The fight to sell (virtual) selling

April 11, 2014, 5:25 PM UTC

FORTUNE — In 2009, the computer security company Symantec quit using Digital River to execute sales of its software online, choosing instead to build its own e-commerce platform. It was a giant blow to the Minnetonka, Minn.-based firm: Symantec represented nearly a third of its revenue.

Digital River (DRIV) had already been on the decline, with stock performance to match. But the blow hobbled its ability to compete with younger companies that were rising to challenge its control of the growing market for e-commerce services tailored specifically to digital goods like software, videogames, and subscriptions for media of all kinds. Today, Digital River remains on top — it closes $30 billion in other companies’ sales online each year, chief executive David Dobson tells Fortune — but the competition is fiercer than ever.

“I’m not ready to declare victory,” Dobson says. “We have to prove ourselves to the market.”

E-commerce companies offer roughly the same services. When you buy a virtual product online, the actual sales process is often turned over to a third-party company that steps in as the merchant of record. The third-party company manages fraud, taxes, charge-backs, and may very well have designed and built the webpages (or app screens) that consumers see as the sale closes. The e-commerce firm brings its expertise in minimizing virtual shopping cart abandonment and closing the deal; the original vendor gets to focus on what it does best: designing its wares.

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The piece of the e-commerce industry that focuses on digital goods — confusingly called “digital e-commerce” — first arose around downloadable software but has since expanded into virtual goods of all kinds that don’t require a warehousing and logistics operation to ensure delivery. But these companies have begun edging into physical goods such as electronics, a toe-hold into a larger, growing e-commerce market that Forrester Research estimates to be worth $262 billion in the United States and 128 billion euros in Europe.

One of Digital River’s challengers is Chicago-based Cleverbridge. Co-founder and vice president of operations Craig Vodnik estimates that his company is the second-largest player in the market, but statistics specific to the segment are difficult to come by. Founded in 2005 by veterans of a company that Digital River acquired, the self-funded Cleverbridge closed $450 million in sales last year and took in $40 million in revenue.

Cleverbridge is picky about clients, Vodnik says. “Only companies that make substantial sales benefit from our platform,” he says. “We don’t let companies sign up themselves.”

Another contender is FastSpring, which was started in 2007 by four software entrepreneurs. The company gained attention by emphasizing its human customer service and updated technology, co-founder Jason Foodman says: Its clients’ stores matched the look and feel of the rest of the client’s website, and its object-oriented platform promised a faster, more flexible setup and deployment than Digital River’s at the time.

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Though FastSpring’s core lies in smaller clients, it also serves Toshiba and Random House. Its 2013 sales were about $130 million, though revenue is growing (37% year over year) in the wake of Pylon Capital’s acquisition for $12.4 million. A fifth of those sales are subscriptions, expected to grow 30% in the next year, CEO Tom Tzakis says.

Waltham, Mass.-based BlueSnap is another competitor. The company, originally named Plimus and acquired in 2011 by the private equity firm Great Hill Partners for $115 million, emphasizes its global acumen. Chief executive Ralph Dangelmaier is particularly focused on mobile devices and points out that mobile payments have a 60% to 90% abandonment rate.

“Number one, it’s not easy. It’s not über-lite,” he says. “The second problem is, it’s not local.” Which is why BlueSnap is, for example, using a buyer’s IP address to lead with the payment method and language that people in a given country are most likely to use.

Dangelmaier would not disclose the company’s latest revenues; in 2010, the company reported a net profit of $20 million on $200 million revenue. It currently has about 130 employees.

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Finally, there is Avangate, which began in the Netherlands in 2005. Its focus is affiliate sales — that is, it sells to vendors who prefer to have others sell on their behalf. In 2011, the 3TS Cisco Growth fund acquired a minority stake in the company for $4 million.

Will any of these companies topple Digital River, or does a rising tide lift all boats? It’s still too early to tell. But with the software-as-a-service category estimated to have grown 373% between 2010 and 2013 — from a 7% to 17% share of the overall global software market — there’s a lot of money to be made in selling digital goods.