Shareware helped to spark the PC revolution. It's the forerunner of today's mobile app development.

In 1982, Time magazine declared the personal computer its "Man of the Year." And helping the computer make its move from corporate back offices to your desktop home office was a new kind of software: shareware.

Shareware software had a simple premise: You could try the application and if you liked it, you paid for it.

Sound familiar? It set the sales model for today's smartphone app market—with a few twists.

In those halcyon days, the PC software market was still getting its traction. Most programs were expensive—a single application often retailed for $495, in 1980s dollars. Often, they were complex and difficult to use. Then, Jim "Button" Knopf, creator of PC-File, a simple flat database, and Andrew Fluegelman, inventor of the program PC-Talk, a modem interface program, came up with the same idea: share their programs with other users for a voluntary, nominal payment. Knopf and Fluegelman supported each other’s efforts, and a new software marketing and sales model was born.

Joel Diamond, vice president of the Association of Software Professionals (originally called Association of Shareware Professionals), believes shareware should be recognized as the first version of e-commerce. You can also point to shareware as the ancestor of mobile app development, collaborative development (with philosophies of trust that led to open source), and community support.

Try before you buy

It happened like this: "It became increasingly expensive and time consuming to notify users when fixes or improvements became available," Knopf explains. "I decided to place a message in the program. I would ask those who received it to voluntarily send a modest donation to help defray my costs. The message encouraged users to continue to use and share the program with others and to send a $10 donation."

Fluegelman had a similar idea. Knopf writes, "He telephoned me immediately, and we decided to jointly reference each other on our distribution disks. I would name my program PC-File, to complement the PC-Talk name Andrew was using. I would request a voluntary payment of $25, to exactly match the amount he was suggesting."

Shareware was born.

Downloading misery

In those days, downloading a program was an exercise in misery. The Hayes SmartModem had been introduced in 1981 and still "boasted" a speed of 300 bits per second. If you wanted to try out PC-File, you had to dial into an electronic bulletin board system (BBS) and download the file, which might take a half hour or longer, in those pre-multitasking days.

So, instead, shareware often was "shared" by being distributed at local PC user groups, on 5.25-in. 360 K floppy disks.

"A few of us early PC adopters got together and started the Houston Area League of PC Users,” reminisces Nelson Ford, one of shareware's early leaders. “Getting public domain software from BBSes and swapping with other members was my start. Shareware came along before too long: PC-Write, PC-File, PC-Talk, etc."

This software distribution method may sound terribly inconvenient today, but back then, it took off like chocolate ice-cream cone sales on a hot summer day. After all, the alternative was packaged software that rarely was priced to appeal to end users.

A viable business model. Who knew?

Knopf remembers, "My wife said I was 'a foolish old man' if I thought even one person would voluntarily send me money for the program. I was more optimistic. I suspected that enough voluntary payments would come to help pay for expansions to my personal computer hobby—perhaps several hundred dollars. Maybe even a $1,000 (in my wildest dreams!)."

While none of the shareware pioneers became Bill Gates rich, many did well for themselves. Knopf eventually went into selling shareware full time. "I had always said I would never consider leaving my secure job with IBM until I was receiving at least twice as much money from another source. I was wrong. By the summer of 1984, I was making 10 times as much with my little software business."

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For Ford, shareware quickly became a thriving business. He says once he started reviewing shareware programs, "this led to people writing me and asking for the programs I was reviewing. At first, I had them send disks; we copied onto them, and sent them back. But that quickly got out of hand, so then we just made up disks in bulk and charged a fee for them. That is what grew into a full-time job, which I called, ‘Public (software) Library.’ Programmers were inundating us with software to add to our collection."

Not long thereafter, Richard Petersen founded PC-SIG, the first mail-order shareware disk vendor with a network of international dealers, first with floppy disks and later with CD-ROMs. Before it went out of business in 1992, Petersen also founded Shareware Magazine, which evolved into a four-color bi-monthly periodical sold on newsstands.

Modems grew faster—1,200 and even 2,400 bps!—which made them more popular, along with BBSes and other online services. It became easy for shareware authors to release their software on BBSes—Computer Shopper magazine printed a monthly list—because all you needed to do was upload the file and other members would share it.

Then CompuServe really rolled out online e-commerce for shareware, as early as 1987, Diamond points out. CompuServe’s SWREG service was the first independent shareware e-commerce provider, leading to an early Internet presence. If a user wanted to convert a shareware application to a full registered version, Diamond says, the online service let the user go to a publisher’s site, transact a credit card transaction, and receive a key that activated the shareware to a full commercial version.

"At least a dozen competitive e-commerce services were formed over the next eight years, formed only for software,” says Diamond. Digital River created the first software catalog for end users to purchase retail versions of downloadable software. “Digital River, founded in 1995, became the largest e-commerce provider for the next 20-plus years," he adds.

Inspiring new software categories

Shareware led to the birth of new types of software, coming from developers who otherwise would never have seen their dreams become reality. For one thing, shareware had a low-budget and low-risk entry point. Programmers used free or inexpensive development tools such as Microsoft Basic or Turbo Pascal to create their applications. The software was coded by one person and published by one person. “It formed the basis of many startups, from individuals who worked from home," says Diamond.

Ford says, "There was no economic barrier to entry in shareware. All you had to do was write a program, send it to a distributor, and you were a shareware author.”

It wasn't just e-commerce that got its start from shareware. One example: In 1988, the first antivirus product, called McAfee AntiVirus. Another: First-person shooter games—Id Software, still an important game company, started with shareware titles Wolfenstein 3D, Doom, and Quake.

Sometimes the application was a tiny useful utility; in other cases, it was a full-fledged business tool. As with all software, quality varied, but since the best shareware became popular, few had reason to complain. For example, 4DOS, a PC-DOS batch file utility, was the runner-up in one of PC Magazine’s Awards for Technical Excellence. (It lost to Lotus Agenda.)

"Shareware in the early '90s served as a source of application ideas, features, and applets for large commercial software publishers,” says Diamond. “Wilsonware, a shareware-only utility, became a source of features that were infused into future releases of Windows."

So, what happened?

The business model always had its doubters. “The problem with such a system is that while some shareware authors made millions, like any other business to which there is no economic barrier to entry, the marketplace cannot support everyone who wants to sell programs they’ve written," Ford says.

“The same is true today with apps,” he says. “But in shareware’s day, when an author was getting very few registrations [payments], they assumed that everyone was using the software but not paying.” That led some shareware authors to limit their software with what we’d now call a “freemium” business model. “Of course, that changed nothing,” Ford points out. “One of the most successful programs in shareware history was WinZip. It was completely unlimited and uncrippled. You got nothing when you registered except a receipt and the joy of paying for a program you were using."

Still, that opened the door to a division between the free-to-try version and a traditionally commercial version. For example, 1991's first Windows screensaver became a retail program. You may remember that screensaver as After Dark for Windows, a.k.a. the flying toasters. Its new owners turned After Dark into retail-only, and it became the all-time best-selling retail package, says Diamond. Its success became a model for commercial software publishers to look at other shareware. “When this generated tens of thousands of downloads, it gave [shareware authors] an opportunity to sell their product to a commercial retailer."

With the rise of the commercial Internet, Ford says, suddenly programmers could get their programs out to tens of millions of users. It only takes a small percentage of users to use and pay for an application to make someone a good bit of money. “But I suspect that the economics remain the same—that a very small percentage of apps make a lot of money and the vast majority make relatively little,” he says. “So, while the web and the app stores had a major impact on how homegrown software is distributed, I don’t know to what extent it actually changed the economics of things for most programmers."

Today, shareware lives on. You can still find PC shareware programs on sites like Download.com and Tucows. Almost all the apps you download from the Google Play Store or Apple App Store owe a debt to shareware. So, while "shareware" may sound archaic, it—and its lessons—live on.

Shareware: Lessons for leaders