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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Online activation. Need you opinion

I had a discussion with several trusted users of my product about ways to improve sales/profit.

They suggested me to implement online activation to protect the program from sharing of license keys.

As I understood this idea, the online activation is performed once and the key is suitable for 2 PCs.

What you think? Can it improve sales?
Igor Kokarev Send private email
Monday, August 19, 2013
>> "Can it improve sales?"

Yes, absolutely. The magnitude of of the revenue increase will depend on your current user base size and your target market. But yes, there will be a revenue increase.
Wyatt O'Day Send private email
Monday, August 19, 2013
What I said presupposes you've built or bought properly designed licensing. Unfortunately not all licensing is created equally. Some licensing is junk that will ultimately hurt you and piss off your customers. We talk about this in detail in our article here: http://wyday.com/limelm/features/why/

That was written for the purpose of selling LimeLM, but it contains useful information even if you're just building online activation in-house.
Wyatt O'Day Send private email
Monday, August 19, 2013
> What you think?

Did you try to estimate the magnitude of this problem for your application?

A. How many "casual" copies out there?

B. What percent of those "casuals" would turn into paying customers if activation is implemented? (Note that current "casuals" may not be turned until they try to upgrade).

If A is big and B is big, so that A*B*Price >> Cost of implementing the activations, then, yeah, profits will go up.
Vladimir Dyuzhev Send private email
Monday, August 19, 2013
+1 to Vladimir for good analysis.

The truth is that there is no yes/no answer to this, in spite of the overwhelmingly positive comments of someone who sells licensing software (a mysterious coincidence, no doubt).

If there are people using the software without paying, adding licensing may not make any difference to revenues, as they may not be prepared to pay at all. In that case, it just increases costs and complexity and may even lead to decreased revenue, due to legitimate users feeling annoyed at "jumping through hoops".
Scorpio Send private email
Tuesday, August 20, 2013
Another option is Peer-to-Peer network licensing:

On startup your program checks if a program with the same license key is running on other computers of the local network.

And if the license keys is running simultaneously on more PCs than allowed by your license, then the user is asked to purchase more licenses.

I used such an approach in the past and it was working well.

I had sales a few sales that started from "Please purchase more licenses..." error message.
MatrixFailure Send private email
Tuesday, August 20, 2013
It's certainly not cut and dried.

I don't buy stuff with online activation. I buy stuff with license keys (preferred), and even have some stuff with USB dongles (tolerable for very costly stuff, but scary since if the dongle dies you lose your $, but it's better than machine locking where you can lose your $ when the hard drive dies).

So are there others like me? Who knows. Perhaps I am the only one in the world that is this way.
Scott Send private email
Tuesday, August 20, 2013
Sometimes I end up with activation stuff inadvertently, in that case I demand a refund. They always say no even though their system allows them to revoke a key. In any case, they've made an enemy for life and I never upgrade and actively disrecommend.
Scott Send private email
Tuesday, August 20, 2013

I stopped buying EA games when they implemented this stuff.

So did a lot of people, and it affected their sales.

Right now you can buy EIGHT of their top games for "name your price" - average is under $5, so 80 cents per game.


The catch? They are all machine locked DRM and you have to run an intrusive licenser that monitors private activity on your computer at all times.

Those are games that were supposed to cost $40-$60, sold for 80 cents.

Behold the value of online activation. Or should we call it - value termination.
Scott Send private email
Tuesday, August 20, 2013
I don't use hardware locking and online activation. I use plain serials + used to have peer-to-peer license checks in the past (to pervent cases when a company purchases 1 licence and use it on 10 PCs).

But I think that properly implemented Online activation  can  remove many drawbacks of the hardware-locking.

In case if you reinstall the program on other PC the program can send the current HardwareID to MicroISV activation servers and can get a new hardware-locked key automatically. I guess, with not so tight rules (like 1 reactivation every week) it won't trouble customers too much.

But for sure the one drawback is still here: if the MicroISV goes out of business (or the author gets hit by a bus), then most likely activation servers will be shut down and the customer will loose the purchased program and his money.
MatrixFailure Send private email
Wednesday, August 21, 2013
@MatrixFailure: If you implement activation, you should also put binaries that do not require it in escrow. In the event that you go out of business, the escrow company would release those binaries to everyone with a proof of purchase.

I even recall seeing people getting away with charging extra for such escrow service.
Dmitry Leskov Send private email
Wednesday, August 21, 2013
Thanks for all responses!

My product will get a new edition which will be prices around 120-150 USD. So I need to think about license sharing.

My market is home user or professional users, not B2B.

There is no issue with key sharing on PCs within local network.

However my product has a large community of users which communicate between themselves.
Igor Kokarev Send private email
Wednesday, August 21, 2013
It's really hard to tell without knowing what the product is and what's your target market.

Remember  we still haven't invented an easy way to predict the future so the best thing is to try out. If it doesn't work, just rollback to the previous version and keep on. If it works, all of the sudden you're making more money.

Implementing a licensing system with serial number activation (the simple way) it shouldn't take more than an hour (it's a form, with one textbox and a button to activate).

Disclaimer: I work for LicenseSpot (http://www.licensespot.com).
Jose Send private email
Wednesday, August 21, 2013
> However my product has a large community of users which communicate between themselves.

Put a clause into your license agreement prohibiting them from communicating. Request a court gag order against your users. Your users are assumed to be fishy cheapskates who cannot wait but share a single license between all of them!

You're only right to stop the crime before the users (those bastards!) even had a chance to think of it!

Listen to all the advices given to you but people who sell licensing systems. Not taking the ulterior motives into account (ridiculous!), their views are completely unbiased.


P.S. Microsoft has tonnes of money. Still, on one of my computers I had issues with activating Windows 8. Took more than an hour chatting online with their support. Well, Microsoft can afford it -- they have money, and there is no competitors. Are those statements true for you, too?
Vladimir Dyuzhev Send private email
Thursday, August 22, 2013
Words have meaning, Vladimir, and “ulterior” doesn’t mean what you think it means. Specifically there’s a difference between “motive” and “ulterior motive”. A chicken crossing the road has a motive. Whether the chicken’s motive is sex, sustenance, or just to get to the other side has been the subject of a billion bad jokes. But it has a motive nevertheless.

A chicken with an *ulterior* motive paints an entirely different, more sinister, picture. Sure, the chicken *looks* like she’s just trying to get to the other side of the road (motive), but that’s just because you can’t see the bomb strapped to her chest (ulterior motive). Suicide bomber chickens are a menace to America, I shouldn’t be joking about them.

Ulterior [adverb]: going beyond what is openly said or shown and especially what is proper.

Thus, you’re wrong when you accuse me of having ulterior motives. My motives are plain for anyone to see. I share my extensive experience with licensing and the effects it has (i.e. demonstrable increased profitability when using well-deigned hardware-locked licensing). Why do I share this knowledge? What’s my motive?

I share this knowledge because it builds my brand, my company’s brand, and our product’s brand. In other words: mutual self-interest. You get useful hard-earned (and independently verifiable) information, and I in turn get recognition for providing useful information. If me providing this information leads to a sale of LimeLM, then great! If me providing this information leads Igor (or anyone else) to build properly designed licensing themselves, then also great! (I can explain why that’s also great if you don’t believe me).

So do I have motives? Yes, absolutely. Do I have ulterior motives? No.

That’s it for the English lesson this week. There will be a quiz on Friday.

Does this mean that you, or Igor, or anyone else should trust implicitly what I say? No, of course not. Hell, most of the article I linked to explicitly says that a lot of licensing is garbage and you have to independently verify the claims of the licensing. See: http://wyday.com/limelm/features/why/

We take the time to explain how licensing works, common mistakes, common lies, etc. Everything in that article and that I’ve written here is independently verifiable. Except for the chicken – she got captured and grilled.

Well-designed licensing will increase your revenue. Specifically, from time-to-time we ask a handful of our customers to provide us with before/after snapshot of how LimeLM is faring. In all cases where the customer switched from a “serial-only” licensing to LimeLM the customer saw a marked increase in revenue.

So when I said this, I wasn’t just pulling it from my posterior:

“Yes, absolutely. The magnitude of the revenue increase will depend on your current user base size and your target market. But yes, there will be a revenue increase.”
Wyatt O'Day Send private email
Thursday, August 22, 2013
Wyatt, two questions for you:

1) Which definition of "grilled"?  Was the chicken questioned or delicious?

2) It is now Friday.  Where is that quiz?


Gene Wirchenko
Gene Wirchenko Send private email
Friday, August 23, 2013
>> "2) It is now Friday.  Where is that quiz?"

The teacher's out sick. It must've been something he ate.

>> "1) Which definition of 'grilled'?  Was the chicken questioned or delicious?"

You caught me. I did indeed have an ulterior motive: to tell an extended "chicken crossed the road" joke playing on the word "grilled". It was my contribution to humanity. There are now 1 billion and 1 bad "chicken crossed the road" jokes.

You're welcome, humanity.
Wyatt O'Day Send private email
Friday, August 23, 2013
If implemented correctly (means hassle-free for users), hardware activation is a good choice to protect your software.  I'm using it.
Kuzmitskiy Dmitry Send private email
Sunday, September 01, 2013

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