Software Marketing Resource Articles: What is Shareware?

You wrote the code, now how do you sell it?

Tuesday, May 25, 2004

What is Shareware?

Shareware is software that you can try before you buy. Shareware is a kind of marketing method for software. Software developers post trial versions of their software on websites. Consumers can then download the trial version to their computer and evaluate it. If the consumer likes the software they can purchase it. Shareware is also called try before you buy.

Today almost every big software company including Microsoft, Winzip, and AOL use trial versions or a form of shareware to market their software.

Who invented shareware?
Andrew Fluegelman, and Jim Button, (also known as Jim Knopf) accidentally invented the marketing method shareware. Surprisingly it was started at about the same time by Andrew Fluegelman in Tiburon California, and by Jim Button in Bellevue, Washington. Jim Button started making simple programs and it soon became a hobby for him.

At the time the IBM PC came out Jim was working at IBM. Jim Button shared his database program with fellow IBM workers. The program spread between workers and they began sharing the program with family and friends. However, it was getting hard for Jim Button to send messages to users to tell them about improvements to Easy File. He found a solution to this problem. Jim Button put a message in the program that told people to please send him $10.00 if they wanted him to contact them about any updates to Easy File. The message encouraged the users to continue spreading the program around.

Meanwhile in California, Andrew Fluegelman, was writing PC-TALK. He faced a similar problem and posted a very similar message to Jim Button's. Jim Button contacted Andrew Fluegelman and Andrew Fluegelman really liked Jim Button's program. Andrew asked Jim Button if he would rename Easy-File to PC-File so that the programs could be bundled. They also decided to ask users for a $25 dollar donation. The software remained fully functional for unlimited time, regardless of whether the user paid.

Unlike other programs, this program could be tried prior to purchasing whereas other programs had to be bought before you even knew what it was like. The unusual marketing method caused a lot of free publicity for PC-File and PC-Talk, which helped increase the popularity of the programs. Shareware was finally born!

How was this unusual marketing method named shareware?
Jim Button, Andrew Fluegelman, and Bob Wallace another popular developer, all had ideas on what to name this new marketing method. Jim Button wanted to use the phrase 'User Supported Software' to describe shareware. Andrew Fluegelman wanted to use the term Freeware, but legally people weren't allowed to call it that without his permission because he had trademarked the term. Also, freeware wasn't descriptive because technically the software wasn't free. Bob Wallace wanted to use the term Shareware. Another developer named Nelson Ford, held a contest in order to determine what the name would be. The winner was. Shareware!

Distribution was critical to a software developer's successs. Developers needed to spread their software to as many new places as possible. Richard Peterson started as a disk vendor in 1982. There were so many versions of software some people were charging to find a certain version Richard Peterson created a diskette with all the versions of software. He copied it and sold the disks for $6.00 each. He called his company PC-SIG. Unfortunately consumers thought that the disk vendors were selling registered versions not trial versions. Jim Button and other software developers were furious because they felt that PC-SIG misrepresented their software applications. Developers protested by refusing to give away their software to anyone who wanted to sell it.

Eventually shareware developers and disk vendors worked together and came to an agreement. The developers would get a percentage of all the disk vendor's sales. The shareware developers also realized that the disk vendors were selling their software to places that the developers had not been able to sell to before, and with more trial versions there was a better chance of people buying registered versions of the software.

How did BBS effect the shareware industry?
BBS' increased software distribution, greatly impacting the shareware industry. A BBS (Bulletin Board System) is an electronic bulletin board. A person would dial out via modem, on a phone line, to a BBS and could send and recieve information on the bulletin board. Normally a shareware developer would have to distribute his/her software by handing out, or mailing floppy disks. That changed when the BBS was invented. Shareware developers could now post their software on a BBS and people could come and download the software to try out. Today many people still use Bulletin Board Systems. AOL is a modern BBS.

Did the Evolution of operating systems affect the shareware industry?
As technology evolved and improved so did software. This resulted in Microsoft improving and upgrading their operating systems. This created a number of problems for the developers. When Microsoft released a new operating system, called Windows 3.0. Many programmers who had developed their programs for DOS had to rewrite their software so it would run on the new Windows operating system. New computers were sold with the new operating systems meaning that the developer had to upgrade their software to ensure future sales. Microsoft then released Windows 95. Once again the programmers had to rewrite their programs to perform on the new platform.

Disk Vendors come to an end.
During 1993 the sales of diskettes drastically fell. As there were too many companies and not enough money for all of them to have a successful business. Even PC-SIG went bankrupt. Due to the distribution changes, disk vendors were no longer a viable means to distribute shareware applications.

What is the Internet?
The Internet is a connection of computers all around the world. People on the Internet can view information from anywhere on their home computer. Internet surfers can go to a web page in Australia, China, or even Russia. The Internet increased communication and opened web surfers to lots of new information. On the Internet there are downloads, auctions, information, and items that you can buy through secure online ordering. The Internet took time to evolve into what it is right now, it began as a simple way to share information.

Why did the Department of Defense invent the Internet?
The Internet was started in 1969 by the US Department of Defense. The Department of Defense linked all the super computers in the USA together. At first they linked them like a bridge's supports, but they soon realized if one super computer was hurt in some way, they would have communication difficulties. They had to link the computers together so if one computer was destroyed they would still be able to communicate. They called this network of computers ARPANET. Throughout the years the Internet's name has changed several times to names like MILNET and NSFNET. Some of the current nicknames for the Internet are The Net and The Web.

Did the Internet have an effect on the shareware industry?
The Internet has had a huge impact on the shareware industry. In fact many industry professionals credit the Internet with having the biggest impact on the shareware industry's growth. The Internet has helped shareware developers by increasing their distribution and reach.

The Internet contains many shareware or software download sites. A shareware download site is a website that has many software programs available for download. Like the BBS', the Internet was a great way to advertise. As the Internet has grown, so has the distribution network for software developers.

What does S= =R mean?
Up until this point shareware versions were the same as the registered version, so regardless of whether the consumer paid for the software the software worked the same. S= =R was adopted by the Association of Shareware Professionals (ASP) in the early 1990's. In the acronym S= =R the S stands for Shareware Version, (trial version) and the R stands for Registered Version. The Association of Shareware Professionals wanted the shareware and registered version to remain the same. However, developers were finding that by placing limits in their shareware version their sales increased.

When the shareware version was the same as the registered version consumers did not have a lot of incentive to purchase the registered version of the software. After the ASP established the S= =R rule there was a huge decrease in sales for shareware developers. Many authors went out of business as a result of the policy. Many developers also left the ASP. The ASP realized their mistake and repealed the rule. Soon many developers began adding limitations to their software, which encouraged users to buy. The shareware industry was thriving again and the Internet began making sales rocket sky high!

Freeware vs. Shareware.
As you know shareware is a marketing method for software. Freeware is also a way of marketing software. However, freeware is free so the developer does not ever request any money. Shareware is free to distribute but cannot be used for an unlimited amount of time, unless the developer is paid. Freeware can be used an unlimited amount of time and can be freely distributed; payment is not required. Many developers use freeware to draw attention to their shareware applications.

What is a Virus?
A virus is a dangerous computer program, it is made to cause damage and unknowingly to spread to other computer systems. A typical virus is one that attaches to a computer program. The virus will cause damage if opened, and will duplicate itself whenever the program is opened or if it is emailed to someone. Some viruses can erase files, others cause programs to not function properly.

What a virus can do to your computer
A very dangerous virus is called a Trojan Virus it can cause security breeches that allow people to look at information on a user's computer without the user's knowledge. Another kind of virus is also capable of attaching itself to emails. These viruses are easily passed on. This kind of virus is known as a Macro virus. Some names for this kind of virus is Concept, Nuclear, Showoff, Adam Wazzu, and Laroux. To block these viruses and others (such as Lovebug, Blaster, Michelangelo and Circam) surfers need to have an updated anti virus system on their computer.

Did Viruses have an impact on the shareware industry?
When consumers realized there were programs written with the intent to spread and cause damage they became leary of downloading software because downloads can contain viruses. The consumers were afraid of being infected by a virus so, shareware downloads decreased resulting in a sales decline. As consumers have become more educated about viruses the impact of viruses on the shareware industry has lessened.

Web providers provide bandwidth for developer's websites. Web providing is easier for a developer because he/she doesn't have to buy a ton of bandwidth, the developer doesn't have to buy a computer to host their site, he/she doesn't have to install and configure a setup to make their bandwidth secure, and when web providers host, people monitor the web provided computer 24/7! As you can see paying a web providing company is way easier and cheaper. Hosting has helped the shareware industry a lot because it has made many a developer's site easier and in many cases faster.

What is software piracy?
There are several kinds of software piracy. One kind of software piracy is hacking into software and disabling the copy protection. Software pirates then distribute or sell the hacked software. The developer does not receive any money for the software the hacker distributed. This is an infringement on the developer's copyright.

Another technique used by hackers is to illegally obtain a registered copy of software. Pirates purchase the software once and use it on multiple computers. Purchasing software with a stolen credit card is another form of software piracy. Unfortunately there are many kinds of software piracy that has slowed the industry's growth.

The effect of software piracy on the shareware industry.
In some countries it is not illegal to copy someone else's work. Nor is it illegal to make several copies of the same software and then sell them or give it away. Also in some countries it is socially acceptable to pirate software. This has resulted in a struggle for developers. In the U.S it is illegal to copy someone else's work, make several copies of the same software or violate the software licensing agreement. If this is done by someone in another country the developer cannot prosecute them.

Registration methods.
Registration methods detail different ways consumers can purchase software. Early on when shareware was new, users of software followed the honor system. If a user liked the application they would send the author money in the mail.

Nowadays consumers are able to transfer money online using a credit card or other electronic payment system. Many software companies use a registration company to process online orders. The developer has to pay the registration company a percentage of the sale. The registration company provides the developer a secure online ordering connection and fraud screening.

Software is also purchased using purchase orders. Once the consumers decide they like a the software the consumer sends a PO (Purchase Order,) which is a legally binding contract stating that they will pay for the software. The developer will then send the consumer the software, along with a bill or invoice. The consumer will then pay the bill.

Another popular registration method has a buy now button inside the shareware version of the software. This is probably one of the easiest registration methods for the customer because they don't have to call or email the author. If the user evaluating the software wants to buy the registered version all they have to do is click the buy now button. The buy now button will then bring them to a secure online registration form that the consumer can fill out.

Registration Incentives.
A registration incentive is something that makes the person using the shareware version of the software want to buy. There are a number of incentives developers use to encourage users to buy. One popular registration incentive is to limit the time of the trial version. This is clever because then the user can't use the shareware version forever. It encourages them to buy the software so they can continue to use it when the trial period is over.

Often shareware versions will have "grayed out" features on the menu that the consumer can see, but not use. Typically there is a pop-up windows in the software encouraging users to register in order to take advantage of the additional features. This is a popular registration method because if the person wants to do more things with the program, then they are forced to buy the registered version of the software.

Another registration incentive is water marking. Often when you print something from the software it will have a caption that indicates it is an unregistered version. Only if you buy the registered version will the watermark not indicate it is an unregistered version.

Another innovative registration incentive shareware developers use allows customers to receive discounts on other software once they have purchased the registered version.

Developers also provide support incentives. The shareware version of software will have everything the registered version has, however, if a person buys the registered version of the software he/she will receive tech support, newsletters, and upgrades. Developers can also limit the number of times you can use the shareware version of the product. The trial version may expire after 10 uses meaning the user has to register if they wish to continue using the software.

Shareware now and how the term changed.
Though the meaning of the term shareware has not changed the perception of shareware has evolved since it began with Jim Button and Andrew Fluegelman. At first when you had a shareware program there was a note that asked for a donation. Now you are required to pay for the registered version of the shareware program. The shareware industry has also evolved and grown into a billion dollar industry.

Why is shareware better than any other marketing method?
Shareware is a good way to market your software. It allows consumers to evaluate an application prior to making a purchase decision. They can easily determine if it meets their business or personal needs, which usually results to a satisfied customer. In addition because shareware companies are often small they can provide personalized service that is not found in larger companies. Shareware also allows for instant gratification, there is no need to wait for a shipment. Consumers can download and use the software immediately.

Success Stories.
Success can be measured any number of ways. Many developers achieve financial success using the shareware marketing method. Others feel they are successful because they are able to spend time with their families and make their own schedules. Some of the obvious financial shareware success stories include Winzip, JASC, and Ulead.

Thanks to the following who assisted with the research:

I would like to thank the following people who let me interview them:

Sharon Housley active in the shareware industry. Visit online at

Dan Veaner owner of EmmaSoft for 14 years until it closed in 2003. Visit online at

Mike Callahan is known for shareware promotion and is also known as Dr. FileFinder. Visit him at

Dave Collins is owner of Shareware Promotions, he is responsible for promoting shareware applications. Visit online at

Suda Pethe is owner of Centered Systems. He is extremely successful. Visit online at

Tom Guthery, software developer. He is the owner of FLIX. Visit online at

Tom Simondi is an industry pioneer and maintains file extension libraries. Visit online at

Scott Swedorski was the founder of Tucows. Tucows was thought to be one of the first 50 commercial sites. Visit online at

Steve Lee, is the owner of SWREG, one of the first secure online registration services. Visit online at

Rosemary West, is active on the ESC board and is partially retired. Visit online at

Larry McJunkin is involved in WUGNET and involved with shareware promotion. Visit online at

Paul Mayer is an industry pioneer and developer of Zpay. Visit him at

About the Author
The author is student, Dan Housley, interning at NotePage, Inc.


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