Making Money from Software Piracy

This week’s post comes from Michael Goff the Marketing Director for V.i. Labs. V.i. Labs helps software companies recover revenue from people who use their software with an unpaid license.

Infringing Use Means Your Software is Useful

Emotions can run strong when you discover that your software has been cracked and pirated versions of your software are widely available on the web. Gut reactions often sound like this: “We need more licensing!” “We need more digital rights management!” “We need more software protection!” “Call the lawyers and get those links taken down!”

Licensing and due diligence on the legal front are important components of protecting your intellectual property and all of the hard work you’ve put into developing your application, but they need to be part of a balanced approach. If your licensing makes it harder for your customers to run your software they will seek other alternatives. Takedown notices are like playing “Whack-a-Mole” – take down one link to a pirated version of your application, and three more pop up right away.

Lost in all of the emotion of confronting piracy is an undeniable fact: If your application is being pirated and used, it means that people find your software valuable. It helps them achieve something that they could not do without the benefit of your application.

This is not just an optimistic way of viewing piracy: it’s based on the economic realities of supply and demand. Think about it. There are thousands of pirated applications available and people and organizations are using your application to meet their needs.

There is a correlation between the availability of pirated software and the utility and popularity of that software.

Piracy Is Often the Result Of Imperfect Marketing

Why do individuals and organizations use pirated software? They see a “good deal” on a website and download your application for free or at a 90 percent discount. They may live in a geography where you don’t have a presence or your pricing is out of alignment with what the local market can bear. In many cases people are not even aware that they are using pirated software.

As much as we would like to think that we always make rational, data driven decisions about the “5 Ps of Marketing” (Product, Price, Promotion, Place and People), we don’t always get it right. Companies make the best decisions they are able to, given the resources and data available to them.

The groups that crack software are in it for the challenge and accolades of being the first to defeat licensing and other software protection. The proliferation of that cracked software through various piracy distribution channels, however, speaks more to imperfect marketing and an unmet need for the software vendor to deliver the desired product at the right price in specific markets.

Don’t Approach Software Piracy Like You Are Dirty Harry

Given these realities of economics and imperfect marketing, what can software vendors do to turn software piracy lemons into license revenue lemonade? They can be reactive and add more licensing, software protection and legal resources, but these responses do not adequately address the underlying issues.

The alternative, of course, is to be proactive. Software vendors that implement a software usage intelligence approach (like V.i. Labs’ CodeArmor® platform) are able to detect unpaid software use, analyze which opportunities represent new business opportunities, and convert those unlicensed users into paying customers. These vendors are taking advantage of a previously hidden market. Despite imperfect marketing, their products have found an audience that is using their software to meet their needs. They are “customers” in every sense of the word but one: they have not paid for the software. Yet.

In addition to using usage data for a highly reliable lead generation program, software vendors can also analyze the data to identify other trends that they can feed back into their marketing efforts. For example, geographies with high rates of piracy may represent an opportunity to implement regional pricing strategies. You can use multivariate testing to help you determine an appropriate market price.

If you treat unlicensed users like the “bad guys” you are unlikely to win them over as paying customers. Skeptical? V.i. Labs data generated more than $300 million in new license revenue for customers in 2013. Once you have the ability to track the use of unpaid software you gain a significant opportunity to generate new license revenue and improve your marketing efforts.


Software piracy or the use of unpaid licenses means that people like your product. Make sure you take the right approach to recover all that potential revenue from infringing users.