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Monday, August 18, 2008

If You Sell Anything Online Your ePockets Are Being Picked

You and I are a lot alike. We are both software publishers and eBook authors getting hosed on a regular basis. You and I, my friend, are victims of software piracy that accounted for over $24 BILLION dollars in lost revenue over the last two years*. There are so many ways people can get your product for free these days. If we continue doing nothing we will lose even more money this year as potential customers become more and more aware of just how easy it is to obtain digital products without paying for them.

The question is, why do we put up with this? When we sell our downloadable products they are being easily and freely distributed (read: STOLEN) by the very same people that we are trying to get to purchase. And don’t be fooled, this still occurs very regularly today even though a lot of us take precautions against it. This confirms that people want our products, they just don't want to pay for them …because they don't have to. In fact, 70% of potential customers won't if they can get it for free*.

We know the ideal scenario; what’s supposed to happen. Consider Bob Jones and his knot tying eBook, “Scoutmaster Bob’s Guide To Knots”. Bob uploads his eBook to his web server and creates a sales link to sell it, and this sales link goes through to his payment processor. After the order is placed the customer is redirected to the download page, or "Thank-You" page, in order to automate the delivery process.

Now Bob figures he’s all set up and starts his massive promotion efforts. He spends lots of time and money getting people to visit his site and convinces them to place an order because it really is a great product. So, the customers place orders via the sales link then are redirected back to the download page automatically to get what they’ve paid for. Perfect automated system, right? Sorry Bobby, in a perfect world maybe. But here’s what really happens.

“Back Door” #1:

Our boy Bob sets up a sales link, a download redirection link (where people go after successfully ordering) and spends time and money promoting his site. People come and visit his web site and feel that they could really use such an extensive knot tying resource and want a copy of it. A couple people place orders and Bob is happy. Because Bob has created such a great product they tell their friends about Bob’s eBook. But instead of telling their friends to check out Bob’s web site they simply email them a copy of the actual eBook. Why not, it doesn’t cost Bob any money right? Those people then tell their friends, who tell their friends, who tell their friends. A couple of weeks later Bob’s knot tying eBook is in the hands of hundreds, even thousands of people…for free. And this is just the first “back door”.

There are three (3) "Back Doors" that people use regularly to easily obtain free access to your product:
Back Door #1: Get a copy via email, newsgroups, forums, eBay, MSN, ICQ, ... whatever
Back Door #2: Get refunded and keep the product
Back Door #3: Locate the download page without paying

And here’s another scary fact: For every 10 copies downloaded, 4 of those are stolen*. How lightly would you take it if you sold a tangible product, like a t-shirt, and only 6 out of ten t-shirts that left the store were paid for? These are lost sales and income forgone, there’s no more blunt way to put it. If you can guarantee that the only way they can get your product is through your payment process you’ve just stopped that leak and increased your profits.

But right now online merchants have no idea who is really downloading their products, or what happens after the downloaded. They lose total control of its distribution. Some thieves/weasels/snakes …whatever you want to call them… even go so far as to sell stolen software and eBooks as their own for a greatly reduced price. This is probably the greatest risk to selling a digital product, and if you ask anyone that’s been doing it for a while they will have experienced this nightmare first hand. The people out there that do this are much worse than one guy that just gets your product for free. These people distribute hundreds or thousands of your product and you don’t see a cent of it. They saturate the market and decrease the value of your product, until it’s virtually worthless. They have to be stopped.

“Back Door” #2:

Back to Bob. There is another big problem for Bob when it comes to protecting his eBook. He doesn’t know that many payment processors promptly, and without hesitation, honor each and every refund request, no questions asked. Seriously…no questions at all, one simple email is all it takes. There's usually no need for the customer to explain anything, just that they would like a refund. They will get their refund right away and the you, the merchant, don’t have a say in the matter at all. And you guessed it, they get to keep the product, for free. There is no requirement to return the product like with a traditional refund, since there's no way to be sure the product was really deleted. Imagine the absolute uproar brick-and-mortar merchants would be in if customers were allowed 100% unconditional refunds on request, and the customer gets to keep the shirt, vacuum cleaner, DVD player, or whatever? Ridiculous right? But it happens to online merchants like Bob every day.

“Back Door” #3:

Lastly, Bob’s uploaded product is also easily and regularly downloaded for free by potential customers right from his own web site. People can get to his download page in any number of ways. For example, open up Google. Type this into the search box: “thankyou.htm ebook download”. Now go to the second and third pages. Here are some free products for you if you were the type to download copyrighted material without paying for it. Of course I’m not suggesting you do that, in fact I ask you NOT to download these products, just look at the thank you page to see that the “back door” is certainly easy to find. These people are just like Bob, and they work hard to create their web sites and their products. They are simply unaware of the kick-in-the-teeth they’re taking by not protecting it.

Some conscientious merchants claim, "I'm safe, I protect my download location with a third-party tool that creates my download location on the fly." This is a false sense of security and it only blocks one back door. Basically this protection method simply hides the download location, but the product is still just as susceptible to being freely distributed after the download. And it can still be kept if a refund is issued. This is equivalent to the banks simply hiding all the money instead of putting it in the bank vault.

So how are online merchants like Bob, and you, and me supposed to stay afloat? As it is now, the only way to turn a profit is to rely on people’s goodwill in hopes that they will do the right thing. And be content in the fact that some people don't know how easy it is to get online products for free, so these people actually pay for the product. So, if you think about it, within this system it's pure luck that anyone actually pays for a digital product.

But there is hope. There is a real way to stop all types of thieves and freebie-seekers. We must protect the product itself with unique identifiers and access codes for each customer. And until more of us become wise to this one simple truth rampant software and eBook piracy will continue to plague online merchants.

* - average 40% worldwide software piracy rate for 2001 & 2002, and dollar losses totaling $24.05 billion, based on intensive studies by the Business Software Alliance http://www.bsa.org, and the report - "Quantifying Online Downloading of Unlicensed Software : Survey of Internet Users for BSA - May 29, 2002"

1 comment:

jwolfiii said...

Great article. Fortunately, Uniloc offers a solution to this problem. We just released a Reporting and Analytics tool that tracks the usage of your software app after it has been purchased/downloaded. You will now know exactly how many unique computers are running your software with detailed insight into any possible piracy/casual copying. This tool is only $40/month but we're currently offering a free 30-day Trial.

Please do not hesitate to contact me directly at JWolfenden@Uniloc.com for your free trial or for more information.

Keep in mind, that Uniloc also offers a DRM solution based off of our physical device recognition patent so you can easily manage your product activations.

Thanks and good luck.

Jack W.

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