Sunday, January 29, 2006

McAfee thinks out of the box

I have to applaud McAfee for thinking out of the box.

Prior to 2005, the major makers (Norton, McAfee, etc.) of virus protection software sold using the same model. People would buy the product with 1 year of subscription online or in stores for about $40.

Many of the store purchases would come with rebates for $20 if you are upgrading or switching from a competitor's product. If you consider the money that had to go to retailers, costs that go to those who did get the rebate, costs of printing books, disks, boxes, shipping to stores, etc., the company would likely take in less than $10.

They do have an online download option that would get around most of these costs to the manufacturer. They charged full cost for this. I think the buyer could get a rebate, but it sure wouldn't be as easy to do as through a retailer (who gives you specific receipts for this process). What it really did was make it very convenient for someone to renew a subscription, but many people I know didn't use this because they knew they could get a lower cost by buying a box from a store and getting the rebate.

This always confused me some as a business model for the anti-virus manufacturers, as they get less income selling through a channel that costs them more. In my mind, I thought they should be more competitive with the download option (unless, of course, they do get a high percentage of people who do pay the full price online - in this case the dual channel model makes sense).

Last year, McAfee changed the system by adding a channel. They partner with ISPs like AOL and provide the anti-virus software to all the ISP's users. This is a big change to the system from someone who thought outside of the box. There are many benefits to this that I can see:
  • they probably get something like $1 a month ($12 a year) per user for this, which compares favorably to their likely income from store sales.
  • product support is likely done by the ISP, so there is a cost savings to McAfee.
  • they also get money the entire time the user is signed up with the ISP (I often let my antivirus expire, as it still works but just doesn't have the newest virus definitions, and then renew it after up to a 6 months lapse - so instead of a net income of $10 for 12 months, it is for 18 months).
  • many of the ISP users, particularly AOL, are considered to be less computer literate, so a good portion likely did not have anti-virus software before. This means they have access to what could be a lot of new customers.
  • many of those ISP users who already had anti-virus were likely users of Norton or another competitor, so McAfee now is likely taking some business from them.

I applaud McAfee for this step. Seems like it could be very positive for them.

Disclaimer - I am just musing about something I see in the market, not something that affects me in any way personally. I am not connected to McAfee at all, and currently use Norton Anti-Virus.

Thursday, January 19, 2006

Book recommendation for those doing business in China

China is both a huge potential market for products, and a low cost source for items we sell elsewhere in the world, but doing business there can be a huge challenge. "China can be a scary place to do business. The legal concepts that govern Western business practices -- the sanctity of contracts, the separation of regulators and competitors, and the protection of intellectual property, for example -- simply don't exist in any dependable way in China".

The quote above is from the book, One Billion Customers: Lessons from the Front Lines of Doing Business in China by James McGregor, and it matches what I have seen in China.

But the book also goes well beyond just stating problems that many of us have seen. Each chapter of the book covers a particular area that may be a challenge that you hit while doing business in China. He starts with a narrative example to show you what it could be like and what can happen. Then a section covers what this means for your business. And each chapter is finished off with a summary of the main points.

James McGregor has the experience to be the author of this book. Not long after China opened its borders in the 80s did he arrive there and started studying Mandarin. Along the way after that he was a reporter (and bureau chief) for the Wall Street Journal in China, was CEO of Dow Jones' China business, headed the American Chamber of Commerce in China, and has advised both the US and Chinese Government.

The book is definitely well worth reading for anyone who is involved with business in China. I found the book both an interesting read and an excellent resource for doing business in China.

For convenience, I have added a link to this book on