iPin Develops Profitable System for E-Content
- By Scott Bekker
- August 10, 1999
When the Web felt the first pangs of e-business, online merchants began needing ways to make financial transactions. At the time it seemed no consumer would trust entering his credit card number into a distant Web site. So startups, such as CyberCash Inc. and DigiCash Inc., began popping up to provide a different payment solution -- one in which consumers could establish an account with a company and then use an assigned pin number to make transactions.
These efforts failed miserably. Consumers had faith in their credit cards. If they could use them at the local mom-and-pop, why not at the virtual bookstore? So now that DigiCash went bankrupt and CyberCash lost millions of dollars, the idea of an alternate Internet cash-transaction company would whither on the vine, right?
Low and behold a new service will start this Fall, one with renewed direction and dibs on a sector that Visa and MasterCard would never be able to touch without revising their standards: the burgeoning low cost e-content market. The music industry is finally getting around to the idea that MP3 music files don’t lose money for an artist if you sell the files instead of allowing pirates to give them away for free.
The problem has been how do you sell something on the Internet for $1.00 or 50 cents? The surcharge for using credit cards would kill that idea. San Francisco start-up iPin (www.ipin.com) has developed a system where consumer transactions are logged to the ISP and the charges show up on the monthly ISP bill.
"The way it works is we allow users to enter a four digit pin and receive that content and then pay at the end of the month," says Robin Murray, COO for iPin. "There’s no credit card, sign up takes 15 seconds and the buy is painless."
But isn’t this just a different path to the same demise as those who have preceded iPin? Murray explains that CyberCash and DigiCash failed for two main reasons. First, their respective systems were difficult to use and second, the business model didn’t lend itself to a critical mass of users.
"They couldn’t get content providers put up because they didn’t have users and they couldn’t find users because they didn’t have content providers signed up," Murray explains. "We have over 60 content providers signed up and a number of key players in the U.S. and Europe market for ISP partners."
There are two main drivers in the "e-content" market: the music industry and the newly popular online gaming industry. There are other uses as well, such as professional and financial research, streaming video and pay-per-use software.
Kip Martin, program director at the Meta Group Inc. (www.metagroup.com), says the Pay-Per-View model is exactly what separates iPin from previous companies. "When you want a movie, you don't type your credit card number into a TV screen," explains Martin. "You say 'put it on my bill.'" CyberCash wasn't PayPerView. It was pay a lump sum now, and then go view.
In addition, e-content is a market credit card giants could never play in. Martin says for credit card companies to feel threatened enough to stop levying surcharges would have to mean iPin was very successful. And that would suit iPin just fine.
International Data Corp. (IDC, www.idc.com) predicts that sales of digital content on the Internet will reach $2.4 billion by 2001. Forrester Research estimates the digital music download business alone will exceed $1 billion by 2003. iPin's Murray points to these numbers as the reason his company won’t survive, but thrive. "When we came together, we wanted to build a system that was industrial strength and scale to the size of the Internet and one that would be global," Murray says. "Content providers are losing and this a way to make some money." -- Brian Ploskina
Scott Bekker is editor in chief of Redmond Channel Partner magazine.