Coverage in the Technophile Community

Here is an interview I did with Brian Dillard of Pathfinder Associates, a front-end development company that is leading the Agile AJAX project. See the blog entry here, or read below.

Q&A with Trace Johnson of Chicago-based mobile-payment start-up Mpayy

Chicago isn't Silicon Valley, so it's always interesting to see tech start-ups putting down roots in Midwestern soil. Last night I hit the launch party for Mpayy, a mobile payment start-up that launched just last week. Over a hundred prospective customers, potential investors, and tech and banking professionals hit Fulton Lounge for cocktails, networking and, of course, a product demonstration. Afterwards, I chatted via email with Trace Johnson, Mpayy's product VP, about the launch, the company's future, and the state of Chicago's entrepreneurial culture. (Full disclosure: Johnson and I were once colleagues at Orbitz, one of the Windy City's big tech start-up success stories.)

Agile Ajax: First off, can you tell me the basics about Mpayy? What's the one-minute pitch?

Trace Johnson: Sure, but there are different pitches for consumers, online merchants and mobile merchants:

* Consumers get online and mobile payment processing. Shop online or send money to your friends from your checking account for free and get cash back when you buy.
* eCommerce companies get a secure payment solution with 0% fraud liability and they save 40-50% vs. credit card processing.
* Mobile merchants - taxis, fruit vendors at a farmer's market, Avon ladies, shirt vendors at a concert - get turn their mobile web enabled cell phone into a retail point of sale system.

Agile Ajax: How are you funded, and where are you in your financing cycle?

Trace Johnson: Equity financing is from US Bank, which is doing development and hosting. Private individuals that are friends of founder Conrad Sheehan have also invested.

Agile Ajax: How did last week's soft launch go?

Trace Johnson: Pretty well, with some bugs with the mobile site that have since been dealt with in a maintenance release. We're working on some usability issues to make the forms friendlier, but core payment processing worked like a charm from moment No. 1.

Agile Ajax: How did the launch party go? How was the response from casual attendees and potential partners/investors?

Trace Johnson: Everyone was very enthusiastic. ... [i]ndependent salespeople were suggesting new uses. We came up with a number of leads and opened a number of accounts that at this point in our young company represented a high growth rate.

Agile Ajax: Now that you've officially launched, what's next for your business plan?

Trace Johnson: With the maintenance release in, we've turned on online marketing. We're briefing Forrester's next week and working on a number of other PR efforts. Biz dev, biz dev, biz dev: We're calling on online retailers and roving merchants/direct salespeople to use Mpayy. And we're continuing to look for charities, nonprofits and political campaigns, all of whom we will process payments for free.

Agile Ajax: I know you're preparing to launch a more complete marketing iniative soon. What can you tell me about your marketing plans for the service?

Trace Johnson: In addition to search engine marketing, we're going to do Facebook marketing with a widget. Facebook issued an open call for a payment widget in late December. OboPay has one, but we'll offer a better user experience.

We're using the Clearspring syndication platform, which allows you to deploy to iGoogle, NetVibes, Vista, Os X, Yahoo, Blogger, Facebook, etc. Plus whatever else we'll need to do to get it on MySpace now that they're opening up their development platform. Right now, the functionality will just be Make Payment. We expect two big use cases to be P2P transfers and charities. Darfur Now or Obama for America could add it to their site and take small-dollar donations, which is a real pain point with credit-card processing.

We're also launching a promotion for consumers and merchants centered around NCAA basketball March Madness. Open a Personal Universal or Mobile Merchant account and you will be able to submit your NCAA basketball bracket for a hosted tournament pool for up to $25,000 in giveaways. People submit their brackets, and the top 25% of them will be winners. The winnings will go into their Mpayy accounts. When they use the money, it's good for our merchants and good for the system.

Agile Ajax: The climate isn't so fertile in Chicago for tech start-ups. Venture capital tends to be harder to come by. What's your experience been like in terms of the wider Chicago tech and entrepreneurial communities? Do you think Chicago offers any specific advantages for tech-start-ups, especially financial-services ones? After all, this is a pretty huge town as far as the financial markets go.

Trace Johnson: There is money in Chicago, but very little early-stage cash. There's a lot more private equity, like "I'll give you $5 million as long as you have at least $5 million in EBITDA." So, there's a much smaller appetite for risk. Most everyone is willing to do a few hundred thousand dollars as part of a syndicated investor group, but no one wants to be a lead investor, and they want ridiculous slugs of equity. They move slowly, having a vested interest in getting more information about the company. If you're more desperate, they can force you into more compromising positions on terms.

But Chicago has a growing tech community that is pretty tight-knit, I think. At least, I was lucky to have worked at Orbitz, which was really the only legitimate ecommerce company in Chicago until Mpayy came along.

However, if you look at things like Crain's Chicago Business, it's heavily real estate focused. The folks at the Tribune and Sun-Times still feel burned from the tech boom and move really slowly. It's not a heavily weighted tech town.

Agile Ajax: Mobile payments are an idea that's been ambient in the marketplace for a while now. How has Mpayy balanced the competing priorities of speed-to-market and polished consumer experience? How crowded is the field you're entering, and how are you positioning Mpayy in relation to its competitors?

Trace Johnson: We're competing on price, security, value to consumer and universality of our mobile offering.

There are companies like Obo-Pay and TextPayMe. Obo-Pay came out with a fat client solution, and its thin client doesn't work on all devices. TextPayMe requires a phone call authorization. Most people who approach it come at it from the tech side and want to put a chip in the phone (NTT DoCoMo, the BART experiment), or a fat client - which forces you to deal with all the operating systems and the networks.

We have the advantage of Conrad Sheehan having spent his entire career in payments. We are first and foremost a payment processing system that has been enabled over the cell phone, and we will make our money now mostly through the ecommerce sites. The Mobile Merchant product needs a critical mass of consumers to really add a lot of utility. We will get plenty of P2P transfers with the cell phone, and that is one way we are subsidizing the consumer side of our network, adding value to their lives. Our payment processing system was created by developers who worked on the IRS's system, and have built previous mobile sites.

Agile Ajax: How is the company structured, and what are your growth plans in the short term?

Trace Johnson: Right now, there are two employees, myself and the founder. We have a customer service person ready to start, but we're not [going to be] a huge company even at scale. We will need a credit risk person. We're looking for someone with deep experience selling into large retailers. As we get more big retail clients, we'll hire account management execs.

Agile Ajax: Tell me what you can about your technology platform and partners.

Trace Johnson: US Bank is our primary partner. We use Java for the core application. The entire application sits within a single account at US Bank, and we leverage the Automated Clearinghouse Network. We are agnostic to mobile device, network, and operating system.

Agile Ajax: I know you have big plans for building out the user experience of both the website and the mobile experience. What can you tell me about the future of your user interface? How do you plan to leverage Web 2.0 technologies - Ajax, social networking, etc. - to build and market your service?

Trace Johnson: The widget we're launching uses Ajax to allow authentication and payment. We're also looking to allow merchant partners to call our services directly into a secure Ajax lightbox. Our services were built in a very modular fashion, so we want to make two features available on partner merchant sites:

1. Sign up: Lots of folks are concerned about the session transfer from their site, somewhat naively, but in a very real fashion. So, we want users to be able to open an account in an Ajax lightbox on the merchant partners' site. Whatever development we have to do for that, we will.
2. Checkout: We similarly want the payment features to be called within an Ajax window to simplify the checkout process. So, you're looking at Brian Dillard's new treatise on Agile Ajax at IngeniusBooks.com. From the Product Details page, you should be able to pop a modal window, specify to use the shipping address you have at Mpayy, and authorize the transaction instead of having to set up an IngeniusBooks account, give them all your personal information and go through any number of cart summary screens.

In terms of our own site, our front end needs a lot of work. The HTML evolved from a perceived necessity to sign someone on immediately. We're going to do a full site redesign that includes newer front-end development techniques. We want to do real-time inline validation on all of our forms. We want to use vector graphics, move more styling to the CSS, remove tables and use standards-compliant markup.

The mobile web experience is also changing to meet Ready.mobi's guidelines: doing more with CSS, adding access keys and input restrictions. It will also get more of our capabilities than just payment.

From $1.40/User to the Moon!!!

"Alright, what the heck is he talking about now...?"

Mashable took a look at the quarterly SEC filing of SNAP Interactive, which operates the "Are You Interested" and "Meet New People" facebook application that boast 5.2 million and 335,000 members respectively. From this, and the company's market capitalization, they back out $1.40/user based on the following insights:

"As deals become more common in the Facebook application space, the question becomes how much is a user worth? As a publicly traded company, SNAP is sporting a market value of around $10 million. At its current pace, the company looks to pull in $1.5-$2 million in revenue this year, meaning its price-to-sales ratio is 5:1. If you assume a 5x price-to-sales ratio, that would mean each one of SNAP’s users is actually worth around $1.40 (each user pulls in $0.28/yr, if the company is valued at 5x sales, you arrive a $1.40 per user valuation)."
Interestingly, neither applications, nor Frengo, which we'll discuss in a moment, show up on Comscore's ranking of widget adoption.

Facebook Application	Engaged Widget Viewers (000)	Penetration of Total U.S. Facebook Audience
Total Facebook.com Visitors	33,660	100.0%
Total Facebook Applications	20,649	61.3%
Top Friends (Slide)	6,230	18.5%
Movies (Flixster)	5,199	15.4%
SuperPoke!(Slide)	3,626	10.8%
Compare People	3,503	10.4%
iLike	3,449	10.2%
Super Wall (RockYou!)	3,237	9.6%
Likeness (RockYou!)	2,693	8.0%
Quizzes	2,583	7.7%
FunWall (Slide)	2,107	6.3%
Graffiti	1,647	4.9%

Second Wave of Facebook Apps

Venture Beat reported on Frengo yesterday as part of the "Second Wave" of Facebook applications centered around companies actually attempting to make money. Frengo has 3.2 million users and gets 12-15 million daily page views. The application is a social dating site and allows users to get new hits directly to their mobile phone as well with the option of charging $5.95 to their cell phone bill to receive more recommendations and new friends. Certainly, the web's modus operandi is to first gather users and then to attempt to monetize them, and the widget trend is no exception to this. Companies like Adonomics are also attempting to put out metrics of usage as well as attempt to quantify the cash value of each of the applications.

Mpayy Secure Payments Widget on its Way

Mpayy's secure payments widget is on its way as has been discussed here. The widget will work with any of the Personal accounts that enable free Person-to-Person money transfers or its Mobile Merchant Accounts that empower direct salespeople from eBay to Mary Kay to Avon ladies with a secure electronic payments system directly from their mobile phones. Mpayy's widget is still in testing, but will be syndicated across facebook, MySpace, Yahoo, iGoogle, and others as seen here.



Mpayy continues to look for charities, political campaigns, and non-profits for whom we will process donations for free. Talks continue, but interested parties can feel free to contact me directly.

Self-Review EOW 1

Ladies & Gentlemen, We Have a Website

For the dozens of loyal readers of this website, I apologize for the lack of communication this week. http://www.mpayy.com and http://mobile.mpayy.com are now live.

The final week saw some interesting road bumps. If you look at the website of the new payments standard, you'll see the Verisign SSL certificates. Let me tell you, ladies and gentlemen, Verisign does its due diligence to validate that the websites that bear its emblem are serious companies.

The domain registry we used created a separate account with a company that holds our information private, preventing the SSL verification team at Verisign from seeing who we were. Since Mpayy was originally Magellan Payments, a company created to hold the Intellectual Property that underlies our patent pending payments system, the privacy account was linked to an email at Magellan Payments.

The fix took a few hours, but is now resolved, and the details of our registration can be seen here.

Mobile Merriment

Mpayy, Inc. launched with a full suite of payment capabilities. Mpayy now enables its Personal Account members to send money to anyone for free through Mpayy.com, mobile.Mpayy.com, as well as the many internet retailers we are in the process of signing up. Soon, we will enable a secure online widget syndicated across the many sites that can be personalized as discussed here.

Mpayy's mobile site is very slick, and initial reports from mobile website authority Ready.mobi point to not a bad first attempt. However, there is still a great deal of work to do.




Mpayy's fantastic development team at US Bank is working to release within the next few days a fix for some redirecting issues we're having. Even with a thin-client solution in which users do not have to download anything to their phones and with a solution that does not require coordination with the wireless service providers, one still has to work to test on every phone out there on the market. Beyond this short-term fix, Mpayy is committed, and well on its way, to migrating more functionality from the website to the mobile site, and continue to improve the user experience of each.

Charitable Commerce

Mpayy also continues to seek charities, non-profit organizations, and political campaigns for whom we will process donations with no cost. Mpayy's secure, commercial grade payment processing system is the perfect solution for such organizations who place a premium on security. Further, we will provide contributors with a detailed receipt that would be usable for tax receipts and personal records.

Making the Grade

Placing a premium on quality, Mpayy did add a few days to its launch
date to test its Disaster Recovery, and make adjustments to our platform
to extend the full set of functionality and security to some late model
cell phones that are still out in circulation. We expect to cover 99% of
the devices on this launch. The site is up with modest issues. All features are fully functional and secure. There are a number of small items we're dealing with in addition to our on-going efforts to ensure that Mpayy's mobile site experience is smooth on all phones on the market as well as to get our widget out the door.

All in all, we give ourselves a B-, but look forward to continual improvement.

If you have any questions, please feel free to email me at tjohnson@mpayy.com.

The New Hotness - Mpayy Gets its First Press

From Internet Retailer - http://www.internetretailer.com/dailyNews.asp?id=25119

New mobile payment service eschews cash and checks for phones

Mpayy Inc., an online and mobile payment processing company, will launch tomorrow a service that enables merchants and shoppers to conduct retail transactions using mobile phones and online payment accounts. Shoppers can use the Mpayy service with roving salespersons or on retail web sites.

Merchants set up accounts on Mpayy.com to establish a mobile payment system. Mobile merchants�Mpayy is not yet targeting bricks-and-mortar retailers�can access reports on sales, send funds to desired banks, manage refunds and perform other tasks through a web-enabled administrative application. Shoppers set up accounts on the Mpayy site, entering their mobile phone number, account nickname, and checking account information.

To conduct a transaction with a roving merchant�an Avon lady, for example�a shopper logs in to Mpayy�s mobile web site and enters the merchant�s mobile phone number or nickname, enters the amount of the purchase, and submits the information, which brings up a transaction confirmation page with a Pay button to complete the purchase. Once completed, the buyer gets an e-mail or text message confirmation and the seller gets a text message confirmation.

�Mpayy turns mobile web-enabled phones into point-of-sale systems. So, the 30 million independent salespersons in the U.S. no longer have to handle cash or checks and can get instant verification of guaranteed funds,� says Trace Johnson, vice president of product, marketing and operations.

To conduct transactions on a retail web site, the service works much like Paypal�s, for example. To enable Mpayy transactions, e-retailers create a servlet�a small, Java-based application that runs in a web server environment�to handle an http double post�secure payment confirmation messages�on their e-commerce sites. On the payment page of a participating online merchant, a shopper selects the Mpayy option and enters her mobile phone number or account nickname. The checking account entered during account set-up is charged and the shopper is sent a confirmation notice via e-mail.

LawBooksForLess.com is the first Internet retailer Mpayy has signed up. It is in negotiations with others to launch the service online.

Mpayy merchant transaction fees start at $0.20 plus 2% of the transaction, though it will negotiate lower rates with retail web sites that can bring high monthly transaction volume. The company, which charges no set-up, maintenance or hardware fees, will assume all fraud liability on any transaction. The service is free to shoppers, who receive 1% cash back on purchases that exceed $50.

Margin-Starved Retailers to Need More

The Federal Reserve put out its "Beige Book" for the January 29-30 Fed meeting in which it pointed to slowing economic growth, though it showed no sign that a recession was already in effect. However, economists, the Bush Administration, and industry leaders/watchers perceive that recession has already taken hold. Those sentiments are the impetus for the $180 billion fiscal stimulus bill being proposed to give Americans an $800 tax rebate.

Boosting this scenario is a recent CBO report that argued, "So to boost the economy by about a percentage point for half a year, the stimulus would have to be about a percentage point of a half-year's gross domestic product, or about $70 billion," according to a a CBS Marketwatch report. Multiply that 2x to get to the $140 billion the Bush Administration is advocating in an attempt that is likely seeking 1% GDP boost, or at least to buttress the retail market. The same CBO report revealed that consumers spent 20-40% of their tax rebates on retail, which is where the growth comes from. The stimulus is likely to sail through (you heard it here first) because no one runs away from giving money to the electorate in an election year.

However, retail deserves a closer look...

While online retail growth was almost 20% over the holiday season as discussed here, overall retail growth was a disappointment over the same period. Retail sales did grow year over year, although it came in at 3% instead of 4%.

Wal Mart announced earlier this year that it would slow the rate of new store openings in spite of their better than expected growth. Some analysts argue that the company's success is a contrarian indicator as many consumers traded down to bargain basement Wal Mart.

The Wall Street Journal notes some recent hard times among

"Zale Corp. said it would close 60 stores in the next 90 days. Talbots plans to pare store openings and use more frequent markdowns to entice shoppers. Chico's FAS Inc., another clothing retailer, is cutting $100 million of capital spending, including scaling back a distribution center expansion and delaying a new computer project until 2009."

Retail has been surging the last several years possibly started by the tax cuts several years ago, but certainly driven forward by skyrocketing home prices, and falling interest rates. Home-owners were able to continually refinance their homes at lower rates, taking out equity in the process, which they tended to pour back into the retail economy. Home prices have stalled in many places and begun falling precipitously elsewhere in the country. It is questionable how much tax rebates will be able to pull consumers out of the hole, especially in light of the buying binge they've been on and the negative savings rate Americans have presently.

A Win for Mpayy

Mpayy, Inc., which launches in less than 48 hours will provide a solution to many of the problems facing the retail industry. As sales decline, this margin-starved industry will be groping for a few percentage points here and there. One place they can find that is by CUTTING TRANSACTION COSTS, through Mpayy, which will also get them out of the pretty pickle JC Penny currently finds itself in with the recent revelation of 650,000 lost identities.

2008 Not the Year of Mobile Payments??? Au Contraire

Four days out from the launch of groundbreaking new payments technology, one finds themselves anxious, nervous, and somewhat conspiratorial, especially when that launch tends to coincide with the immediate wake of the Consumer Electronics Show and Macworld 2008. Both Apple and Google have filed patents over the last 18 months to make mobile phone payments, and the second hand on a clock turns more slowly than possibly conceivable. However, there is much reason to take heart.

NFC - Not (a) Fantastic Choice

David Chamberlain, Principal Analyst for In-Stat/MDR just published a report in December of this year. In it, he notes,

"Using mobile handsets to accomplish financial transactions and
purchases is starting to appear as something inevitable in the
worldwide marketplace. However, we do not believe that 2008 will be the
year of mobile payments. It may not even qualify as the year of trials
of mobile payments;...

The key enabling technology will be near field communications (NFC)
chips deployed into handsets as well as in merchant payment terminals."

I have inquiries into Chamberlain, and it is possible he is referring to paying with your cell phone in the bricks and mortar world. If that is the case, certainly Near Field Communications, or the placement of a chip within the actual device, will be necessary. This will essentially attempt to be a universal version of the Swipe-N-Go cards that gas stations and others issue their customers to go on their keychains.

Whatever chip is added to the phone will need to be universal, as unlike a keychain, the device is not likely to grow. Furthermore, whatever company ultimately decides to provide this option commercially will be forced to deal with all of the phone Operating Systems, mobile devices and the wireless service providers.

Further, there would need to be integration with and proliferation of merchant point of sale systems that can handle this communication and form of payment. As such, this is not likely to be a mobile-to-mobile payment option, and will require huge fixed investments.

Similar problems will continue to plague other companies that have so-called "thick-client" solutions in which users must download software on their phones.

Mpayy provides a secure mobile-to-mobile payment processing system that can be used for person-to-person money transfers. Similarly, purchases occur when the recipient account is a Mobile Merchant account. In other words, the 30 million independent salespeople in the United States doing $85 billion in sales will have secure payment processing systems with their mobile web enabled cell phones.

One Week Out

One week from today, Mpayy officially opens its doors to the public, and the new standard in payments begin. One of the original purposes of this blog is to give a behind the scenes view of operating at the startup phase of a new technology company. Today, we will open the kimono a little bit, and provide some of the exciting ways Mpayy will establish relationships with YOU, our soon to be members.

• (Up to) $25,000 Bracket Challenge - In discussions about our target demographic, Mpayy expects our Members to be 18-45, skewing toward tech savvy, who use their phones to access Sports, Weather, Stock and Video Game content, primarily. Participants in Fantasy Sports are of unique interest because of the frequency with which they plug in to check their statistics. Certainly, our product is particularly useful for any of the 80 million Americans rolling balances on their credit cards, because interest begins burning at the moment of purchase for those card-holders. However, our expectation is that our Members will skew toward higher incomes.



• The Widgetization of Mpayy - Last December, I discussed here the New York Times new "MyTimes" page that allows users to include their own content on their page. The most unique one I like a lot is having the movies pre-filtered to my preferred local theaters. However, in one week, Mpayy will bring a truly integrated, secure payment widget to facebook, Yahoo, iGoogle, NetVibes, Vista, Mac OS X, etc. Mpayy expects this will be incredibly useful for i) charity associations accepting contributions through their facebook pages - Darfur Now for instance; ii) individual pledges for fundraising; iii) and just paying your friends. Further, given the number of businesses focusing on facebook, our payment widget will open the door to unrestrained commerce, and facebook has clear potential to compete with eBay, especially in light of the number of users and frequency of use by each. Lots of merchandise can move through this venue.
  
  



• Marketing, PR & Sales - We met with a PR firm recently to discuss potential engagement. It's an interesting conundrum. Any impassioned marketer will tell you that it doesn't matter how much better your mousetrap is if no one knows who you are. We'll pursue a strategy that attempts to get coverage within publications of a number of constituencies from tech geeks to payment wonks and everywhere in between. We'll pursue a mix of search engine and display marketing, and lean heavily on word of mouth campaigns, promotions, and a few launch parties, the first of which is here in Chicago on January 30th.

It's an exciting time, and it's starting to heat up.

Get ready for the new payments standard. INSIST on Mpayy!