Is this the end of the “Download Valley”?

Mon 24 February 2014 Written by Evi
Evi

Not too long ago I was reading about Google’s decision to end its contract with the translation company Babylon, run by Noam Lanir and Alon Carmeli. It appears that Google has finally accepted the simple truth that in the “making users happy” vs. “making a bit more money” equation – making users happy has to win out.

What is Download Valley?

The companies that have become known as “Download Valley” providers are those that develop plug-ins and add-ons for operating systems and browsers. Unfortunately, they develop these pieces of software so that they download themselves and install themselves. The user is often unaware that they’ve just been signed up for a service. Even worse, the user is often provided no option to uninstall or remove the unwanted add-on.

So, what’s their business model?

It’s pretty simple. Some software companies experience massive downloads of their free products but they don’t have a monetization engine behind it.  Download Valley companies approach them and ask them to install a plugin / toolbar that will be bundled with their products. In return these software companies get $X for every new installation that comes out with the plugin bundle. Every company involved in Download Valley teams up with a search engine company like Google - they then get paid $X plus $Y by the search engine company for each user they direct via the toolbar / plugin to the search engine company’s main page . The search engine company has sponsored links on that page hence is making $Y plus $Z for every click on a sponsored ad.  Hence we see a food chain starting with the software company that is developing a popular product with no monetization, onward to the Download Valley Company and onward to the search engine company. This is happening without the user being aware of it.

How big is this business?

It’s HUGE! There are literally hundreds of millions of dollars a year spent through companies in this sector. Until not too long ago, there was certainly enough money there to tempt new entrants to the game. With that with Google hardening it’s policy for such collaborations, we see consolidation in this industry and an attempt to seek new business models.

So who are the serious players?

There are countless companies in this space - I don’t even have room to list them all - but some of the biggest brands are Babylon, Conduit and Peryon

What’s the risk facing Download Valley?

The risk is that these companies have built their entire revenue models around the three big search engine companies. That’s Yahoo!, Google and Microsoft. Without the search engines’ revenue stream, the Download Valley companies are in trouble. That’s exactly what’s happened to Noam Lanir and his company Babylon. I don’t know if this is the beginning of the end for Download Valley but the there is no doubt that this industry is changing and quite rapidly.