Did you know rebate checks in 2008 totaled over $6 billion?  It’s a hugely successful and popular merchandising tool.  We just released a new feature for online vendors that increases profits by offering a mail-in rebate to your customers instead of a coupon. This is the first online-based rebate service of its kind, and it is unavailable through any other e-commerce service. Rebates have proven to boost sales and profits in the offline world, but to date they were difficult or impossible to implement online because the online customer base is truly global and the logistics were too much of an obstacle…until now!

While customers redeem coupons nearly 100% of the time, typically less than 40% of rebates get redeemed, so the difference gets added to your profit instead.  Run these numbers on your own coupon promotions and you’ll quickly see how much you can potentially increase your profit in short order by replacing some coupon promotions with mail-in rebate promotions.  Through the service’s global mail-in locations and payment options, customers mail a form in to an in-country address and get paid in the default currency for that country.  For example, a customer in Germany would be provided with an address in Germany to mail their rebate to and would subsequently be paid via an EFT in Euros.

While some rebate companies try to disqualify consumers, hold consumers’ money for a long time for no other reason than the float, or send the consumer something other than what you promise them, we take the exact opposite approach and make the experience fast and easy for the consumer so that they are kept fully satisfied at all times.  Since the rebate form is simple and the payment is done quickly and efficiently, it’s a positive experience for both you and your customer.

You also have the option to offer a complementary product (already at a special discounted price) to which the consumer can apply their rebate, instead of having to mail in the rebate and wait for weeks to get reimbursed.  This will further decrease the number of actual rebates fulfilled, constituting additional savings for you (and more new customers who will potentially purchase upgrades).

You can view a diagram that illustrates the flow here:
http://www.fastspring.com/features_rebate.php

I hope you enjoy the financial benefits of this innovative new feature we’re introducing as a new merchandising opportunity for FastSpring vendors.  If you’d like to learn more about setting this up, please contact your FastSpring Dedicated Account Manager.

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Recently a consumer software publisher said they were approached by a big German PC magazine requesting to feature the software product on the PC magazine’s covermount CD. The magazine asked to bundle a fully functional version of the software product. No compensation was offered. What should the software company do?

It certainly wouldn’t hurt to ask for money upfront. Some magazines will pay, and sometimes they’ll pay well since they’re asking for a free copy of something others are paying significant money for. We’ve done a couple of deals where the software vendor was paid a one time upfront fee of $5-$8K, though that tends to be the exception more than the norm certainly.

The next best thing is to give them an older version which prompts users to upgrade to the new version, or to give them a Lite version which doesn’t have all features enabled, and when users click a non-Lite feature they are asked to upgrade from Lite to a higher version.

It would be great if they accepted a trial version but they generally don’t since it doesn’t have perceived value to their readers. Another option is to ask them for a free advertisement in their publication or a story included in that issue about your product if they haven’t already offered that. Either option gets at least some traffic to your site where hopefully you can offer their readers additional products or editions of your product.

Some software vendors just want the free exposure (think word-of-mouth) more than anything and are OK without having a way to monetize it at all, and that’s fine too if you’re comfortable with that. Especially since the magazine is based in Germany and most likely most of those magazine subscribers wouldn’t have found your particular product on their own anyway, so it’s not likely cannibalizing your business to any great extent by giving it away for free, unless your primary market happens to be Germany, though even so there are still advantages along with disadvantages.

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The question has come up a number of times — I’m a software company and I’ve been asked by a 3rd party company to bundle their software along with mine, should I do it?

I’ve managed a number of bundle deals in the past, including a little time spent working with the Google toolbar bundle distribution team while I was at Google.

Bundle deals can be very lucrative if they’re done properly with the end user experience in mind.   You need to be extra sure that the products you bundle are products that are considered user-friendly, useful and pleasant applications, not anything that has been considered spyware in anyway.  Enable your users to easily view and evaluate the 3rd party bundle offer and opt-in or abstain from it without any confusion.  The bundled product should be easily uninstallable by your users as well, with all components uninstalling.

The amount of money you make depends on which company’s product(s) you bundle, how much you are paid per install or as rev share, how many installs you receive of your own product, the geographic breakdown of your installs, retention of the 3rd party bundled product among your users and how often your users use the bundled product if it requires usage, etc.   For those bundle opportunities that pay you on a revenue share basis, you can expect to be paid 35-75% of the revenue earned, depending on the company you’re working with.  Examples of companies that at times pay on a revshare include Google, Yahoo, Ask, Conduit, and Visicom.

It’s hard to know if you’ll earn more from doing a revshare or a pay-per-install arrangement, the only way to know is to ask a lot of questions and test different bundles.  How much will you earn if you do a pay-per-install arrangement?  Say you generate 1,000 installs per day. In my experience, that can generate anywhere from $50 to $500+ per day, depending on the factors I’ve mentioned. I realize that’s a big range, but there are so many factors, and that’s why it’s good to test a few different bundles in case one makes you a lot more revenue than another.  If you find a good fit, you can definitely earn $300+ per day on 1,000+ installs per day ($.30 per install) with a decent geographic breakdown which includes a higher pay rate for US traffic, lower for non-US.  Some firms will pay as much as $2.00 for a US install, some will pay as little as $.25 per US install, it really depends on the situation.  Those firms which can do a good job monetizing your non-US installs might be willing to pay as much as $.75 for EU-based installs, though oftentimes they won’t pay more than $.10-$.25, especially for countries they consider less able to be monetized such as third world countries.  The better paying install countries are US, UK, Canada, the next tier down is generally other EU countries such as France, Germany, and perhaps Italy, then everywhere else is the 3rd tier which almost always earns only $.10-$.25.

Here are some questions, techniques, and tips to consider when you are evaluating a bundle opportunity:

- Ask the company who wants you to bundle their product with yours if they will pay you even if their product is already on the user’s desktop.  Some firms will only pay for unique installs and if a lot of your users already have their product installed, you lose out on a lot of installs - think Google Toolbar.

- Will they pay for installs on Firefox and other browsers as well as IE?  If 20% of your users are on Firefox and your bundle partner only pays for IE installs (this assumes the bundle product gets integrated with a browser and thus the browser type matters), you’ll make a lot less than you would with a partner who pays for Firefox installs as well, assuming all else were equal.  Check Google Analytics (FastSpring has it integrated) if you don’t know what % of your users browse with Firefox.

- Can they track the geographic location of your installs from their end of do they require you to?  If they require you to and they’re paying a different rate based on geography, you need to be sure you have a way to track the user location and that your partner will accept your tracking method as valid.

- Test out the 3rd party product with popular anti-virus/spyware programs and be sure those popular programs don’t get flagged by this 3rd party product.  If they do, then the bundle may not only damage your brand and reputation, but can also lead to fewer installs of your own product since users will be notified that your software is not safe.

- Is your bundle partner OK being bundled alongside another product, if you do already bundle something else?  Some companies will be OK with this, some not, and some will be OK with it so long as the other bundled product isn’t a competing product to theirs.  When you ask this, be sure to specifically ask about their product being bundled with a specific product you are already bundling or intend to bundle along with theirs.  The last thing you want is to find out at the last minute post-integration that they didn’t realize what else they were actually going to be bundled with, and they can’t accept the co-bundle as is.

- If you are planning to bundle on an opt-out or opt-in basis, be sure your partner is OK what the setup you prefer.

- If you want the installer/EULA page where you mention to your users that there is a 3rd party bundle to have a certain appearance or contain certain content, be sure your bundle partner is OK with it, and in your contract state both parties get to approve of the install page’s look and feel.  Include in the contract that you have the right to approve everything related to the bundle, so that your partner can’t insist on anything you aren’t OK with, you get to have final say.

- Have a short-term exit clause (ie. 30 days) in the agreement in case you need to pull out of it quickly.  You don’t want to find out the bundle is causing a problem for your business and then be stuck with your new bundle and no way to get out.

- Ask your bundle partner for financial projections based on your install volume and user profile (geography, browser usage) and their experience with other similar products they’ve bundled their products with.  Ask to talk to other clients of theirs who are bundling their products and ask those clients about the experience and whether it’s been a lucrative initiative for them, what if any issues emerged, etc.

- Find out if your partner will pay you for all installs or will deduct those users who uninstall within X days after installing.  If those uninstalls get deducted, you will earn significantly less than if you are paid for all installs no matter if the users uninstall at any point.  In general, you will find no two bundle partners tracks your installs the same, and so it is difficult upfront to accurately estimate what you will earn, but you might as well try for a rough estimate.  You may find that for every 100 installs you track, your bundle partner only credits you with, for example, 65.

- Find out what the bundled product will add in file size to your installer.  If your file is 5 MB you don’t want to bundle a product that is 4 MB as you’ve almost doubled your file size which means you may get fewer installs of your own product.  Many firms will offer a stub installer or another option that enables you to bundle a file that is far less than even 1 MB and that file will fetch the bigger file on its own or address the problem in another similar manner.

- Ask about how the bundled product will install/open/run/embed itself once the user has selected to install it.  Ask for screenshots to see all the steps the user will be presented with, or go through the process yourself if you can.  Be sure you are comfortable with how the installation process will work, how their product will be displayed to the user, their product’s behavior once on the user’s PC, etc.  Avoid behavior that is unattractive to your users, such as the bundled product running in system trays, spawning pop up ads, etc.  Put yourself in the shoes of your users and make sure you’re comfortable with the process and its result.

These suggestions should be helpful in evaluating 3rd party bundle opportunities.  At FastSpring, we provide marketing guidance to our clients, so always feel free to drop me an email if I can be of help.

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If I build it, will they come? Let’s say they do come — will it matter?

A FastSpring client invested some time back in 2007 into making videos to post on YouTube which would demonstrate their product and hopefully drive traffic and sales to their website where users could buy the company’s software. They were extremely successful in generating interest in their primary video, “Kitty said what?”, which now has about 4 million views and was nominated for the 2007 YouTube awards last month.

But what can one expect to earn from a wildly successful video like Kitty said what? After all, most videos never make it bigtime, and their producers may assume they are missing out on riches if they had intended their videos to generate revenue. How many units of software do you think 4M views resulted in? Keep in mind, this is a uniquely synergistic situation in that the users who view the video and click a link to view the producer’s website (the link is posted at the end of the video and next to the video in the comments section) can actually use the software available for sale on the producer’s website to create their own similar videos.

Did 4M views result in 10,000 unit sales? 5,000? 500? More? Less? The answer is fewer than 250 units. (Note: The software company provided their permission for us to disclose their sales results related to this YouTube promotion.) Crazy, right? It’s definitely disappointing, but shouldn’t come as a huge surprise to veterans of marketing, given how many people you need to show your product message to in order to generate a sale. Let’s say perhaps 1% of those who view the YouTube video will visit the producer’s website. 1% isn’t so out of the ordinary when you think about click through rates for, say, banner ads which often perform far worse than that. And you have to remember, these aren’t users dying to pay for products, these are YouTubers looking to watch funny videos and be entertained. Given the type of users, if you assume 1/2 of 1% of those who visit the producer’s website actually buy something (which would not be an atypical visit to sale conversion rate for some products), you get close to the results mentioned.

So is there a way to make money creating popular videos on YouTube like people assume? Well, on the bright side, YouTube recently announced that videos can now have ads running inside and next to them and their producers will earn a fee for every video view/page impression. My guess is that this will become a more lucrative way to monetize popular videos, but we’ll have to see how it plays out.

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