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Is the Time Right for Micro-commerce? (was Re: @NY Vol. 4, No. 24)
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Sat Feb 13 20:03:55 1999
Date: Sat, 13 Feb 1999 19:45:19 -0500
To: cypherpunks@cyberpass.net, cryptography@c2.net
From: Robert Hettinga <rah@shipwright.com>
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Date: Sat, 13 Feb 1999 17:25:49 -0500
To: Digital Bearer Settlement List <dbs@philodox.com>, dcsb@ai.mit.edu
From: Robert Hettinga <rah@shipwright.com>
Subject: Is the Time Right for Micro-commerce? (was Re: @NY Vol. 4, No. 24)
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At 7:10 PM -0500 on 2/12/99, NPC, Inc. wrote:
> ^
> ^
> ^ < NEW MEDIA >
> ^
> Is the Time Right for Micro-commerce?
> Silicon Alley's Cha! Prepares Its Launch
> ^
> ^ By Pamela Parker
> ^
> ^ Now that 1998's e-commerce holiday season has justified early
> hopes that consumers would make credit card purchases online, Silicon Alley
> start-up Cha! thinks the time is ripe for Internet entrepreneurs to realize
> another revenue-producing dream -- the widespread adoption of micropayments.
>
> The idea of finding a profitable way to sell small-ticket items, for a
> quarter, seventy-five cents, or even ten dollars, has been around a long
> time -- long enough for companies pursuing this dream to have already gone
> from birth to bankruptcy -- witness DigiCash of Palo Alto, California,
> which filed for Chapter 11 protection in November. Other would-be
> micropayment enablers, like CyberCash, have put their efforts in a holding
> pattern as they pursue more ready-for-prime-time revenue streams.
>
> But Cha!, a 3-year-old Alley start-up, is just getting ready to take off,
> launching the beta version of its 1Click Charge product at Esther Dyson's
> much-ballyhooed PC Forum in March. The 15-employee company, founded in
> 1996, hopes to become the big player in the now virtually non-existent
> marketplace by making it cheap and easy for digital content providers to
> sell items by-the-piece that would normally go into a subscribers-only
> section of a Website.
>
> "All the merchant has to do, assuming that they've already set up premium
> areas, is to give us a price list and give our servers access," said Jim
> Chard, the CEO hired by Cha! in August of 1998. "We believe that we can be
> first to market with this kind of ease of use and this ubiquity."
>
> For the content provider, there's no hardware or software to buy, no
> commitment to exclusivity, and no profit-killing credit card processing
> charges. Cha! hopes to make its dough by taking a percentage (about 10 to
> 12 percent) of the selling price, by selling data about its customers that
> they agree to share, and by earning interest on the funds that members
> deposit in Cha! accounts. So far, there are no real merchants, only beta
> testers like Motocross.com. "I think it has a huge value in releasing
> revenues from archived data to the publishers," said Michael Dalton, VP of
> iScape, which runs Motocross.com.
>
> For the customer, the Cha! service (http://www.cha-tech.com) works
> something like a bank. The user signs up and uses a credit card to fill up
> a Cha! account (admittedly a behavior that will not be simple for Cha! to
> elicit). Then, whenever the person visits a Cha! enabled site, a dialog box
> pops up whenever the user tries to access premium content, giving the price
> of the item and asking whether he or she would like to purchase.
>
> The trick, of course, is to sign up enough sites with valuable enough
> content to encourage consumers to start up accounts. Company execs are
> convinced that content sites struggling to bring in bucks will be eager to
> exploit the opportunity. But then Cha! must get enough users actually
> buying items to generate meaningful revenues, which is by no means a sure
> thing given that consumers haven't shown much of a willingness to pay for
> content on the Internet. "The value of the service is geometrically related
> to the number of merchants and users," said Chard. Although 1Click Charge
> is suitable for selling anything from music to online education, the
> company is starting out by targeting one of the only types of content that
> users have become accustomed to paying for -- business and financial
> information.
>
> The system would allow subscription sites like Slate, TheStreet.com, or the
> Wall Street Journal Interactive to allow access to single stories, for a
> small fee, rather than requiring customers to pay for a whole month at a
> time. For a publisher with valuable archives, the potential is enormous.
> But it's only potential if people are reluctant to sign up and pay.
>
> Cha! is confident, though, that consumers are prepared to ante up for
> quality content. "I think people have figured out that most of the free
> information out there is a commodity," said Chard. "It's the lowest common
> denominator."
>
> So far, investors have bought into Cha!'s plan and its patented technology
> to the tune of $2.5 million, and the company is just completing its second
> round of financing, having brought in about another $1 million. Given that
> the company doesn't expect to even release its product commercially until
> September, another round of financing is in the works. In about May or
> June, the company will be seeking another $5 million to do marketing.
>
> Whether a micropayment model will ever turn a profit remains to be seen.
> The sector's biggest player, CyberCash, is losing money, and it failed to
> even mention its CyberCoin product in its statement about 1998 revenues.
> Compaq Computer's MilliCent product, which the company inherited with the
> purchase of Digital Equipment Corporation, has yet to be launched, having
> recently gone through a nine-month beta period. And Qpass, the company that
> may be Cha!'s closest competitor, is dismissing micropayments as "dead".
>
> "There just isn't that much that people want to sell for a quarter," said
> Cornelius Willis, the Seattle-based company's VP of marketing.
>
> Despite these doubts, Cha! projects it will sign up 30 merchants and 50,000
> consumers by the end of the year, which will generate an expected 250,000
> transactions. By the year 2001, the company is aiming for 500 merchants,
> two million members, and 40 million transactions, bringing Cha! to its
> projected break-even point. Will it happen? Well, if micropayments fail to
> catch on, it certainly won't be for a lack of industry effort. If anyone
> has a chance, it's a company like Cha! that makes signing-up a cheap,
> low-risk proposition for content providers.
-----------------
Robert A. Hettinga <mailto: rah@philodox.com>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
--- end forwarded text
-----------------
Robert A. Hettinga <mailto: rah@philodox.com>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
