Making Money with Free Software? Sampling Implications of Software Market

Abstract

Distributing freeware or trialware is a common practice of most publishers in the software market in order to increase potential users' experience prior to their final purchasing. Third-party rating of new software is an objective quality reference to the users as well. We develop an empirical framework to analyze the impact of freeware/trialware and third-party rating on software sampling. Our results show that freeware is not always a dominant strategy to enhance the users' software sampling and outperformed by trialware when the quality gap between them is high enough to the users in some software categories. Third-party rating reflects more credible information to the users compared to anonymous users' rating. As the sampling acts as risk relievers for final purchasing, our findings demonstrate how actual marketing strategies work in the software market. We have used various estimation methods to address endogeneity issues in our model.

Keywords: Product sampling, Freeware, Trialware, Third-party rating, Software