New Mobile Payments Services Revive Old Model

A number of new mobile payments services have been born recently, three of which have revived the model of Simpay - a defunct/reborn joint venture between Orange, Vodafone, T-Mobile and Telefónica Móviles - that attempted to create a pan-European text messaging payments standard.

Evolution of a Model

Simpay dissolved in 2005, when T-Mobile defected from the venture, but it reincarnated two years as PayforIt.

Simpay's business model is fairly simple - create a micropayments service that leverages the millions of mobile phone subscribers, allowing them to charge these sums (less than 10 Euros) to their existing cellular provider's bill.

SimPay never got off the ground because, "It was rumoured that the operator had concerns about the way the system was integrated with handsets and other payment systems," according to Finextra. As a result, Simpay went defunct, but Payforit has now emerged in its place.

PayforIt is now an option for online and mobile transactions for the 52 million mobile subscribers in the UK. New billers have to apply with each of the carriers to gain access to the new standard.



Micropayments of <10 Euros necessarily constrains purchase size and makes this purchase method most useful for digital content downloaded directly to the phone including song, premium data subscriptions, or potentially videos.

Newest Entrants

Three new companies have launched that mimic the model of SimPay/PayforIt.

Zong

Zong just launched at the TechCrunch50 conference in California. Zong's model is almost an exact replica of PayforIt's. Zong has created a REST API that allows developers to plug its payment system directly into their back ends.

Zong works with 55 carriers in 12 countries, but has two big drawbacks from what we can tell: revenue and time to collect. According to their site, you net $0.58 on the $1.00 for every payment through Zong. That is a painful amount of rent to extract before paying for any of your overhead (CAPEX, bandwidth), input costs, and labor. While it's true to some extent that digital content has limited marginal costs, where content is KING, it is expensive, and this increases the break-even sales point for whatever product you're selling.



The second problem is that Accounts Payable time period, and only once a site has reached over 100 Euros. According to their site,

"Payout is made once the amount payable has reached 100€ and around 75 days after traffic dates. Why so long?

Mobile network subscribers pay their mobile operator within 30 days. The mobile network operator pays Echovox within 30 days. Echovox pays you - a Zong client within 15 days. (30+30+15=75) "

Paymo/Mobile Merchant Services

Paymo/Mobile Merchant Services was founded by the mBlox executives. mBlox was one of the first "short code" text messaging marketing solution services. Paymo is virtually identical to Zong, with the same shortcomings.

According to their website,

" What are the costs ?

mMS charges a % of the transaction fee - typically 10% - depending on the volume of transactions you process each month. If you choose the Individual account you can get started today and there is no Setup charge and no Monthly fee.

The main costs of a mobile payment are the fees taken by the mobile carrier. In some markets the carriers take as much as 50% of the transaction value. With Paymo, you can choose to pass some or all of these costs to the consumer as a surcharge. In this way you can still get as much as 100% of the list price of the item you are selling.

How do I get paid ?

We will pay you the money for the transactions processed using Paymo. Payments are typically made monthly. The first payment will be made once you have passed a minimum revenue level and we have received the money from the mobile operators.

When do I get paid ?

We will pay you within 10-15 days of receiving money from the Paymo network. This timing is driven by mobile carrier payment cycles and varies by market. Some markets settle within 30-45 days, other markets can take several months."

mGive

mGive is a mobile donation service providing a tool to process mobile donations for non-profits and 501(c)3 organizations. The service is particularly useful in large groups, such as concerts, where Eddie Vedder says "Text DONATE to 12345" and raises tens of thousands of dollars within a few minutes.

mGive has virtually the same model as all of the companies mentioned above. However, the company's pricing model is more complex. Donations are limited to $5 per transaction, and the company takes $0.25-0.50 depending on volume. Then, the 'Mobile Giving Foundation' takes another $0.50. Add to this $100 setup fee, and a monthly service fee of $250-1,250 related to the text messaging and web features, and the non-profit is getting 80-85% of the donations minus more operating fees and their upside is limited to the $5.00 units, and the funds are held for 60-90 days for the same reasons as the other companies.

Mpayy Mobile Payments - Faster, Less Expensive & More Secure

Each of the companies listed above is an intermediary providing a mechanism for billing charges to users' cell phone bills. Their use of the cell phone carriers results in exhorbitant rents being extracted from the merchant or non-profit organization, and significantly eroding margins. Further, the time to collect for these solutions is likely to be unacceptable to many merchant/content solutions. The transaction size and volume will also continue to be limited by the carriers' willingness to float the credit risk.

Mpayy has one challenge vs. these companies - Mpayy requires a subscription before users can make payments to merchants or charities. However, once a subscription is opened, Mpayy is the least expensive, most secure, fastest solution out there. At just $0.20 + 2.00%, Mpayy Mobile Merchant accounts enable 0% fraud liability transactions from any mobile-web enabled cell phone. Further, those funds are available for withdrawal within just 48 hours from Mpayy's advanced Cash Management console.

Mpayy also offers enterprise ecommerce payment solutions as well as secure payments through social networks.

Reconciling Consumer Crosswinds

Frequently, in his space, we discuss both the online and offline retail spaces as Mpayy's secure online shopping system relies first and foremost on the consumers' willingness to go shopping. However, beyond transactional data released by the Commerce Department and Comscore, there are other tea leaves that we can read to get a view into the consumer's plight.

Today we look at real estate and credit card transactions.

Underwater Real Estate

Zillow.com is an innovative online real estate research and data website that provides holistic views into cities and neighborhoods for consumers. Home-shoppers use the site to look at purchase data of homes near the addresses the potential buyer is considering. To do so, Zillow has to track publicly available purchase data nationwide.

Zillow released its Real Estate Market Report yesterday. According to Dr. Stan Humphries, Zillow's vice president of data and analytics, ""The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets. The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss." His prognosis is not rosy, predicting that "most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines."



Zillow's press release mentions, "For example, 32.7 percent of homes sold in the second quarter were sold for a loss and 18.6 percent were foreclosure sales compared to the year-ago quarter when the rates were 12.2 percent and 7 percent respectively."

In other words, the investment with the best track record of creating wealth, and most home-owners' largest investment is now a massive liability with exit scenarios that force a loss. Most home-owners save up for a substantial period of time before purchasing a home, and it will take time after those losses are booked before those folks are back in an equally financially healthy position they were before the purchase. This will have material consequences for discretionary spending for the foreseeable future.

Growth in Expenditures Benefits Payment Processors

Amidst the consumer damage resulting from the bursting of the real estate balloon, billions have been written off the balance sheets of banks related to illiquid auction rate securities, foreclosures, losses on home sales and defaults on credit card balances, there is significant strength among the payment processors. The American consumer continues to spend.

The chart below displays the payment processors versus the pure play credit card issuers.



However, the pure play payment processors are exhibiting unbelievable growth. MasterCard has skyrocketed over the last year, and Visa has demonstrated incredible strength since its IPO earlier this year. Visa demonstrated 8% year over year volume growth in its credit card volumes in the US and 28.5% in the rest of the world. Visa also reported more significant strength of 13.6% in its debit card volumes in the United States.

Mpayy's secure online payment processing system is a debit instrument that allows shoppers to pay online with their checking accounts. Mpayy saves the retailer money, guarantees payments and eliminates fraud liability. Shoppers receive enhanced security and cash back guarantees on top of expanding their ability to send money to their friends and family for free anywhere in the US.

Much Ado About eCommerce

With brick & mortar retail sales demonstrating a paltry 0.1% growth in June, artificially supported by rising gas and food prices, there is a concerted move among big box retailers to enhance their online sales presence.



Comscore reported last week that ecommerce sales continue to refuse to succumb completely to the weakness of the American consumer. The rate of growth has fallen by 50% year over year, but ecommerce spending continues to demonstrate growth in the low double-digits. There is faint hope that the stimulus checks will continue to provide further boost to online retail spending.

Retailers are demonstrating that the lesson of this divergence between the growth prospects of online and offline sales is not being lost on them. Internet Retailer notes that, "At Sears Holdings Corp., same-store sales at Sears and Kmart retail chains declined 8.6% for the quarter that ended May 3, the company lost $56 million and shuttered 62 stores, yet the company increased investment in its online and multi-channel operations by $10 million."

Shop.org, the online arm of the National Retail Federation & the e-tailing group have each published white papers concerning the focus of those eCommerce investments in "The State of Retailing Online 2008" and "Investing in eCommerce, Despite the Times", respectively. Universally, there is a great deal of focus on improving on-site merchandising tools, including search, personalization, and integration of product presentation for the online and internet spaces. From the e-tailing group's document:



Opportunity for Mpayy

According to Shop.org, which conducted the research in conjunction with Forrester Research, more than 75% of retailers cite the Checkout Process as a tactic and investment priority. Of that group, 80% want to improve their shopping cart page; 79% want to improve their checkout process; and, 57% want to include "Third-party Email Payment" capabilities.

Mpayy is in finishing stages of launching its Lightbox Checkout Window that will streamline the checkout process for its online retail partners. (Check back for sneak peeks.) Mpayy's offer for online retailers enables them to reduce cart abandonment and growth their sales online.

Mpayy is a secure online & mobile payment processing system that processes payments from shoppers' checking accounts at a 50+% discount to credit cards. Mpayy provides 0% fraud liability for retailers, and guarantees payments. The application is developed by and housed at US Bank (NYSE:USB) in an environment that meets PCI DSS standards, and is compliant with USA Patriot Act, OFAC, Reg E and Reg Z.

CardLine/CardForum Article

Below is the article that was featured in CardLine/CardForum.

MPAYY SEEKS GROWTH AFTER SECURING ADDITIONAL FINANCING
Mpayy Inc., a Chicago-based alternative-payments company, says it will use
additional funding from U.S. Bancorp to grow its e-commerce, mobile commerce
and widget-based payment services. Minneapolis-based U.S. Bancorp also
provided Mpayy with funding last year. ³We want to tap into larger
retailers,² Conrad Sheehan, Mpayy founder and CEO, tells CardLine. ³They
have not been as aggressive in adopting alternative payments, and for a lot
of good reasons. Any retailer should be extremely comfortable with running
high volume through our platform.² Launched in the first quarter, Mpayy says
it provides consumers, small businesses, Internet retailers and charities
with a variety of payment options. Consumers may make person-to-person funds
transfers through Mpayy¹s online and mobile Web sites and by using a
social-networking widget found on Facebook and MySpace. Consumers can pay
for goods by linking a checking account to Mpayy. Small businesses and such
independent salespeople as taxi drivers and flea-market vendors can use
Mpayy¹s mobile-payment capability to turn their mobile phones into
point-of-sale terminals. ³It works on all phones, but it¹s particularly
tailored to the most-popular devices,² Sheehan says. New York-based charity
Alliance for Lupus Research uses Mpayy¹s widget on social-networking sites
to obtain donations. Sheehan claims Mpayy offers retailers a processing
platform that is ³50% to 60% less expensive than card-based processing.² The
company also is touting Mpayy¹s security. ³We exceed all PCI standards,²
Sheehan says. ³Retailers don¹t have to worry about storing any data because
that information is hosted on servers by U.S. Bank.²

American Banker's "Mobile Banker" Feature

Mpayy is excited about a feature we received in the American Banker today. It can be found here. Registration is required, but they have a two week free trial with no need to input a credit card.

Enjoy!


American Banker
Its Testing Done, Alt-Pay Start-Up Faces New Tests

American Banker | Thursday, July 10, 2008

By Steve Bills

Mpayy Inc., a new entrant in the alternative payments space with backing from U.S. Bancorp, is hoping that its combination of e-commerce, mobile technology, and automated clearing house services will help it stand out in an increasingly crowded market.

The Chicago company announced Wednesday that it had closed a funding round led by the Minneapolis banking company.

Conrad M. Sheehan, Mpayy's founder and chief executive, said U.S. Bancorp had also led an earlier funding round, last year, but he would not disclose the amount of funds raised.

Mr. Sheehan said his company has intentionally been keeping a low profile. "We're very focused on designing and building a great product without putting too much attention on us too early," he said in an interview Wednesday.

But after testing its Internet and mobile commerce technology since early this year, Mpayy is now ready to begin promoting it actively, Mr. Sheehan said.

A U.S. Bancorp spokesman said the company would not discuss Mpayy, though Mac McCullough, an executive vice president at U.S. Bank and a director on Mpayy's board, said in the processor's press release that the banking company is "very pleased to continue with our role in Mpayy and continue to view it as an attractively positioned player in alternative payments with a compelling and unique value proposition."

Mr. Sheehan said that in addition to its financial backing, U.S. Bancorp is hosting Mpayy's applications in its data centers.

Mpayy is positioning itself primarily as a lower-cost alternative to credit cards for online merchants, using the ACH system as a way to beat payment card interchange expenses, Mr. Sheehan said. "It's more of an e-check platform. There's also a stored-value piece" for the unbanked.

Initial customers include Lawbooksforless.com and the Alliance for Lupus Research, which Mr. Sheehan said is using an Mpayy application known as a "widget" to add a payment system to social networking sites.

Mpayy's mobile payment capability uses the same secure Web interface but with a streamlined design, he said. "It turns your cell phone into a mobile point of sale."

Commercial users — such as taxi drivers, flea market sellers, and multilevel marketers who sell using the home party method — could save half or more compared to bank cards, and Mpayy offers free person-to-person transfers.

Big banking companies have begun placing some bets on alternative payment technologies. Bank of America Corp. last week took an equity stake in mFoundry Inc., a developer of mobile banking and payments software. Citigroup Inc. is pursuing a variety of strategies, testing mobile-phone payments with technology from Obopay Inc. and forming a joint venture with the South Korean wireless carrier SK Telecom Co. Ltd. to develop mobile technology.

Bruce Cundiff, a research analyst at Javelin Strategy and Research, said Mpayy could break through by offering its service online, on mobile devices and through social networking widgets.

"I like the fact that they are going after multiple markets here. They're not putting all their eggs in one basket," Mr. Cundiff said.

But like other entrants in the alternative payments market, Mpayy faces what Mr. Cundiff called a "chicken and egg" predicament in trying to develop both a merchant base and a customer base, similar to the issue that eBay Inc.'s PayPal unit faced in e-commerce in the early part of this decade before beating out rivals.

"Mpayy's key differentiator is being able to integrate with U.S. Bank's robust merchant services business," he said. "I think that dovetails nicely with U.S. Bank's merchant strategy."

© 2008 American Banker and SourceMedia, Inc. All Rights Reserved.

Hard Data on Mobile Usage

Nielsen Mobile put out new data today based on a global survey of 1 million mobile subscribers' use of the web on their phones, and the numbers continue to point to a growth narrative that is one of the strongest in the American economy.

Monthly Usage & Upside

Nielsen's data demonstrates that 40 million Americans access the Internet via their cell phones as of May 2008, which is 15.6% of the mobile subscribers in the US. This data is very consistent with what the Pew Center found that we discussed here. However, even more exciting is the fact that fully 95 million Americans have access to the mobile web through their cell phone service provider either by directly paying for it, or bundled with their other services. That number is up 28% from Q1 2007, but still accounts for just 37% of the 254 million mobile phone subscribers in the US.

These numbers are very exciting for Mpayy demonstrating that the installed untapped base is already 55 million strong. Further, continued growth of the mobile web subscribers to even 50% will more than triple the number of users today. Mobile data packages account for $1.7 billion in annual sales, and the average subscriber is spending $11 on monthly data plans.

Specific Uses

Nielsen's data contradicts what we discuss yesterday, demonstrating that the iPhone is #2 in the device list with 4% penetration, still a ways behind the 10% occupied by the Motorola Razor.


As far as the specific browsing habits, Nielsen reveals that 40% of mobile Internet users find their favorite sites through search engines, and 22% type in the exact URL. Just 17% of users find their sites through carrier portals, a number that is likely to continue to decline as iPhone, SmartPhones and imitators continue penetration.

Further, 5 million users in the US are accessing mobile banking websites that mostly just allow them to view their account balances and make a few payments. This number shows massive potential for breakout for Mpayy's Personal accounts that allow electronic payments to friends and family as well as roving salespeople that use Mpayy's secure Mobile Merchant account. As you can see from the left, email, weather and sports continue to lead mobile web usage, but watch out for Mpayy!

SmartPhone & iPhone Penetration Continue

This blog has covered mobile web usage growth as reliable numbers come out. A couple of interesting data points have been released lately that point to a high probability for the continuation of this trend.

SmartPhone Numbers

Nielsen Mobile put out numbers on SmartPhone penetration last week. The numbers are consistent with the Pew Research numbers we discussed here. Fully 63.9% of SmartPhone users are below 45, with 35.9% below the age of 35.

Further, focusing on this market exposes companies to some of the highest paid Americans with 35.1% having incomes over $100,000, according to Nielsen's data. These users are spending over $200 for their device and over $100 on their monthly plans, and 52% of those users are paying for the plans themselves as opposed to their companies remitting these fees.

Many Apples a Day

The Apple 3G iPhone launches on Friday, and though it is still 4th in the SmartPhone race, this year promises to be a barnburner. Apple expects to sell 5.1 million iPhones in Q3 2008 and another 6.5 million iPhones in the 4th quarter, according to numbers quoted by Silicon Alley Insider. Some analysts are estimating that Apple will sell 45 million iPhones in 2009.

SmartPhones and the iPhone are driving the move of functionality from the internet to the mobile web. As more and more of these phones come online, more people will begin to use Mpayy for free person-to-person money transfers, and independent salespeople and small businesses can use these phones as mobile Points of Sale. Check out our mobile website with advanced account management features.

Reconciling Retail Data

The Commerce Department reported retail sales numbers grew 1% in May, and revised April retails sales growth to 0.4%, up from the original estimate of 0.2%. This data is somewhat promising in light of the other troubles the consumer is facing - rising joblessness, falling home prices, and rising consumer prices including food and gas.

The retail sales report also demonstrated a 1.2% increase in sales among general merchandise stores, such as WalMart. Much of this spending increase could be related to the $300 checks received from the government stimulus package. Auto and home sales continued to show weakness in light of rising gas prices, and lends credence to the notion that much of the spending surge could be tied to the stimulus checks.

The promising retail data comes just one week after the Labor Department reported the largest one month increase in the unemployment rate to 5.5%, up from 5.0%.

There is some evidence that the offline world's performance can have some impact on the online world. TNR reports that online display advertising growth slowed to 8.5%, about half the pace of the previous year. Online advertising continues to grow faster than tv's, newspapers and other media. Similarly, non-store retailers - i.e. ecommerce and catalog companies - continue to maintain the strongest growth on a relative basis vs. other retail scenarios. eMarketer is forecasting that ecommerce sales will still top 14% in 2008.

Whether these online trends continue to be insulated from the offline trends will determine the overall economic outlook for 2008.

Join the Fight Against Lupus

Mpayy has officially joined the fight against Lupus with the Alliance for Lupus Research. Together, Mpayy and the ALR are working to leverage Facebook traffic to fight against Lupus. See the ALR's donation widget at http://apps.facebook.com/curelupus.

Mpayy will match each new donation account with a $1 donation to the ALR.

As the Consumer Goes....Must eCommerce Follow?

Endless Growth?

Last year, eCommerce sales grew 21.8% to $165.9 billion, vs and overall growth of just 3.9% for the broader retail industry. According to Internet Retailer, even big box retailers are turning to eCommerce sales more and more as that growth far outpaces the traditional stores, the share of revenues grows north of 30%. Even L.L. Bean, which made its bones through phone catalogue sales now counts almost 60% of their sales through their website.

Online sales continue to show growth this year in light of paltry overall economic growth of just 0.9% in the first quarter. According to Comscore, ecommerce sales are up an average of 12.5% in each of the first four months of 2008. The press release points out that after a weak March of just 9% growth, eCommerce rebounded in April to put in 15% year over year growth, though some of that may have to do with tax refunds hitting consumers' wallets.

The question is whether rising consumer prices that are compounding an already difficult economic environment will put an end to the growth in eCommerce. A gallon of gas is now at or over $4/gallon. Food prices are massively on the rise. Consumer confidence has fallen below 50 to 45.7 vs. 100 last September and 33.6% of the people surveyed anticipate a worsening business environment over the next 6 months according to the Conference Board.

Will retail in general and eCommerce specifically be able to sustain this growth?

What Do Payments Cost?

Internet Retailer digs into what the true costs of credit card processing are in attempting to educate its readers on how to pick among the various merchant acquirers. IR counsels that the Base rate, which is the rate many people think they're actually paying for each transaction, can be misleading. There are so many fees that go into credit card processing that the Base Rate can be less than half of the overall rate a merchant pays for a transaction.

Rates paid by merchants vary with the type of card, and the Interchange Rates vary as well, and can boost the Net Rate to well over 4%. Internet Retailer examines 6 different credit cards and the Interchange rates they face on an imaginary $169 transaction. The same article says 2.2% + $0.30 is the typical Base Rate for a mid-sized retailer. Compared with Mpayy's max price of $0.20 + 2.00%, the savings abound.



That chart shows at least a $3 cost savings on the part of the retailer for every transaction!

Further, a recent CyberSource Survey shows that not only can Mpayy bring online retailers around the country cost savings on their payment processing and 0% fraud liability, but it will boost conversion!



Mpayy has a good pipeline of new clients, but we are lightweight, easy to implement and infinitely scalable. We look forward to hearing YOU knock on our door.

As growth starts flattening due to a weak consumer, Mpayy is the place to turn to grow your online business!

Blue Steel & Other New Mpayyment Widget Skins

Lipstick on a Lamborghini

One of the things I planned to do when I started this blog was to document the empirical record of birthing and nurturing a startup. I've neglected it because at the end of the day, it's difficult to broadcast to the Internet's permanent record many things along the continuum from a lapse of concentration to tactical errors. Many times, one can become naturally reluctant to call attention to decisions and actions you've taken that materially improve the situation.



One thing that I am really enjoying is the depth of the hands-on education that becomes a necessity. I've alluded many times to the painful status of our front-end. It's like we've put a cover on the car the makes our underlying Lamborghini payment application has the shape and power of a Saturn coup. We'll be lifting the veil with a much more exciting front-end in the next few weeks that I think people will understand and enjoy. Matt Shea joined us about 5 weeks ago, and we will make the most of his skill set.

For my part, though, I have finally had the time to study and learn some basic web development skills with specific tasks that go into production. I've been working with websites since August, 2001, though I had to learn through work in connection with developers. My Poli Sci/Econ undergrad did nothing to prep me, and I started to get a grasp because I had a PHP developer and Oracle DBA who vituperatively despised one another. Through Zacks and Orbitz I became adept at writing Requirements documents, shepherding projects through design and development, and testing and maintaining the bug lists for a number of sites. As my career went on, I've dealt with sites at increasing levels of sophistication and transaction numbers, our present front-end notwithstanding.

The first full site pages I've ever created are the new micro-site for the...

Secure Payment Widget

Mpayy re-launched our Secure Payment Widget last Saturday with a new skin -- "Blue Steel" created by Matt Shea. We added some DHTML popups to help people through the system. Additional improvements to the widget were the ability to specify a new skin. We've created three initial skins in the forms of an iPhone, a Chocolate, and a kind of sad Blackberry. Mpayy's mobile payment processing system is now available as a phone skin on your blog or favorite social network.

(The widget micro-site denoted by the black buttons is a Trace Johnson original. Compliments and invectives are equally encouraged.)

The other exciting new piece of functionality we added to the widget was the ability to co-brand it with your own logo. This was necessary first to comply with MySpace application Terms of Service which stipulate that any payment applications must make perfectly clear that the application is unaffiliated with MySpace and Fox Interactive Media.



We went ahead and customized a bunch for fraternities and sororities @ our Gone Greek page also within the microsite.

Widget Commerce Tool

I was annoyed today when I saw a Payments News story on a UK company with a new Facebook widget to send money to friends, though they charge the sender 1% up to 0.50 euros. Mpayy is set to empower charitable donations, digital music & online auction sales directly through any social networking page. Mpayy's Mobile Merchant account is just $0.20 + 2.00%, less than PayPal, and more secure than most other online money transfer services being hosted within US Bank's data centers.

Series B Closed - The $$$ is in the Bank!

Mpayy has just CLOSED a Series B round of financing. All private and institutional investors from the prior round participated in this round to maintain or increase their stakes in the company. Plus, we welcome new investors into the fold.

Mpayy will use this money to improve the look and feel of its front-end, broaden and increase its marketing program, and work with new ecommerce merchants to integrate what will become the new standard in payments into their websites.

On Monday, Mpayy will welcome a new VP of UI Engineering, and next Saturday, we will relaunch our site for Mobile Merchants who wish to take their stores on the road.

For now, we've finished the bottle of Dom, and moved onto the beer, and Monday, we will redouble our efforts for both commercial and consumer adoption.

Sneak Peek to New Mpayy Mobile Site

Mpayy developers have been hard at work on a new mobile site that enhances the account features available through https://mobile.mpayy.com. Mpayy's Mobile Merchant accounts provide direct salespeople, taxis, and online ebay sellers with a free mobile point of sale system through any web-enabled cell phone. The new functionality being ported to the Mpayy mobile site will make it easier for sellers to process transactions and returns.

Mpayy's current mobile site rates a 4-Good by Ready.mobi's mobile website tester, which is certainly not bad.



However, one of the things we wanted to do was to make sure that we followed all of Ready.mobi's guidelines, including providing the ability to differentiate the experience based on the 10 best distributed cell phones, and we will launch with this device targeting ability. The new site does meet the guideline test as seen here (Dev URL is masked):



Mobile Dashboard

The Dashboard on the Mpayy Mobile Homepage still includes the Make Payment options, but a new piece of information and several new features, including Balance Information, a Withdrawal button and a Help Center.




From the Dashboard, any user can select to make a Withdrawal directly to their Linked Bank account, and get the payment batched up and ACH'd that night.




Payment Activity

Mpayy takes large steps to make sure that all communications are authenticated, including the creation of a Digital Signet at account opening. The Digital Signet is a piece of user-generated content that we place at the top of text messages and emails, so you know it comes from us. Payment recipients, whether they are free Personal money transfer accounts, or Mobile Merchant accounts for AVON/Mary Kay salespeople, Tupperware sellers, Passion Partiers, etc. who are taking direct payment, the Activity list will provide confirmation that the payment was made beyond the text message receipt.



Beyond checking their activity, sellers on the road can also process refunds with the new mobile website. This image is what happens when you drill down to a specific payment by either scrolling and selecting it, or using an AccessKey number to jump to the payment and make the selection.


When a Merchant selects to make a Refund of the specific transaction, the screen looks like this.



Secure Mobile Payments

Mpayy offers free mobile payments for anyone with a mobile web enabled cell phone. Money can be moved from any bank within the United States. On the receiving end, it is free to receive transfers, but traveling salespeople can get guaranteed payments with very low transaction costs and 0% fraud liability. Sign up, and check it out. You'll be glad you did!

Venture Capital Not Insulated from Broader Market Turmoil

Investors opening up their 401K statements for the first quarter of 2008 will probably need a large supply of Pepto-Bismol to assuage their pain with the Dow Jones Industrials offer more than -500 points. A rally on the first day of the second quarter was quickly dispatched by Fed Chairman Ben Bernanke's sick April Fool's joke that the economy could very possibly contract in the first half of 2008 sending stocks tumbling.



While at first glance, the Venture Capital industry should be insulated from the broader market and economy, new data out from the National Venture Capital Association and Thomson Financial indicates that may not be the case.

Short Line @ Exit Sign

The NVCA provided data on Venture Backed Exits in the First Quarter of 2008. In short, this is a count and measure of the magnitude of liquidity events - Mergers & Acquisitions (M&A), Initial Public Offerings (IPO) - by companies that were previously financed through venture capital funds.

The number of M&A deals was down -31% to 56 deals, from the first quarter of 2007, and even more significantly when compared with the Q1 2006. The value of those deals was down -45% to $2.491 B.

Further, the data reveals that 38% of the M&A transactions valued the venture-backed startups at less than the initial VC investment.



Even starker is the IPO trend. In Q1 2006, Venture Backed companies accounted for 18 IPO's with a combined value of $2.2B, and an average of $121.7 million. In the first quarter of 2008, those numbers were 5 deals for $282 million, and an average deal of $56 million.

According to the Wall Street Journal & Dealogic (registration required):

There were fewer IPOs in the first three months of 2008 than in last year's first quarter in every major region of the world. Globally, the number of IPOs fell 60% to 100 deals and the amount raised slid 10% to $35.9 billion, according to data from Dealogic. In terms of the number of new offerings, it was the worst period world-wide since the third quarter of 2003, by Dealogic's count.

Now, the IPO market is typically very sensitive to the overall trend in the market, and venture capitalists, entrepreneurs and investment bankers alike will often postpone an initial public offering when the market is going through a correction. IPO's are meant to allow founders and VC's to take some money off the table as well as create a publicly valued currency that allows the company to engage in some of its own M&A activity. However, the magnitude of the slide is significant, and if you strip out the Visa IPO, everything looks a bit less rosy.



Plenty of $$$ for Now, Financing is NOT the End Game

While the exit picture isn't so rosy, plenty of money is still out there, particularly if you call yourself an Open Source technology company. Further, VC's are so desperate for deal flow that in some instances, they are willing to buy out the owners personal stakes according to the founder of thefunded.

It is important for entrepreneurs to manage their burn rates and work to produce revenues quickly, though, because this funding could easily dry up. Smaller deal size could be a leading indicator for a slowdown in the supply of funding, especially in light of falling confidence among VC's, according to Silicon Valley Venture Capitalist Confidence Index.

BillMeLater to get BilledNow by Credit Crunch?

The credit crunch that is striking at the heart of Wall Street's largest, oldest and most venerable firms also has impacts in the payments industry. Bear Sterns, an 85 year old investment bank was sold to JP Morgan for pennies on the dollar last weekend. Today, the New York Times is reporting that CIT Bank tapped its entire line of credit in order to fund its on-going operations. That line amounted to $7.3 billion in emergency credit.

CIT is a diversified financial institution including student loans and commercial lending. However, CIT is also responsible for the financing offered at Dell computers and by alternative payment processor, BillMeLater.

BillMeLater has a large cadre of internet retailers, including WalMart.com, and provides an instant line of credit to consumers in the checkout process. There has been angst about both the high rate of rejection of some customers, and the impact on your financial score the way the company pulls your credit report. Both those factors could get worse.

Consumers are being hit by hiking of credit card interest rates regardless of payment history, mortgage lenders are also increasing rates to reflect a risk premium in the housing market.



If the tightening of credit standards reduces CIT's ability to offer credit, and it has trouble selling "non-strategic" assets or finding someone to merge with, the BillMeLater experience could go downhill quickly.

Mpayy - Alternative Payments for YOU

Mpayy continues to look for new ecommerce retail partners to provide consumers with a secure alternative for secure payments directly from their checking accounts. Mpayy provides 1% Cash Back on purchase amounts over $50, and the same Chargeback protections as credit cards. Certainly, Mpayy doesn't extend credit to its Personal account-holders, but it does offer the best consumer protections for online shopping available.

Obopay Adopts Mpayy Thin-Client Single Step Payment Process

Glenbrook Partners, which covers the payments industry and strategies, ran a story today that Obopay has moved away from their 2-step "Store & Forward" approach and to the Mpayy model of enabling payments directly from users' checking accounts.

Ramy Mora, VP of Marketing at Obopay notes that the decision was made as a result of focus groups and not the careful study by Obopay employees study and testing of Mpayy's service. We'll take them at their word.

Obopay, which has taken $46 million in Venture Capital financing, started with a "fat-client" solution. A "fat-client" requires the download of software onto a mobile device, requiring a team of developers to ensure that each Operating System put out by Motorola, Apple, Nokia, LG, Samsung, etc. is compatible with the subsequent releases. This is hugely capital intensive pursuit requiring a huge team of developers. In fact, as recently as January, the company added support for Blackberry users through specific software on the device.



Obopay moved to a thin-client solution based around a WAP site, but maintained its "Store & Forward" model. It will be interesting to see what Obopay does with their payment lags and accounting opening process now that the money goes directly from Person A's checking account to Person B's Obopay account where it can be withdrawn with an ATM card. This introduces significant credit risk, and we'll look to see how they handle it.

Obopay does have a slick front-end, something Mpayy can not claim presently, and they do have a relationship with Citigroup, but usage has fallen since the partnership was announced. Perhaps this most recent change will pick the traffic back up.



Recent Press for Mpayy



Mpayy has received two "also ran" mentions in sidebars and lists of mobile payment companies of note.

In the Nilson report, Mpayy was included in a list of alternative payment systems that was a sidebar to an article covering Steve Case's startup, Revolution Money, which recently concluded a deal with Fifth Third Bancorp to accept the Revolution Card in bricks & mortar stores.

Today, Mpayy got word that it would be mentioned in Javelin Strategy's "Mobile Person-to-Person Payments and Transfers: Security and Timing Are Everything" report.

Don't shell out $2,250 to learn about Mpayy, though, as this is evidently the extent of our honorable mention. We very much appreciate the coverage, though, and enjoy being mentioned in the same breath with Visa, Mastercard, PayPal, Obopay, Textpayme, etc.

CrunchBase Information

obopay

Information provided by CrunchBase

CrunchBase Information

Mpayy

Information provided by CrunchBase

CrunchBase Information

Revolution Money

Information provided by CrunchBase

On Web Growth & Web $Growth$

Much has been made of Internet company valuation, and with the order of magnitude money has been flying at startups in the Valley, much demands investigation. Valuation is an inherently subjective process that can be made to conclude anything depending on methodology and assumptions. Value investors who prospered in the crash of 2000-1 were vindicated that company value is derived from a string of revenues, and the stock value is a claim on that string. The followers of Benjamin Graham's approach will only invest in stocks of companies with strings of positive Free Cash Flow that have a Net Present Value to the stock-holder.

Venture Capital Investing a Different Animal

Now, Venture Capital investing is far different from buying stocks listed on the NYSE, NASDAQ and S&P 500. Venture Capital investors have the flexibility to demand very sharp hook-clauses into the Term Sheets they give out. I just finished my MBA at the University of Chicago where we studied how to structure a Term Sheet to limit downside risk, and ensure a positive return with near certainty, while still having significant exposure to the upside should a startup venture succeed.

It's a powerful piece of knowledge to have as an asset manager who is renting money from wealthy individuals and institutions. In order to raise future funds, an asset manager must show returns greater than the stock market and other asset classes. The first Case Study in Professor Steven Kaplan's Entrepreneurial Finance & Private Equity class is a study of David Swenson, Chief Investment Officer of Yale's Endowment.

The Boston Globe wrote a story about a study by Josh Lerner of Harvard with colleagues:

It shows that $1 billion invested at the end of 1991 by the average US college or university endowment grew to $3.68 billion at the end of 2005, a gain of 268 percent over the 14-year period. That was slightly less than the 278 percent compounded growth of the benchmark Standard & Poor 500 stock index in the same period.

By contrast, a $1 billion investment by "Ivy Plus" school endowments turned into $5.88 billion, a gain of 488 percent. The Ivy Plus group was defined as Ivy League schools - Harvard, Yale, Brown, Columbia, Cornell, Dartmouth, Princeton, and Pennsylvania - plus the Massachusetts Institute of Technology, Duke University, Stanford University, and the California Institute of Technology.

Those very large endowments had access to the best VC funds and startup deals, with terms that would most benefit investments by Endowment managers in the role of Limited Partner. The investments grew the endowments of the Ivies so significantly that the schools are substantially liberalizing their tuition assistance. Here is Harvard's 3-Point Initiative to lower Expected Family Contributions.

To an entrepreneur, the experience can look more like this anonymous posting on thefunded.com.

The term sheet provided to us was astonishing, the most rapacious I have seen in 20 years. The terms were far from even remotely resembling market: extreme liquidation preferences, antidilution ratchets, wiping out of the previous investors. Most unbelievably, an absolute requirement for the management team and Board to resign, to be replaced in their entirety at [their] sole discretion[edited].

How Blogerrific Can You Get?

Mr. Blodget, 35, gained fame among American investors after correctly predicting in 1998 that the share price of Amazon.com would soar to $400. But that fame turned to infamy as Amazon and many others among the Internet stocks he recommended plunged. Several companies that Mr. Blodget praised in published reports and television interviews, including Pets.com, a unit of IPET Holdings, and eToys, failed before ever turning a profit.

...Through all of 1999 and well into last year, Mr. Blodget advised investors to buy virtually every stock he covered. Boyishly handsome with a charmingly casual manner, he became a fixture on CNBC and in the financial press, making the case for companies that were losing lots of money selling diapers or dog food over the Internet.(New York Times, November 15, 2001)

When Henry Blodget left Merrill Lynch, this was his Wall Street epitaph in the New York Times. Blodget's departure came at at a point when everyone felt burnt by Internet companies, and they perceived him as a cheerleader. A quick perusal of the stories about his stock picks on theStreet.com reveals positivity on the likes of Yahoo, Amazon, and Priceline.com, all of whom produced profitable businesses to the tune of many billions in profits.

However, Henry Blodget, who edits the very poignant Silicon Alley Insider is credited with arguing TechCrunch at $100 million, which TechCrunch Founder Michael Arrington disputes in this interview on Charlie Rose.



Whose Rents are they Anyway?

AOL announced plans to buy social networking company, Bebo for $850 million giving it access to 40 million members worldwide and rich video content like the online production house that arose out of lonelygirl15 fame on YouTube. In fact, Avatar of WidgetsLab predicted the move made sense for AOL over a month ago. Zach Hurst of 1Dawg notes that values Bebo users at $21.25/user, and that facebook users would be $300 per person at the $15 billion valuation given by its Microsoft investment.

The facebook valuation has driven many associated investments, and thus more venture capital into social networking websites. Adonomics is a facebook only VC fund, widget valuation tool and marketplace for orphan widgets. The company publishes its theoretical valuations of the Top 100 widgets on facebook by users. According to its valuation, the Top 100 facebook applications are worth $1.2 billion and each instance of use is worth $27.09.

So, if facebook is worth $15 billion and the ecosystem that drives facebook usage is worth over $1.2 billion, what is the valuation of the ad networks that plan to use widgets as marketing tools and advertising vehicles? Gigya received $9.5 million this week and WidgetBox received a CEO from Hummer Winblad who helped it raise $14.5 million with several other firms.

The final answer to the question of how much value facebook users create, and for whom will be fascinating. It's interesting and important for investors and entrepreneurs alike to ask now which investments will deliver profits, and which shall be attrited.

Widget Commerce w/ Mpayy

Mpayy's Secure Payments Widget hopes to securely produce this stream of revenues. We are a highly scalable commercial application, and can enable either our Person-to-Person money transfers or Internet Point of Sale web services through its widget or with simple integration to any website. For charities, non-profits, and charities, we'll process donations for free.

Check us out and play the Mpayy Bracket Challenge!

Announcing Mpayy Secure Payments Widget & Bracket Challenge!

It's 3:40 AM on Sunday morning, but I'm giddy as a school-boy and felt it important to announce the exciting new functionality we've just completed launching.

Secure Payments Widget is Here!

I've forecast the Mpayy Secure Payments Widget a number of times in this space, but finally it is in production and ready for all to use.



(Here it is, though the blog post CSS is changing the color of the background in this post.)

Mpayy is utilizing the Clearspring Launchpad Widget syndication platform in order to make it one-click to the addition of the widget anywhere our Members wish to use it.

The Development and Product teams at Mpayy and US Bank discussed Widget security extensively. The question of, "Why did PayPal redirect the payment piece to their own website" with the subtext of, "clearly these guys know a whole lot about security." The concern about "spoofing" is very real. Clearspring makes it incredibly easy to grab some part of a website as a Widget, and it would be simple to take the front end from PayPal, Causes, or others and change the Widget file to use JavaScript that posts sensitive User Names and Passwords to another source. The criminal could then use the User Names and Passwords on the real site to steal money.

As a result, we decided to pop up a small version of the website so users can verify our SSL certificates and see the URL and iconic Padlock to demonstrate the security of the page. Only then do we request Password. I spoke with Joel Pulliam, VP Product at Clearspring about providing a Verisign-esque service to validate the source of the Widget, but they declined to do so due to concerns about spoofing the certification. If you look at NOCA's One-Click Pay literally asks you to put your Bank Routing Number and Account Number into a facebook page. Caveat emptor, pal.

Mpayy's widget can be used by any of its Members, and provides a simple and easy way for Online Sellers and Charities to add the payments widget to any page they wish with limited technical prowess. On 3/16, we will make it server driven so Members can pre-populate Payee, which will be more helpful. Mpayy will process payments for non-profits and charities for free, and hopes to see it employed very frequently with large charities.

Get Paid w/ Mpayy - Mpayy Bracket Challenge

Mpayy announces the (up to) $25,000 "Mpayy Bracket Challenge" for all Personal and Mobile Merchant account-holders.



Our good friends at PoolTracker have a wonderful White Label system that allows us to customize with our own header. Sign up now, and submit your bracket before the tournament starts on March 20th.



The payouts to the Bracket Challenge can be found here. We will obviously pay users into their Mpayy accounts where they can withdraw it directly to a Linked Bank account or send to someone, and soon to shop online.

Other New Items

Three other notable items:

• Free Donation Processing - Mpayy will process donations for free for Charities, Non-Profits, and political campaigns. Zero transaction fees will be taken through any of the Mpayy Channels - online, mobile, social networking
• In-Line Validation - We added local JavaScript in-line validation to the Personal Information page of each account. We require a number of fields for the identity check, and when we launched, we had some unfriendly validation rules around Mobile Phone number, email address and Date of Birth. Those have hopefully been ameliorated.
• Person-to-Person Text Notification - We originally did not send an immediate text message notification for Person-to-Person transactions, but determined it was a necessity to communicate immediately the action taken when paying a friend for dinner, quick loans or other expenditures, especially in the world where folks are paying each other through our mobile site.

Many Praises for US Bank

At my last job, subsequent builds made me feel as if we were getting worse at our jobs. In days subsequent to builds products, or the whole site was dusted for hours and days on end. This build went off without a hitch, with just about 45 minute delay. Our partners at US Bank (NYSE: USB) have an incredible amount of experience in developing software generally, and enterprise payment & mobile applications specifically. We remark regularly that in many ways we are a non-startup startup. We mean this in the fact that US Bank is an incredible Partner to have, and from day 1, we piggy-backed on world class security, operations and development assets.

More to come, now SIGN UP, it's FREE!

Online Sellers' Satisfaction

In my continuing attempt to tap into the habits and attitudes of the online selling community, I put out a survey last week on the following sites' forums.

• Power Sellers Unite
• Overstock Auctions
• eCrater
• iOffer
• BluJay
• Yahoo Group I subscribe to

The survey was anonymous and 10 questions long. 62 responses were collected within ~24 hours.

Online Auction Site Satisfaction

As I have discussed here, there has been a great deal of consternation in the eBay community since the departure of CEO Meg Whitman. New policies related to release of funds through PayPal, and restrictions on the types of feedback sellers may give to buyers are two of the reasons. At a high level, there seems to be a great deal of dissatisfaction among the online auction choices as seen here (readers should filter a certain level of angst among those who participate in online forums to begin with):



The good news for eBay and the other online auction sites is that the Satisfaction levels are significantly higher among sellers with >25 items. Among this group, about 49% classify themselves as Dissatisfied or Very Dissatisfied vs. 55% among the overall population.




In both groups, 64-65% indicate there is a 51-100% chance they will try new auction sites.

Among Power Sellers, those with 100 or more products currently listed online, the picture gets more interesting. 55% of them indicate they are Dissatisfied or Very Dissatisfied with eBay, and fully 42% of them indicate there is at least a 76% chance they will try new auction sites. Among all three groups, Online Auction has the most consistent Satisfaction levels.

Payment Options

Because Mpayy offers the best merchant model for online sellers, and is very new to the market, this section of the survey holds particular interest to us. None of the respondents indicated they were currently using Mpayy (subject to change), although two did indicate they were Very Dissatisfied with us, but that is likely me pestering this community for information and attention as I evangelize the virtues of our secure money transfer service.

Not surprisingly, PayPal has an incredibly tight grip on this market, with 88% of respondents using PayPal and 36% using Google Checkout. PayPal helped midwife the online selling market and eBay, and Google has been loss leading to get a toehold in the payment processing business. Google Checkout has paid some shopping cart providers to include their service, and so these two providers are the most available and thus most highly utilized right now.

100% of the Google Checkout users rate themselves as Satisfied or Very Satisfied, which is a nod to the continuing user friendliness of the Northern California behemoth known as Google. 30-40% of the PayPal users across the three groups rate themselves as Dissatisfied or Very Dissatisfied.

The survey indicates that ~40% of online sellers are at least 51% likely to try new payment options, with Power Sellers showing the highest willingness to switch. The following table shows by group the percent in each group of sellers to try new payment options.

# Items	0-25%	26-50%	51-75%	76-100%
All Respondents	37%	16%	16%	30%
More than 25 items listed	44%	16%	13%	28%
Power Sellers	44%	12%	12%	32%

56% of Power Sellers Participate in eBay Boycott

One interesting tidbit revealed in this survey was that while 45% of the overall eBay community participated in the boycott, 56% of the Power Sellers (>100 items listed online) who responded to the survey participated in the eBay boycott. There was no further qualification of this participation, but it's an interesting number.

Lessons Learned

It seems rather clear that this is a movable market. Online auctions have virtually zero switching costs, especially as new software platforms arise that allow online sellers to manage their inventory in one central location and publish to multiple selling forums. Mpayy can gain market share here by demonstrating its value and integrating to the sites and solutions being used by this market. Given the ease of implementation and the value proposition to buyers and sellers alike, it is only a matter of time.

Calling All Sellers! Mpayy Mobile Merchant Accounts

Mpayy has been operating as an online and mobile payment processing system at http://www.mpayy.com and http://mobile.mpayy.com for about a week and a half, and the name of the game is find SELLERS.

So, this is an open letter to the following types of sellers:

- eBay auctioneers
- Overstock Auctioners
- uBid auctioneers
- Bidtopia sellers
- eBid sellers
- AVON ladies
- Mary Kay sellers

Mpayy's Mobile Merchant account was created JUST FOR YOU!!!

How it Works

Mpayy offers two Mobile Merchant accounts. Both are fully self-service and priced at $0.20 + 2%. The only difference is that the Mobile Merchant Universal is linked to a checking account, and funds can be withdrawn to that linked bank account at any time. The Mobile Merchant Standard account was created so that teams can empower their independent salespeople with this awesome mobile point of sale tool, and they can transfer any revenues to a company account that then has funds moved into the linked checking account.

All Mobile Merchant sales receive 100% guaranteed payments, instant account notification by both SMS text message and email. Merchants face 0% fraud liability, as Mpayy assumes that burden. Sales are tracked and downloadable through the Mobile Merchant account dashboard Activity section.

Buyers must have Mpayy accounts as well. However, this can be opened in a matter of minutes and users can open accounts and make purchases within the same session. They will automatically receive 1% Cash Back on Purchase Amounts over $50.

Give it a go! Start selling through Mpayy, today!