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Webroot spies enterprise growth
t r a c k e r
Cath Everett [email protected]
Webroot spies enterprise growth Webroot is currently the leading pure play anti-spyware vendor, but its desire to remain independent may make it vulnerable as the market consolidates.
pyware is moving up the corporate information security agenda. This is great news for fast-moving independent players like Webroot, but the sales potential and account control implications are attracting heavyweights like Symantec and McAfee.
S
In fact some consolidation has already happened. Microsoft bought Giant in December 2004, and Trend Micro acquired Intermute in May 2005. Such moves now appear far-sighted and well-justified.A Forrester Research survey of 200 technology decision-makers in North American companies in 2004 rated spyware as the fourth most worrying security threat. But by 2005 only viruses and worms ranked higher.
So far pure play anti-spyware suppliers have found themselves in a good position.About 65% of organizations surveyed had opted for best of breed applications to address the challenge.A mere 24% had deployed anti-spyware software as part of a larger desktop security suite, and the rest have done nothing.Yet.
"Standalone anti-spyware vendors will either become acquisition targets or fade into obscurity." Over the next few years, suite products are likely to catch up with best of breed offerings in functionality, says Natalie Lambert, a security analyst at Forrester.The appeal of suites is simply that hard-pressed security staff are faced with fewer things to look after, which cuts down the administrative and management overheads.
Infosecurity Today May/June 2006
But this puts Webroot "in a vulnerable position if it wants to remain independent," she says. "It has a large customer base that loves how the product works, so it has the ability go in another direction, maybe by adding anti-virus software and the like, which the suite vendors already have." Webroot’s CEO, David Moll: anti-spyware can be effective on its own
But Lambert is not convinced of the vendor's commitment to such a strategy.“It has that opportunity, but
I'm not sure if it wants to go in that direction. But it has to or it has no future,” she says. Still time
David Moll,Webroot's chief executive, disagrees that time is starting to run out for best of breed products. Moreover he insists that the company is well-set for future growth. “Suites versus best of breed is an age-old question,” he says.“There are a lot of suites available today, but we continue to grow simply because of the orders of magnitude of difference in how effective our products are. I think what the analyst community is saying is logical, but it completely undervalues the idea that anti-spyware software can be effective on its own." Webroot's market share backs his claim, Moll believes. He cites market researchers, the Radicati Group, which indicate that the company had a quarter of the global installed base last year and a one-third of overall revenues. Moreover, Forrester estimates that the privately-held firm's turnover increased between 400 and 500% in fiscal 2005 to $100 million, a figure Moll says is “not a bad guess”. He expects more moderate growth rates “north of 20%” in the year ahead. Much of this growth will come by expanding international sales, particularly to Europe and Japan, and from a sharper focus on the business market. Going abroad
While Webroot currently generates 80% of sales from its domestic North
32
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“SMBs, we believe, are an important market and we're being very aggressive here.” Moll says the company already generates about 43% of its sales in this market.“SMBs of less than 500 seats are our bread and butter customers, he adds. Consumer purchases from the firm's web site and retail outlets account for 35% of revenues, while the rest comes from direct sales to large enterprises.This is the real goal as this is where the big profits lie.
“The enterprise is important because companies here are thought leaders. But we've come to understand that long deal cycles are involved when you're talking about client end-point software,” Moll says.“While they're important, sales here happen at a slower pace and we understand that we can't just live at the high end.We have to have the full breadth of opportunity to offset these long deal cycles.” But all of this is a long way from the company's beginnings.Webroot was set up in 1997 by Steve Thomas, a self-taught hacker who was on the FBI's watch list by the age of 14, and his girlfriend, Kristen Talley. “In Boulder, Colorado (which is still home to Webroot), the National Center for Atmospheric Research had one of the first Cray supercomputers for modelling the weather. Steve got excited about that and decided to 'borrow' it from his bedroom,” explains Moll. This background, however, proved useful when designing Webroot's first product,Window Washer.This removes junk software left over from downloaded applications to a Microsoft Windows-based machine to make it run more quickly. It also removes all traces of online activity for privacy purposes.
Different view Forrester’s Natalie Lambert: future is suite
“I took a different view of the company's strengths, which is easier to do as an outsider.These strengths lay in
Weaknesses • As a $100 million company, Webroot is vulnerable to acquisition, especially as the market is expected to consolidate rapidly over the next couple of years. • Over time, analysts expect software suites to overtake best of breed offerings in popularity with business because of the lower administration and management overheads. • Microsoft plans to enter the antispyware market in early 2007 with a product that is expected to prove popular among consumers. This may directly affect some 35% of Webroot's revenues.
Strengths • Webroot plans to expand its international sales and to focus on the business market, particularly the high end, to boost sales. • Management is preparing a stock market listing, which will give it more direct control over its future. • An entry into new desktop security or malware markets is imminent. It could be via technology acquisitions, partnerships or in-house development.
its understanding of the Windows operating system at a fundamental level. This is absolutely necessary to build effective products like Window Washer and Spy Sweeper. I also felt that the emerging spyware trend might be quite big.That's why we chose a niche. It's also been a formula for much of our success,” Moll says. This led to Webroot launching Spy Sweeper for the consumer market in March 2003 when it started developing relationships with retail outlets as well selling the offering online.The move, combined with growing business sales the following year, meant that by February 2005, the company won itself venture capital backing worth $108 million. This money went to research and development, to open new offices abroad and to buy back much of the founders' equity to gain more control. Thomas and Talley subsequently left the organization, which now employs about 300 staff worldwide, but they still consult to the firm.
Infosecurity Today May/June 2006
Until 2000, says Moll, the company “grew handsomely” and was on track for sales of about $3 million a year. It was also cash flow positive and profitable. But it subsequently “reached a plateau, which had a strain on relations”.As a result, he was hired in April 2002 to break the deadlock and re-invigorate growth.
r
The firm has already opened offices in London, Frankfurt,Amsterdam, Paris and Tokyo, and “is working very hard" to take on channel partners in order to address the small and medium business (SMB) market, but at the same time “ensure they are actively selling our solution”.
Thought control
Finely balanced
e
"These strengths lay in understanding the Windows operating system at a fundamental level."
Webroot released its Spy Sweeper Enterprise offering in June 2004, 16 months after launching the consumer version. Moll claims that growth rates for corporate sales are now outstripping consumer purchases. Hence big firms “will be a key focus area” over the coming year. In fact, he says, the company now has more than 10,000 business customers of all sizes, which comes to over three million seats.
k
American market, the aim over the next three years is to get 30% of the total from Europe, the Middle East and Africa, and 20% from Asia-Pacific.
33
t r a c k e r
But the main reason to go after VC funding was to build up a management team that could drive Webroot to become “the clear leader in the anti-spyware space”. Since then, it has hired eight new vice presidents to head sales, marketing, technology and finance. As to an exit strategy for the VC investors, Moll is clear:“We'd expect to be of interest to the big boys and people have been interested in us from the start. But our aim is to run the organization as an independent company that is the best at solving the spyware problem,” he says. He believes that if a firm is built to be independent,“you'll create a company worthy of the activity, but if it's built for acquisition, you cut off its potential. We'll deal with any interest as appropriate, but we'll pay back our funders by IPO (initial public offering)”. Competing with Microsoft
Moll says that Webroot is not unduly worried by the threat of Microsoft's proposed entry into the market in early 2007.“We've been competing with Microsoft's free product for
about 18 months and we've been growing rather well,” he says. Moreover, he expects the new offering to affect the consumer rather than the business market:“If it hits the business market, we'd expect it to have an impact in the SMB space first.” But Moll thinks that it will be “a good long while before people give it a shot” because of market scepticism with Microsoft's security credentials.
"At some point, you recognize that you can't be a one product company for ever." He also makes clear that Webroot itself will not be idle. It is already identifying new growth areas and, Moll says, “Entry into new markets is imminent.” But he adds,“We don't want to lose focus or energy on the anti-spyware problem as we consider new opportunities, so timing is a key element”.
Diversification could happen via targeted technology acquisitions, partnerships or in-house development work. But adding new modules to its existing products is a “likely scenario”. “Things that are adjacent and sit nicely with what we have are a natural place (for us) to investigate.When we consider our strengths, one is desktop software and the other is malware research, so we view our opportunities as being able to leverage one or both,” Moll says. Forrester's Lambert thinks this is sensible.“Standalone anti-spyware vendors that do not expand into other areas will either become acquisition targets or fade into obscurity,” she says. Moll concedes the point.“At some point, you recognize that you can't grow a tree to the moon and that you can't be a one product company for ever.” Cath Everett writes for Computing, Computer Weekly, ZDNet UK, Outsource and Third Sector.
Infosecurity Today May/June 2006 34
Cath Everett [email protected]
Webroot spies enterprise growth Webroot is currently the leading pure play anti-spyware vendor, but its desire to remain independent may make it vulnerable as the market consolidates.
pyware is moving up the corporate information security agenda. This is great news for fast-moving independent players like Webroot, but the sales potential and account control implications are attracting heavyweights like Symantec and McAfee.
S
In fact some consolidation has already happened. Microsoft bought Giant in December 2004, and Trend Micro acquired Intermute in May 2005. Such moves now appear far-sighted and well-justified.A Forrester Research survey of 200 technology decision-makers in North American companies in 2004 rated spyware as the fourth most worrying security threat. But by 2005 only viruses and worms ranked higher.
So far pure play anti-spyware suppliers have found themselves in a good position.About 65% of organizations surveyed had opted for best of breed applications to address the challenge.A mere 24% had deployed anti-spyware software as part of a larger desktop security suite, and the rest have done nothing.Yet.
"Standalone anti-spyware vendors will either become acquisition targets or fade into obscurity." Over the next few years, suite products are likely to catch up with best of breed offerings in functionality, says Natalie Lambert, a security analyst at Forrester.The appeal of suites is simply that hard-pressed security staff are faced with fewer things to look after, which cuts down the administrative and management overheads.
Infosecurity Today May/June 2006
But this puts Webroot "in a vulnerable position if it wants to remain independent," she says. "It has a large customer base that loves how the product works, so it has the ability go in another direction, maybe by adding anti-virus software and the like, which the suite vendors already have." Webroot’s CEO, David Moll: anti-spyware can be effective on its own
But Lambert is not convinced of the vendor's commitment to such a strategy.“It has that opportunity, but
I'm not sure if it wants to go in that direction. But it has to or it has no future,” she says. Still time
David Moll,Webroot's chief executive, disagrees that time is starting to run out for best of breed products. Moreover he insists that the company is well-set for future growth. “Suites versus best of breed is an age-old question,” he says.“There are a lot of suites available today, but we continue to grow simply because of the orders of magnitude of difference in how effective our products are. I think what the analyst community is saying is logical, but it completely undervalues the idea that anti-spyware software can be effective on its own." Webroot's market share backs his claim, Moll believes. He cites market researchers, the Radicati Group, which indicate that the company had a quarter of the global installed base last year and a one-third of overall revenues. Moreover, Forrester estimates that the privately-held firm's turnover increased between 400 and 500% in fiscal 2005 to $100 million, a figure Moll says is “not a bad guess”. He expects more moderate growth rates “north of 20%” in the year ahead. Much of this growth will come by expanding international sales, particularly to Europe and Japan, and from a sharper focus on the business market. Going abroad
While Webroot currently generates 80% of sales from its domestic North
32
t r a c
“SMBs, we believe, are an important market and we're being very aggressive here.” Moll says the company already generates about 43% of its sales in this market.“SMBs of less than 500 seats are our bread and butter customers, he adds. Consumer purchases from the firm's web site and retail outlets account for 35% of revenues, while the rest comes from direct sales to large enterprises.This is the real goal as this is where the big profits lie.
“The enterprise is important because companies here are thought leaders. But we've come to understand that long deal cycles are involved when you're talking about client end-point software,” Moll says.“While they're important, sales here happen at a slower pace and we understand that we can't just live at the high end.We have to have the full breadth of opportunity to offset these long deal cycles.” But all of this is a long way from the company's beginnings.Webroot was set up in 1997 by Steve Thomas, a self-taught hacker who was on the FBI's watch list by the age of 14, and his girlfriend, Kristen Talley. “In Boulder, Colorado (which is still home to Webroot), the National Center for Atmospheric Research had one of the first Cray supercomputers for modelling the weather. Steve got excited about that and decided to 'borrow' it from his bedroom,” explains Moll. This background, however, proved useful when designing Webroot's first product,Window Washer.This removes junk software left over from downloaded applications to a Microsoft Windows-based machine to make it run more quickly. It also removes all traces of online activity for privacy purposes.
Different view Forrester’s Natalie Lambert: future is suite
“I took a different view of the company's strengths, which is easier to do as an outsider.These strengths lay in
Weaknesses • As a $100 million company, Webroot is vulnerable to acquisition, especially as the market is expected to consolidate rapidly over the next couple of years. • Over time, analysts expect software suites to overtake best of breed offerings in popularity with business because of the lower administration and management overheads. • Microsoft plans to enter the antispyware market in early 2007 with a product that is expected to prove popular among consumers. This may directly affect some 35% of Webroot's revenues.
Strengths • Webroot plans to expand its international sales and to focus on the business market, particularly the high end, to boost sales. • Management is preparing a stock market listing, which will give it more direct control over its future. • An entry into new desktop security or malware markets is imminent. It could be via technology acquisitions, partnerships or in-house development.
its understanding of the Windows operating system at a fundamental level. This is absolutely necessary to build effective products like Window Washer and Spy Sweeper. I also felt that the emerging spyware trend might be quite big.That's why we chose a niche. It's also been a formula for much of our success,” Moll says. This led to Webroot launching Spy Sweeper for the consumer market in March 2003 when it started developing relationships with retail outlets as well selling the offering online.The move, combined with growing business sales the following year, meant that by February 2005, the company won itself venture capital backing worth $108 million. This money went to research and development, to open new offices abroad and to buy back much of the founders' equity to gain more control. Thomas and Talley subsequently left the organization, which now employs about 300 staff worldwide, but they still consult to the firm.
Infosecurity Today May/June 2006
Until 2000, says Moll, the company “grew handsomely” and was on track for sales of about $3 million a year. It was also cash flow positive and profitable. But it subsequently “reached a plateau, which had a strain on relations”.As a result, he was hired in April 2002 to break the deadlock and re-invigorate growth.
r
The firm has already opened offices in London, Frankfurt,Amsterdam, Paris and Tokyo, and “is working very hard" to take on channel partners in order to address the small and medium business (SMB) market, but at the same time “ensure they are actively selling our solution”.
Thought control
Finely balanced
e
"These strengths lay in understanding the Windows operating system at a fundamental level."
Webroot released its Spy Sweeper Enterprise offering in June 2004, 16 months after launching the consumer version. Moll claims that growth rates for corporate sales are now outstripping consumer purchases. Hence big firms “will be a key focus area” over the coming year. In fact, he says, the company now has more than 10,000 business customers of all sizes, which comes to over three million seats.
k
American market, the aim over the next three years is to get 30% of the total from Europe, the Middle East and Africa, and 20% from Asia-Pacific.
33
t r a c k e r
But the main reason to go after VC funding was to build up a management team that could drive Webroot to become “the clear leader in the anti-spyware space”. Since then, it has hired eight new vice presidents to head sales, marketing, technology and finance. As to an exit strategy for the VC investors, Moll is clear:“We'd expect to be of interest to the big boys and people have been interested in us from the start. But our aim is to run the organization as an independent company that is the best at solving the spyware problem,” he says. He believes that if a firm is built to be independent,“you'll create a company worthy of the activity, but if it's built for acquisition, you cut off its potential. We'll deal with any interest as appropriate, but we'll pay back our funders by IPO (initial public offering)”. Competing with Microsoft
Moll says that Webroot is not unduly worried by the threat of Microsoft's proposed entry into the market in early 2007.“We've been competing with Microsoft's free product for
about 18 months and we've been growing rather well,” he says. Moreover, he expects the new offering to affect the consumer rather than the business market:“If it hits the business market, we'd expect it to have an impact in the SMB space first.” But Moll thinks that it will be “a good long while before people give it a shot” because of market scepticism with Microsoft's security credentials.
"At some point, you recognize that you can't be a one product company for ever." He also makes clear that Webroot itself will not be idle. It is already identifying new growth areas and, Moll says, “Entry into new markets is imminent.” But he adds,“We don't want to lose focus or energy on the anti-spyware problem as we consider new opportunities, so timing is a key element”.
Diversification could happen via targeted technology acquisitions, partnerships or in-house development work. But adding new modules to its existing products is a “likely scenario”. “Things that are adjacent and sit nicely with what we have are a natural place (for us) to investigate.When we consider our strengths, one is desktop software and the other is malware research, so we view our opportunities as being able to leverage one or both,” Moll says. Forrester's Lambert thinks this is sensible.“Standalone anti-spyware vendors that do not expand into other areas will either become acquisition targets or fade into obscurity,” she says. Moll concedes the point.“At some point, you recognize that you can't grow a tree to the moon and that you can't be a one product company for ever.” Cath Everett writes for Computing, Computer Weekly, ZDNet UK, Outsource and Third Sector.
Infosecurity Today May/June 2006 34