Two-thirds of online software purchases are digital downloads

Nearly two-thirds of all online software purchases were digital downloads in 2010, up slightly from 2009, according to the new report, A Landscape View of Online Software Purchasing 2010, from leading market research company, The NPD Group. Online digital downloads of new products accounted for 23 percent of online purchases, up from 22 percent in 2009. Online subscription renewals accounted for 34 percent, down one percentage point from 2009, and trial-to-paid conversions were 8 percent of sales, up from 6 percent in 2009.

As more and more consumers purchase software with annual subscriptions (and the vast majority of online digital purchases are security software, which requires an annual fee) the comfort level of renewing online is crucial for customer retention for the security firms. More than half of consumers say they would rather update their annual software subscriptions by renewing online and the experience has been overwhelming easy for them, according to the report.

There is, however, considerable resistance to auto-renewals. According to the report, only 5 percent of consumers trust the merchant to automatically renew the subscription for them. Unsolicited marketing was the number one reason for not automatically renewing their subscription (40 percent) while security concerns with personal and credit card information was cited by 34 percent of consumers.

In 2010, 53 percent of consumers who purchased a systems utilities product did so from a manufacturer direct site, a 2 percentage point increase over 2009. System utilities purchases made at a retailer site increased 7 percentage points to 34 percent in 2010.

“Consumers are willing to put their trust in an online purchase, but they still have some reservations about where that purchase comes from and how much they pay,” said Stephen Baker, vice president of industry analysis at NPD. “Security software, one of the largest online categories, has a lot of direct sales but third party sales are growing faster. Consumers feel that they are getting better deals and a better selection from third party retailers than from manufacturers directly.”

Methodology
Nearly 4,000 consumers from NPD’s online panel responded to the survey, which was fielded earlier this year.