iPin Develops Profitable System for E-Content

When the Web first became a vehicle for e-business, online merchants needed a means to make financial transactions. Startups began popping up, such as CyberCash Inc. and DigiCash Inc., that provided payment solutions through which the consumer had an account with one of these companies and used a pin number to make transactions.

These efforts failed miserably. Apparently consumers had more faith in using their credit cards than had originally been anticipated. So now that DigiCash went bankrupt and CyberCash lost millions of dollars, the idea of an alternate Internet cash-transaction company is passe, right?

Think again. A new service starts this fall with an emphasis on a niche that Visa and MasterCard would never touch without revising their standards: the burgeoning low-cost e-content market.

In the past there was always the problem of how to sell something on the Internet for $1.00 or 50 cents? The surcharge of credit cards would kill that idea. But iPin (www.ipin.com) has developed a system where these minimal consumer transactions are logged to the Internet service provider (ISP) and the charge shows 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 [they] pay at the end of the month," says Robin Murray, COO at iPin. "There’s no credit card, sign-up takes 15 seconds and the buy is painless."

This attempt at Web-credit is expected to be different. Murray explains that CyberCash and DigiCash failed for two main reasons. First, their respective systems were difficult to use; 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 markets for ISP partners."

There are two main drivers in the "e-content" market: the music industry and the newly popular online gaming industry. One example of low-cost e-content sales is the marketing of MP3 files. The music industry is finally realizing that MP3 music files don’t have to lose money to piracy, and it is selling the music files for a nominal fee. Other low-cost e-content possibilities include professional and financial research, streaming video and pay-per-use software.

Kip Martin, program director at 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 pay-per-view. It was pay a lump sum now, and then go view.

Another aspect that could help the start-up is that e-content is a market credit card giants will probably not play in. Martin says for credit card companies to stop levying surcharges would mean iPin had become enormously successful and the credit cards feel threatened.

International Data Corp. (IDC, www.idc.com) predicts 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 why his company will not only survive, but thrive. "When we came together, we wanted to build a system that was industrial strength and could 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."

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