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Avast purchase of AVG shows uncertainty in antivirus market

Avast purchased competitor AVG to improve consumer and enterprise products, but one expert said the purchase price proves the antivirus market may be on the decline.

Two leaders in the antivirus market are becoming one, as Avast Software has agreed to purchase competitor AVG for $1.3 billion.

In a press release, Avast said it was purchasing AVG in order "to gain scale, technological depth and geographical breadth" in an effort to both reach new customers in emerging markets, but also to expand its scope to technologies like the internet of things (IoT).

"Combining Avast's and AVG's users, the organization will have a network of more than 400 million endpoints, of which 160 million are mobile, that act as de facto sensors, providing information about malware to help detect and neutralize new threats as soon as they appear," Avast wrote in the release. "This increase in scale will enable Avast to create more technically advanced personal security and privacy products."

However, Don Jackson, senior threat researcher at advanced persistent threat security company Damballa Inc., based in Atlanta, said the deal doesn't appear to offer any advantage in terms of greater security for end users or disruption of cybercriminal businesses by limiting the number of computers vulnerable to malware infections.

"Of the big three freemium antivirus vendors -- Avast, AVG and Avira -- all seem to offer the same level [of] effectiveness. End users looking for free antivirus protections often choose the first result from the search results page," Jackson told SearchSecurity in an email. "Avast and AVG both offer mobile products, with relatively good market share. They both are looking at IoT for major growth opportunities to counter the declining desktop PC market. Neither offers true enterprise solutions, so that market remains not addressable. Freemium business only grows value to AVG or Avast when enterprises convert to paid service, and that is going away."

Andrew Braunberg, managing director at NSS Labs Inc., based in Austin, Texas, said the deal was not surprising, given the growth opportunities for Avast in the antivirus market, but said the purchase price of $1.3 billion was worrisome.

"Eighty-five percent of AVG's fiscal year 2015 revenue came from its consumer segment, with the remainder deriving from its SMB segment. AVG is transitioning its SMB business to more of a SaaS-focused [software as a service] mode, which is likely attractive to Avast. AVG also gained some traction with its mobile offerings, and has strong brand recognition and use globally," Braunberg told SearchSecurity in an email. "Avast is acquiring AVG for roughly three times AVG's [fiscal year] 2015 revenue, which was $428 million. This multiple is low for a security acquisition and highlights the headwinds confronting consumer [antivirus] companies."

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What do you think about the state of the antivirus market?
It's kind of strange there are not more companies creating AV products. Over the years it been a handful of paid applications and a few free ones that seem to dominate the market. I have yet to find one that is 100 percent, that's why I run multiple. Some even seem to have fallen out of favor. We used one here at work for many years and just dropped them for another product.
We've tried more than a few, both paid and free. None have been perfect. We've finally settled on the freebies because they seem as good as any other. Not sure how that becomes a viable business model worth a $1.3B investment, but presumably they have bigger plans than my little office....
Defense against malware is multi-faceted.
One aspect is scanning the machine code in order to find known signatures. That requires constant updates from an online resource, and work of analysts to keep the database current.
Another aspect is firewalls and access permissions.
Yet another aspect is scanning your system for various vulnerabilities.
That requires a family of products. And security is always a concern.
I have used AVG for many years. I hope this acquisition does not result in a lesser quality product. I'd have to have to start testing a few more out. It's just a time consuming task.