust your plan if the desired results do not occur.

Keystone: A business is expected to improve in order to survive. Without a regular review of performance metrics, whether monthly or quarterly, your company will be at a disadvantage in the marketplace.

Leave a comment if you would like share any interesting metrics that you use for performance reviews. As always, you can follow us on Twitter and Facebook.

Chris Hamill contributed to this blog post

Pitfall #1: Using Your Home Page As The Landing Page

Many new marketers simply send paid search traffic straight to the home page of their website. The problem with this practice is that it assumes your visitors will automatically know where to go to get what they are searching for. But when a searcher types a keyword or phrase into a search engine, they are looking for an immediate solution and people will bounce out of your site if they do not see that solution in less than three seconds. By directing them to your home page, you are wasting precious time in successfully converting a searcher into a buyer.

If you would like your prospects to remain on the landing page, the content needs to closely resemble the ad they clicked on. Not only will this increase the likelihood that the visitor will convert, but it will also increase your Google Quality Score. Google values relevance between the keyword, the ad and the landing page, and they will reward you with a lower cost-per-click (CPC).

Pitfall #2: Giving Your Visitor Too Many Choices

Minimize main navigation, footer links and other distractions on your landing page. Based on the keywords used in your PPC, you know exactly what the user is seeking; additional navigation can distract the visitor from your message.

In most cases, a PPC landing page shouldn’t have a link to your Facebook page. This is a great way to get visitors to login to Facebook to ‘like’ a video of kittens, but it will likely distract them from buying your product. After all, conversions are the ultimate goal of the PPC campaign.

Pitfall #3: Hiding Your Call-To-Action

What is the purpose of paid search advertisements? Don’t say brand awareness. You are paying for these clicks with the hope that a large percentage of visitors will buy your product. So why bury the call-to-action (CTA) below the fold?

Your call-to-action should communicate a clear message to your visitors. I tend to favor a CTA in the form of a big, bold button with engaging language that makes the user want to click. For example:

1. Download Now
2. Start your Free Trial
3. Try it for Free

In the image below, we see that Auslogic makes their CTA buttons hard to miss. Not only do they place the first call-to-action above the fold , but they add another below the fold.

Auslogics’s landing page features a prominent CTA button above-the-fold.

Pitfall #4: Giving Away Trial Versions Without Collecting User Data

If your product is available as a trial, you have a prime opportunity to score a mini-conversion by requiring the visitor to submit their email address in order to receive the download. Use this data to build a list of interested users. Take a look below to see how TuneUp uses their PPC landing page to gain leads through the test version of their software:

TuneUp collects user data by asking trial users to submit their email address.

On the registration page, specify that registered users will receive promotional emails, but they will have the ability to opt out of newsletter subscriptions.

Pitfall #5: Neglecting To Track Results

Tracking is fundamental for an effective campaign, helping you determine the success of your campaign and plan future advertisements. Google AdWords and Microsoft adCenter provide conversion tracking codes that you can place on the confirmation page. Within this code, you can also define the value of the conversion – this should be the average order value. Conversions will be reported within your PPC interface, right down to the keyword level.

Create a different tracking code for each type of conversion: paid orders and leads (trial downloads). This information is invaluable when optimizing keywords and ad copy.

Once you’ve updated your page, ask for feedback. Most users are not as savvy about your product as you are, so test your page on some unsuspecting people and then watch how they interact with the landing page. In order for the process to be as seamless as possible, this page needs to be easy for anyone to buy your product.

Keystone: If you’re paying for traffic, don’t make the mistake of sending targeted searchers to untargeted pages.

What changes to your landing pages have resulted in the most success for you?

Jessie Kleino contributed to this blog post.

By far the most popular distribution channel in digital gaming is Valve’s Steam platform, which now controls more than 50% share of the digital distribution market for video games. Due to Steam’s size, many developers think that Steam is the only viable option for digital distribution, but there are alternatives.

Before we discuss other options it’s important to understand the pros and cons of Steam, as it may be in important component in your overall e-commerce strategy.

Pros:

• With 30 million users, Steam gives your game a lot of potential exposure.
• Your hosting and bandwidth costs are taken care of by Steam.
• Steam offers non-exclusive contracts, which is key as it allows you to widen your distribution channel.

Cons:

• Valve has final say over what appears on Steam, meaning your creativity will be subject to Valve’s approval process.
• Valve doesn’t publish commission rates, but chances are you’ll be paying at least 30% royalties to steam for each transaction.
• Steam currently only supports 3 transaction currencies (USD, EUR, GBP). With a world-wide audience, many of your customers may be forced to pay currency conversion fees to buy your product.
• The Steam client is a required download in order to purchase and play your product. Many users may not want to download the Steam client and this is may be additional barrier to purchase.

Using A Direct E-commerce Partner

An option that is often overlooked by game publishers is pushing customers to a direct e-commerce partner instead of a distribution channel like Steam. Recently, EA made some news by not publishing big-name titles like Battlefield 3 and Star Wars: The Old Republic through Steam.

Despite not pushing any pre-sales through Steam, EA managed to break presales records entirely through a direct channel. Eventhough EA is a house-hold name in the video-game sphere, the important lesson here is that gamers will make purchases outside of Steam.

Fortunately, as mentioned previously, Steam offers non-exclusive contracts. This means that you can continue selling to customers on Steam while managing your own direct e-commerce channel. The way this generally works is by adding a ‘Buy’ option on your game’s website, landing pages, and trial versions.  This buy link directs a customer to a direct shopping experience instead of a distribution channel like Steam. There are a number of benefits to this option:

• You don’t have to jump through any hoops to get software listed. Instead the e-commerce styles and experience are up to you.
• Depending on how you setup your direct e-commerce channel, you can offer your customers more currency and payment method options than Steam.
• Generally speaking, commission costs for direct e-commerce channels will provide much better margins then Steam.
• Your customers get a better shopping experience as there are fewer barriers to purchase.

If you are looking to work with a third party e-commerce provider to help manage your shopping cart and payment processing, there are a few things to consider:

• Non exclusive contracts – Just like Steam, your direct e-commerce partner should not have an exclusive agreement. This will allow you to sell your games direct and through channels like Steam.
• Currency/language support for your customer base – Make sure you offer currencies and payment methods appropriate to your customer base.
• A partner who is familiar with direct e-commerce sales and can add value by providing you with recommendations and best practices.

Keystone: Steam should be an important component of your e-commerce strategy, but not your only component. Pushing your organic traffic to a direct e-commerce experience is worth exploring.

I am currently at the Cloud Gaming USA conference in San Jose. Feel free to tweet at me if you’d like to schedule some time to talk or challenge me to your favorite cloud game.

Mike Batko contributed to this blog post.

Last week, we discussed the vulnerability of e-commerce sites to hackers and the benefit of complying with external security standards, like PCI-DSS and SAS-70. This week, we focus on protecting digital content from unauthorized access or copying.

Like the common cold, there is no cure for hackers, and digital e-commerce companies need to have preventive measures in place to protect their revenue stream. We begin by analyzing different types of digital content and understanding that each type of digital content has it own challenges in keeping it’s copyright protected.

SaaS, for example, is relatively easy to prevent unauthorized access to, because SaaS keeps the provider in control of the digital content, while users pay for access to a product or service. Nevertheless, a wily hacker can steal access to the service or the content (e.g., if you offer video courses or flash-based applications through a web portal, a hacker can screen record the content).

Software is probably the most common digital asset sold today and is moving more towards the cloud, but the vast majority of software is still downloaded on to a machine. On premise software, (and audio, video, and text products like ebooks), is more difficult to protect. Since oversight of the product is lost when delivered to users, digital e-commerce companies selling these products online need to find ways to control what is done with the product after it is received. Otherwise, a product is susceptible to being “cracked”, and the rightful vendor can be cut out of further sales.

Games have both download and cloud delivery models. The download, or license model, has similar protection issues to software, but cloud delivery is essentially the same as SaaS where the product is harder to steal, so a hacker seeks unauthorized access to the product.

Best Practices

For an expert perspective on different ways to protect digital assets, we spoke with Dieter Hӓrle, owner and managing director of Mirage Systems, a global software provider with a focus on content and copy protection, digital rights management, license management, software activation and copy protection for applications.

“A license key solution was sufficient 10 years ago, but not today,” Hӓrle says, “a good solution covers more than just the licensing mechanism.” Hӓrle recommended the following key practices in developing a complex and useful strategy to prevent unauthorized access.

Protect Against Decompiling

Decompiling is the process of taking a software program and reverse engineering it until the source code is revealed. Manipulating the source code to remove the copy protection or licensing mechanism results in the hacker gaining a free version of your product. Dangerous indeed! One preventative measure against decompiling is to obfuscate your source code. Note that programs written in .Net and Java are vulnerable to this type of hack and harder to obfuscate, while Delphi and C++ are less vulnerable and easier to obfuscate.

Develop a Strategic License Model

Asking which licensing model is best for copyright protection is like asking which chess move is best. The answer is entirely dependent on your situation, and there will be trade-offs between your desire for control and the user’s desire for unrestricted access. Several important license models are listed below.

• Per computer  - A very strict licensing model that restricts installation to a single computer.  The upside is that users buy more licenses for other computers… if there isn’t a cheaper option available elsewhere. The downside to this scenario is that with such strict limitations, a higher percentage of installations turn into customer contacts and user frustration. If the license is restricted to one PC, an important feature to include is the ability to move the license to a new PC in case the PC is replaced.
• Per user license model –(e.g. switch between office PC, home PC and mobile PC.) This gives the user a great additional value as he can use a product on multiple devices.
• Family License – Allow users to install software on e.g. three different computers.
• Network license - (e.g. per PC/seat or per user) lets a company a central point of license administration. Only the administrator handles licensing issues — the end user does not even know that a license exists.
• Floating license – A floating license is available to different users within a company, resulting in a shared model between employees. As long as enough licenses exist, other users can run the program legally.
• Individual feature enabling – Use this strategy to get customers to buy at a cheap price and upgrade with more features later.

In all models, a combination of several computer identification points is used to strictly limit the installation and identify a computer. An activation process (online, e-mail, fax or phone) is necessary to send the hardware information to an activation server.

Recommendations

Protecting your intellectual property is a complex topic and needs careful attention and thought before releasing a product to the market. Hӓrle notes, “Depending on the kind of software you sell, the focus can be different. A network license is essential for business software where a game vendor may  focus on decompiling and copy protection.” Here are some of Hӓrle recommendations:

Selling B2C software

• Allow a license key two-three installations before locking to avoid unnecessary customer contacts.
• Market a higher-priced family license that permits installation on all household computers. This is a good way to increase the average revenue per order or household!

Selling B2B software

• Offer a concurrent licensing model, which is more flexible.
• The typical alternate to concurrent is a per-computer model, which results in more seats and cost; good if you can get it, but companies usually have alternatives.

Global Distribution

• Digital product distribution is global, so make sure your system supports a wide variety of languages. Ensure that your licensing product is also multi-lingual.

Keystone: In the words of Dieter Hӓrle: ” A customer expects that software just works – no matter if the PC is replaced, used on a virtual machine or on his mobile PC. A software vendor wants revenue from each sale.  To balance both requirements you need a comprehensive licensing and copy protection solution. A simple system is insufficient. As the requirements to use software get more and more complex, you need a protection system that covers every usage scenario.”

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