OpenCandy Builds Online Marketplace For Free Software Downloads
[Updated 1/14/2010, 9:37 am. See Below] Darrius Thompson tells me he’s been involved for a long time in the software community, and he sees how consumer acceptance can be fluky. Some new software products get widespread distribution, and some go nowhere. Thompson says he believes in open-source products, but sometimes it doesn’t seem to matter if the software is available for free or not.
The runaway hit-or-miss nature of software development reminds him of the music industry. “Some of these guys were just taking in enough money to pay their server bill,” he says.
But Thompson tells me he’s also noticed that consumer acceptance tends to be much higher when users are offered a free software download at just the right moment. For example, during the years he worked at San Diego-based DivX (NASDAQ: DIVX), which provides audio-video compression technology, users would often readily agree to download software for a “surround sound” system if it was offered while they already were installing the DivX codec. Figuratively speaking, it’s like offering a free download of peanut butter while you’re installing jelly.
It was that realization that led Thompson and Chester Ng to found OpenCandy in 2007 with a handful of other ex-DivXers. The San Diego startup operates a Web-based network that allows a software publisher to advertise its product—and to offer it as optional download—while another program is being installed on a user’s computer. Both are usually offered as free downloads.
[Updates to clarify that OpenCandy’s system selects the software offer] OpenCandy helps facilitate the process by providing software publishers what it calls “a tiny plug-in” they can integrate into their installer, which enables publishers to recommend complementary software or services that might be valuable to their users. “Software developers are doing their best to make their advertising as targeted as possible,” Thompson explains. The publisher picks the products they want to recommend and our network automatically chooses the best offer for each consumer. For example, through OpenCandy’s partnership with San Francisco-based Nitro PDF Software, a user who downloads PrimoPDF, a popular free alternative to Adobe Acrobat, gets an offer to also install Snagit, a free program for capturing, sharing, and editing anything users see on their computer screen.
While it’s possible to do tricky things to get users to install software, Thompson says OpenCandy’s business model calls for recommending good software and ensuring that consumers opt into the download. “We really like the idea of openness. That’s the way we operate internally. We really believe in transparency, and in open systems in general,” Thompson says. The founders conveyed that sentiment when they named their startup, combining it with a positive sense that the software products they’re offering, once you taste them, are like candy.
“Almost all the products getting recommended are free downloads,” says Thompson, explaining that if users like the free version, they’re usually willing to pay to upgrade to a more sophisticated version. OpenCandy’s software partners are both advertisers and publishers. Thompson says its top partners offer products that rank among the most popular downloads at download.com, CNET’s website that provides free software and reviews.
“We’ve created a network where a lot of publishers can interact with dozens and dozens of advertisers,” Thompson says. “What we end up doing is automating the process.” He describes OpenCandy as a marketplace that helps match publishers with advertisers. Like any market-maker, though, one of OpenCandy’s biggest challenges is matching the supply and demand. “We have to work to bring in publishers that have inventory and advertisers who can fulfill that inventory,” he says. “We have to keep those two in balance.”
As an example, Snagit pays Nitro a fee to “advertise” its product during the principal download, and OpenCandy takes a cut for electronically brokering the deal. But Thompson says OpenCandy only gets paid when a user actually downloads the advertised product, with its fees ranging from 50 cents to several dollars per installation. “We’ve powered tens of millions of downloads through installers,” Thompson says, “and our accept rate is in double digits, which is pretty phenomenal.”
Thompson says OpenCandy’s founders bootstrapped their startup until October 2008, when they raised $3.5 million in a Series A round that included Bessemer Venture Partners, O’Reilly AlphaTech Ventures, and some prominent individual investors: DivX founder Jordan Greenhall, LinkedIn founder Reid Hoffman, and Excite founder Joe Kraus.
The company has grown to about 20 employees, and Thompson says he expects to hire another person per month over the next year. “We’re doing really well in terms of growth,” Thompson says. As long as that growth continues, he adds, “We’ll definitely consider raising more money.”