Born free

Luxurious position: Peter Cameron, founder AVG AU/NZ

Company: AVG (AU/NZ)

Rank: 8

Chief executive: Peter Cameron

Founded: 2004

Revenue 2008-09: $13.32 million

Growth: 136.53 per cent

Secrets of success: We get paid upfront, then pay creditors down the track - generating the cash flow to fund growth.

After only four years in business, Peter Cameron's internet security company counts one in eight Australians as a customer and revenue has grown at an average of 137 per cent annually. How did he do it? Partly by giving products away. Not try-before-you-buy. Not bundled with a lucrative service contract. Free.

AVG AU/NZ markets and distributes anti-virus and internet security products. About 2.8 million Australian computers are protected by its licensed products. The basic one - that most home users require - is free, while about 20 per cent of users pay for the more sophisticated commercial version.

The enthusiasm with which consumers embrace freeware - then spruik it online - has helped AVG scale up fast. From a standing start in 2004, the company is likely to record sales of at least $18 million this year.

"Our success is driven by the huge goodwill created by the free product," Cameron says. That goodwill means that many of those users will go on to buy the premium product for their businesses, and recommend it to friends and associates. It is an online phenomenon that gives the lie to the adage that people don't value something unless they pay for it. Users love

the product so much the company has printed "I ♥ AVG" stickers - and gets at least 30 requests for them each week.

The software developer is privately owned, Dutch-domiciled company AVG Technologies, which Cameron approached in 2004 for permission to distribute its products in Australia, New Zealand and the South Pacific. At the time, he had a small business, started in his lounge room the year before, distributing a low-cost alternative to Acrobat software, pdfFactory. He had runs on the board when it came to selling and marketing software for his own and other's start-ups, but with eight jobs in 17 years, he also had a track record of itchy feet. How did he get the European company to take him seriously?

"We did whatever we could to alleviate risk on [AVG Technologies'] behalf," Cameron says. He didn't try to negotiate the exclusive right to sell the software licences, for example. "Over time, I was confident that we could generate enough business that [they] wouldn't contemplate going to anyone other than us."

The first year of trading, 2005-06, was tough, and the only income Cameron earned was from the separate PDF business. But after making a splash through trade shows and the trade press, the business suddenly took off, notching up 298 per cent growth in its second year with revenue of $5.53 million.

A serious misstep by a competitor helped. Cameron says his main rival, Symantec Corporation's Norton AntiVirus, was a "dog" of a product in 2006-07 that dramatically slowed down the user's computer. "We picked up a lot of business because people just hated our competitor," he says.

But AVG's growth has been due to more than luck and timing. It even continued during the global financial crisis, rising 64 per cent to $13.3 million last year, and Cameron is confident growth in 2009-10 will be between 35-50 per cent. "Security is a must-have product for people," Cameron says. "We're in the very luxurious position of having a product everyone needs and can't afford to scrimp on."

There have been speed bumps, notably in 2008 when AVG's competitive advantage - that it checked sites in real time, rather than periodically - was found to be inadvertently chewing up the end-user's bandwidth. Influential online community Whirlpool posted an orange banner on its site, warning users of AVG's weakness. Cameron quickly alerted the developers, and posted a message that the company was listening. Within two days, a big upgrade for the freeware was available, and within four days, all the products were fixed. It's an example of the Australian operation's sway with head office, Cameron says. "We're one of their largest independent distributors."

Such nimbleness will be fundamental to the company's continued success. AVG has two main freeware rivals, avast! and Avira, while commercial products by the big-spending Russian software company Kaspersky Lab also pose a threat. "It's hard to fight back in the free space." Cameron says. "We've never provided tech support for free users, but now we're looking for strategies to do that - maybe have a charge for service."

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