Today, Avast’s $1.3 billion acquisition of fellow endpoint security vendor AVG closes. The deal creates a behemoth in the consumer space. Avast nearly doubles in size, going from 230 million users to approximately 430 million – a third of the PC users outside of China. 160 million of those will be mobile users. That expands Avast’s threat network, improving their early detection ability. For AVG and Avast channel partners, however, the burning question has been what the new Avast’s business model would look like going forward. That question has now been answered. Since AVG’s business unit is considerably larger than Avast’s, its non-freemium model will become the future model once all of the integration work is done.
“Avast is extremely excited about joining with the AVG team – and specifically its SMB team – to add strength to our offering,” said Glenn Taylor, Chief of Staff and GM of SMB at Avast. “Avast has been very strong in consumer, but relatively small in the business center. AVG has been stronger there and has made some strategic moves to enhance their position. Together, we think we can extend that.”
Avast once had an endpoint product which was not free, and which was sold by channel partners through distribution. It didn’t make much noise in the market however. In contrast, their consumer- based freemium model turned the company from a small Czech regional player into a major worldwide brand. So in early 2015, Avast rolled out Avast for Business, to sell to the sub-100 seat market, through the channel, using the freemium model.
“Our thinking then was that it was a very crowded business market, and that Avast had always done the freemium well in consumer,” Taylor said. “We hadn’t had traction doing it the conventional way. We thought if we entered the business market with the freemium model, we could get that traction, and could then upsell additional applications.”
Selling the freemium model to VARs – who like to get paid – was always a tough sell, but Taylor said there was some logic to it for them.
“Resellers also sell services, and small business customers only have so much money,” he said. “If they have to pay for license costs, they have less to spend on services. Charging $0 for licenses would allow resellers to charge for services.”
Going forward, the issue becomes moot. Because AVG’s commercial business revenue is five times the size of Avast’s, the AVG non-freemium model will be the one used going forward.
“The right move is to put the Avast model on hold, and set it aside, and follow the AVG business model, because their commercial business is so much larger,” Taylor said. “They also have momentum in the market that warrants adoption of their approach moving forward.”
Taylor indicated that Avast has no intention to reduce the size of its now much larger channel. In fact, the reverse is the case.
“I would be looking to increase the number of partners,” he said. “Every partner has value, and together we can definitely grow.”
While the channel will not be rationalized, the product sets are likely to be, Taylor stated. The company now essentially has three sets of products: Avast’s, AVG’s, and the Norman Safeground line that came to AVG when the company acquired that Norwegian-based firm in late 2014.
“We will encourage partners to take a look at the full product set, but long term, we need to simplify the products,” Taylor said. “We have three lines, and for each of them we have both an on-prem and a cloud solution. We need to do things more efficiently, pull all three lines together and come up with more simplified products. We expect to bring the product road map into harmony over the next year.”
One of the big strategic moves AVG made was its entry into the RMM space in 2013 with the acquisition of Level Platforms. The idea was to develop the clear synergies between the RMM platform and the AVG security software. The plan proved more difficult in reality than on the drawing board however – something that probably shouldn’t have been a surprise given that AVG had basically no knowledge of the MSP market before the acquisition. In late 2015 and early 2016, several management changes were made in the area, and the new team altered the strategy, introducing a new certification program, and adding more focused, value-added distributors.
Taylor said the plan is to continue to emphasize the RMM business, and build on the changes that have taken place.
“We are committed to the MSP market and the RMM space,” he said. “It was one of those AVG assets we considered strategic, and that we thought had long term value in the market. That being said, we are also new in the MSP space, and we need to spend some time listening to customers and making sure their needs are addressed. The new AVG team had made some headway in that regard, and we plan to follow through on what they had already started.”