WinRAR, a private company, has estimated revenues of $5 to $25 million with a reported profit of 1.2 million euros in 2022. The company, created by brothers Eugene and Alexander Roshal, achieved success by solving the problem of limited disk space and poor file compression quality in the 1980s. WinRAR used a freemium model, offering a 40-day free trial and then politely requesting payment. Despite widespread piracy, this strategy fostered popularity and loyalty, especially among corporate clients. Companies are compelled to buy licenses to avoid hefty fines, satisfy customer and employee preferences, and comply with ISO standards that favor paid software. WinRAR’s success demonstrates how a free product can lead to significant revenue from corporate customers.
WinRAR's Financials and Origins #
- Revenue and Profit: Estimated revenues range from $5 million to $25 million annually. A document suggests a profit of 1.2 million Euros in 2022.
- Founders: Created by brothers Eugene (programmer) and Alexander Roshal (business/marketing).
- Initial Problem Solved: Addressed the issue of limited disk space and low-quality file compression in computers during the 1980s.
WinRAR's Business Model (Freemium) #
- Free Product Strategy: Initially offered a free 40-day trial, allowing users to continue using the program by simply closing a polite purchase reminder window.
- Piracy Context: The creators recognized the prevalence of software piracy in the 1990s and 2000s and strategically chose a free distribution model rather than fighting piracy.
- Building Goodwill: Offering the program for free built sympathy and popularity, as each additional copy didn't cost the company, but generated good public relations.
- User Psychology: Repeated polite requests for payment instilled an awareness in users that they were using a paid product for free, fostering a sense of guilt or obligation.
The WinRAR Cult and Meme Culture #
- Popularity Measurement: Tens of thousands of internet memes about WinRAR underscore its cultural impact.
- "Badge of Honor" Purchases: Some users proudly bought licenses, displaying them as a sign of integrity.
- Fan Art and Community: A subculture of "fan art" exists, with the official WinRAR social media accounts often showcasing these creations.
The 9Gag Campaign #
- User Initiative: In 2023, a user suggested involving the 9Gag community in purchasing WinRAR.
- Discount Offer: WinRAR offered a discount code, reducing the price from $30 to $10, with the promise of a free license for the initiator if 1,000 sales were made.
- Unexpected Success: The campaign resulted in 3,000 sales within 24 hours and a total of 5,500 sales, overwhelming WinRAR's single social media/email handler.
- Significance of Sales: While seemingly small ($55,000), these sales covered a year's salary for an employee and generated significant positive publicity for a company with only about 10 employees.
How WinRAR Truly Makes Money (Corporate Clients) #
- Focus on Corporations: WinRAR's primary revenue comes from corporate clients, not individual users.
- No Data Selling or Ads: WinRAR does not sell user data or display ads.
- Three Reasons for Corporate Purchases:
- Legal Obligation and Fines: Corporations must purchase licenses to avoid significant legal fines and penalties for using unlicensed software.
- Legal Consequences: Penalties include fines, imprisonment (3 months to 5 years), and computer seizure (e.g., Article 293 of the Penal Code in Poland).
- Copyright Infringement: Use of pirated software for financial gain can lead to up to 3 years in prison (e.g., Article 116 of the Act on Copyright and Related Rights).
- Compensation Claims: Companies whose software is pirated can sue for compensation (e.g., twice the program's value in Poland, up to $10,000 per pirated license in the USA).
- Customer Expectation: Corporations want to use software that their customers already use.
- Example: A user receiving an insurance policy in a compressed file expects to be able to open it easily.
- Employee Familiarity: Corporations prefer software that their employees are already familiar with.
- Analogy to Microsoft Products: Educational institutions using Microsoft products (Windows, Word, Excel) indoctrinate future employees, making these tools standard in the workplace.
- AutoCAD Example: Using familiar software like AutoCAD, even if more expensive, saves training time and maintains efficiency compared to switching to cheaper, unfamiliar alternatives.
- Legal Obligation and Fines: Corporations must purchase licenses to avoid significant legal fines and penalties for using unlicensed software.
WinRAR and ISO Standards #
- Organizational Inertia: Companies tend to stick with what works ("if it ain't broke, don't fix it").
- ISO Standards: The International Organization for Standardization (ISO) sets standards that favor paid software over free alternatives, considering them less secure.
- Compliance for Corporations: While not mandatory, ISO certification is prestigious and signals good practice to boards and shareholders.
- Practical Impact: ISO standards push corporations to purchase paid software for essential functions like file compression, and since "everyone uses WinRAR anyway," it becomes the default choice.
WinRAR's Legacy and The Freemium Model #
- Pioneer of Freemium: WinRAR was an early adopter of the freemium model, offering a valuable service for free to gain market dominance.
- Leverage with Corporations: This dominance allowed WinRAR to dictate terms to corporate clients.
- Long-Term Strategy: By integrating into the habits of customers and employees, WinRAR ensured its presence in the corporate toolkit.
- Company Size and Purpose: WinRAR was never intended to be a large corporation; its goal was to provide a dignified life for its creators.
- Broader Implications: The freemium model can generate hundreds of millions or billions for other companies, each with unique approaches.
- Call to Action: The speaker invites viewers to comment if they want more episodes on how great businesses are created using this model.
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