Twin announcements May 22 from competing companies highlight a growing trend in interactive advertising: Putting ads within software, giving software makers an alternative source of revenue.
Ad-insertion technology developer Radiate today announces it has inked deals with Clarisys, which markets accounting software; Havas Interactive's Sierra On-Line division, which creates games software; and IMSI, which has design and graphics software.
One of Radiate's competitors, Web3000.com, also announces a deal today with music software developer Rosoft Engineering.
Many software companies have moved to offer free versions of their applications, downloadable from the Web. So to generate revenue, software makers are turning to the likes of Radiate, Web3000 and a third player, Conducent, to place ads from other marketers within the applications and share in advertising dollars.
How well the ad-supported software model will fare is questionable and such ads' effectiveness is unclear, analysts said.
"The jury's still out," said Kent Allen, a Palo Alto, Calif.-based analyst with the Aberdeen Group.
Theoretically the concept makes sense for software companies that can't get consumers to pay for their applications when so many are free, said Michele Slack, a Jupiter Communications analyst. "This is a way for [software companies] to still make money, but through the advertiser--not through the consumer."
Radiate, Web3000 and Conducent hook up with software developers to create networks of applications across which advertisers, agencies and ad networks can buy space.
"It almost inevitably has to be a network model because no one software application is going to get a strong enough user base to attract advertisers," Ms. Slack said.
Generally, consumers can skip the ads, but they are charged for the software if they opt out.
Conducent said companies that integrate ads into their software using its technology reap monthly click-through rates up to 1.7%. The company guarantees a click-through rate of at least 0.5%, which, according to Jupiter Communications, is average for banner ads.
In April, Corel Corp. teamed with Conducent to create an ad-supported, free version of Corel WordPerfect Suite 8. The software, which contains interactive ads, is bundled with more than 10 million PCs shipped worldwide a year. Under the deal, Conducent provides technology that integrates ads into the software; ads appear when the applications launch. Marketers advertising within Corel's software include Oracle Corp., Individual.com and Columbia House Co.
Qualcomm's relaunch of its Eudora e-mail management software as a free, ad-supported product provides a somewhat different example of the ads-in-software model. Users choose among three versions of Eudora; the full-priced version has no ads. Real Media handles ad sales for Eudora.
UP-TO-DATE AD MESSAGES
As for businesses providing the technology to incorporate the ads, Conducent works with companies that sell software at retail and offer it free online. In both cases, advertisers get to update their messages in real time, said Robert Regular, director-marketing.
"That's key," Mr. Regular said. "At the end of the day, people see software as a utility. We are able to display ads while you are not online. But if you click on an ad, it will launch the browser and bring you to the advertiser's Web site."
Marketers advertising across Conducent's software network include Oracle, Capital One Financial Corp. and RollingStone.com.
Radiate, which received $5 million in funding from CMGI @Ventures in March, also works with software developers selling off-the-shelf and offering free online versions of applications. The company said it has a network of about 475 applications and gets 100,000 new users a day.
Like competitors, Radiate's sell to advertisers is the promise of a highly targeted ad buy. Click-through rates are generally 1% to 2% and the cost to advertisers is comparable to buying banner ads, said Ehren Maedge, Radiate CEO.
Sprint Corp., Intel Corp. and Doubleday Book Club are among advertisers that have bought media across Radiate's network.
WAY TO MAKE MONEY
Web3000, whose technology places a small, rectangular ad at the top of a user's PC screen when using downloaded software, works only with publishers that offer their software free online. It's pushing those selling their wares at retail to abandon that for the online, ad-supported model.
"It's a way for users to get free software products and publishers to make money," said Gene Kavner, Web3000 CEO.
Copyright May 2000, Crain Communications Inc.