Cross-posted from StartupSD.net.
In February of 2008, six guys in San Diego decided to fundamentally change the software community for the better.
You need only read the first sentence of OpenCandy‘s About us page to learn a telling amount about the new company: one, they carry a grand vision for the impact their product will have on the software business, and two, there are a lot of dudes at this place.
Let’s tackle the latter characteristic first.
Who are all these guys?
Well, they’re ex-DivX employees, particular those who were building Stage6, a high-quality internet video sharing service that never escaped the gravitational pull of beta, despite its popularity.
What’s their grand vision?
Simply put, their goal is to improve the distribution and monetization of downloaded consumer software. They aim to do this by helping increase software distribution volumes, by monetizing this distribution through referrals, by providing marketing data to software creators, and by helping consumers find relevant applications. To fund their pursuit of this goal, they’ve raised $3.5 million in Series A funding from Bessemer Venture Partners, O’Reilly AlphaTech Ventures (OATV) and angel investors including Reid Hoffman (Chairman of LinkedIn, Board of Mozilla), and Jordan Greenhall (Former CEO and Co-Founder of DivX).
How’s this work?
The OpenCandy plug-in is bundled with an existing software installer. Let’s call this software Orange. While Orange is being installed, OpenCandy recommends to the user another application that is, in theory, relevant to the user. Let’s call this recommended software Banana.
Banana is picked from a fruit basket pool of applications chosen by the publishers of Orange. Orange Co. can hand-pick free recommendations (no charge to Banana for being recommended), can allow OpenCandy to select paid referrals (a “bounty” is paid to Orange if the user installs Banana), or a mix of the two.
The user can then choose to opt-in and install Banana. I emphasize opt-in because the recommended software will not be installed by default, an important distinction from annoying installers like RealPlayer that try to stick the user with 20 extra programs.
Another important note is that the Banana software is not included with the Orange installer, so the size of the installer is not noticeably increased (only by the negligible size the OpenCandy).
In fact, it is not determined what software will be recommended until the Orange installer runs. When it does run, OpenCandy scans the user’s registry for installed programs, operating system details, and chosen language. This information is sent to the OpenCandy servers where some magic happens (including consideration of which recommendations are converting best), and then a personalized recommendation is sent back to the installer in response.
For example, if a user has several already developer tools installed, OpenCandy might recommend Notepad++, a popular text editor. If a user is installing Miro, an open source video player, OpenCandy might recommend Audacity, an open source audio editor.
(If this process threatens your sense of privacy, then you’re not alone. Several blog comments have echoed this sentiment, so OpenCandy’s CEO, Darrius Thompson, answered some of the frequently asked privacy questions here.)
If the user opts to install Banana, or whatever juicy personalized software is recommended that day, OpenCandy will download the necessary installer and handle the installation process. Opting in will not interrupt the in-progress Orange installation.
You can see screenshots of the process here.
Let’s talk money
OpenCandy is aiming to charge between $1 and $2 each time an application is installed through a recommendation. It then splits these revenues with the publishers of the original software.
The OpenCandy team learned a lot about sponsored recommendations at DivX, where the company was reportedly raking in around $20 million annually for bundling software like the Yahoo! Toolbar with the DivX player.
Trick or treat
So, what’s it going to take for OpenCandy to find success and change the software world?
Fundamentally, there needs to exist a strong, profitable market for downloadable consumer software, because OpenCandy’s business is built upon that ecosystem. Downl
