Business model of AVG Technologies

Customer Segments

AVG has a segmented market business model, with customers that have slightly different needs. The company targets its offerings at consumers and small and medium businesses (SMBs).

Value Proposition

AVG offers four primary value propositions: price, accessibility, risk reduction, and brand/status.

The company offers a price value proposition. It provides a free version of its software so that users can preview its features. The premium version is low-cost compared to that of many competitors.

The company enables accessibility. Starting in 2011, it began expanding its offerings to mobile products, particularly tablets and smartphones. In 2014 it unveiled AVG Zen, a connected solution across PC and mobile platforms, and acquired Location Labs, a mobile security solution vendor. AVG now has over 102 million customers using its product on their mobile devices.

The company reduces risk by providing multiple layers of protection in its products. They include the following:

• Protection against known malicious computer programs
• Protection against known malicious computer program families (heuristic analysis)
• Protection against unknown malicious computer programs (behavior analysis)
• Protection against web exploits
• Protection against known malicious or phishing web addresses
• Protection against network attacks

The company has established a powerful brand as a result of its success. It now has 202 million+ active users and operates in over a dozen offices worldwide. Its prominent business clients include Overton’s, the world’s largest water sports company, and Big Thought, the Immanuel Broadcasting Network, and the AARP Tax Aide Foundation. Lastly, it has won many honors, including “Security Vendor of the Year“ from the European IT & Software Excellence Awards (2016), many Virus Bulletin 100 Awards, and recognition as one of CRM’s “20 Coolest Cloud Security Vendors“ (2016).

Channels

AVG’s main channel is its website, which accounted for 82% of revenues in 2015. It also utilizes resellers and distributors, who account for the majority of SMB sales, and retail chains such as Best Buy, Office Max, Office Depot, Staples, and Wal-Mart. The company promotes its offering through its social media pages and advertising.

Customer Relationships

AVG’s customer relationship is primarily of a self-service, automated nature. Customers utilize the product while having limited interaction with employees. The company’s website includes self-help resources such as videos and answers to frequently asked questions. It also enables paid customers to renew or upgrade their subscriptions and register their licenses. That said, there is a personal assistance component in the form of general phone and e-mail support for all customers and premium technical support for paid users. Premium service plans are as follows:

• Simple Fix – One-time call for basic help ($79 per call)
• Complete Fix – One-time call for advanced help ($119 per call)
• Total Care –Unlimited calls for an entire year ($199 per year)

Key Activities

AVG’s business model entails designing and developing its software products for customers.

Key Partners

AVG maintains the following partnership programs:

Reseller Program – Includes companies that purchase and sell AVG’s products to expand its customer base. Benefits of the program include the following:

• High initial discounts
• Competitive end-user pricing
• No minimum sales volume requirements
• Priority access to 24/7 phone and e-mail technical support
• Access to a Reseller Center that includes marketing resources (brochures, leaflets, posters, logos, testimonials, etc.), license management tools, and an online ordering system
• Informational newsletters providing updates abut the software and the company

Affiliates Program – Includes organizations that promote AVG’s solutions through their platforms (website, mobile apps, etc.). Benefits of the program include the following:

• 5 – 30% commission on all sales resulting from a lead (paid within 45 days)
• 60-day referral period
• Promotional tools such as text links, banners, and a product catalog
• Exclusive campaigns, offers, and promotions
• Affiliate partner-specific newsletters
• Regular bonuses and incentives

Key Resources

AVG’s main resource is its staff of engineering employees that design and develop its software. The company also depends on its customer service staff (52 full-time and 339 contract employees as of December 2015) to provide varying levels of support. They operate from 15 call centers located in the U.S., India, the Philippines, Czech Republic, Canada, Poland, Portugal, Brazil, the United Kingdom, Norway, and Serbia.

Cost Structure

AVG has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is sales/marketing expenses, a fixed cost. Other major drivers are in the areas of research/development and administration, both fixed costs, and cost of revenues, a variable expense that includes fees paid to third-party distributors of AVG’s mobile and search solutions, fees for third party technology service providers, costs of electronic downloads, commissions to payment providers, and costs of packaging and licenses.

Revenue Streams

AVG has two revenue streams:

Subscription Revenues – Revenues generated from sales of fixed-term software licenses and access to software-as-a-service products

Platform-Derived Revenues – Revenues generated from AVG’s search solution, third-party advertisers, and the sale of threat analysis data