Commerce Taps New Business Model

By John Makulowich, Senior WriterIn the continuing struggle to mine the Internet for e-commerce riches, Qpass Inc., a Seattle start-up led by two former Microsoft employees, is using a government agency to jump-start a service that lets consumers seamlessly make small-dollar purchases of reports, studies and data. Publishing giant Dow Jones & Co. is about to sign on for the service as well.Calling itself "the content transaction service" and sporting the trademarked phrase "Point, Click, Purchase" on its Web site, Qpass is busy lining up vendors interested in selling their content to what company president, Cornelius Willis, refers to as episodic buyers. The firm's first customer is STAT-USA, an agency in the Commerce Department's Economics and Statistics Administration, which just started offering the Qpass service on its Web site Dec. 1. The agency compiles economic, business and international trade information produced by the U.S. government and makes it available through subscription services like STAT-USA/Internet and the National Trade Data Bank CD-ROM.Ken Rogers, director of STAT-USA, said the arrangement with Qpass is a natural extension of the Internet services his group has offered since 1994. A revolving fund agency (similar to the U.S. Patent and Trademark Office) that pays its own way with no appropriations from Congress, STAT-USA is a user-supported site. "In some respects, this is a field-of-dreams application. I would be pleased if we generated $100,000 through the use of Qpass in fiscal 1999," Rogers said. "We intend to ramp up in the new year with a lot more announcements about the service. We realize that the Internet is the growth area. I already received an expression of interest about the service from the National Center for Health Statistics." Initially taking subscriptions for its services, Rogers' agency later offered site licensing for its information and products to organizations like an entire university campus. The next stage was bulk access to its data by companies such as Federal News Service, which redistributes STAT-USA data by bundling it with its own services, for example, transcripts of government testimony.STAT-USA earned $1.8 million of its $4.5 million total revenue from the Internet alone in fiscal 1998. Nearly half of its revenue is generated from data compilation work for other agencies.Admitting neglect of the individual consumer with a one-time need for data, or a special research project, and those uninterested in subscribing to STAT-USA, Rogers said Qpass answers the key objections he previously had about offering such a service. In early spring, Rogers said, the agency looked into offering such a service to individuals, but "found it very expensive, several hundred thousand dollars minimum." The two major hurdles jumped by Qpass are frictionless interaction, where the user has to register only once, and the handling of micro-payments. That Qpass is focusing on synergy among content providers and plans to sign with Dow Jones also are plusses. "If their service is good enough for Dow Jones, then it certainly is good enough for us," said Rogers.What Qpass does is offer a registration form on its own Web site (www.qpass.com) as well as the vendors' Web sites; users only need fill in the form once. Any vendor that accepts the Qpass system lets users buy from them using the Qpass account. Rather than sending micro-payments of less than $10 or $1 to the Web merchant, Qpass totals all the payments due all the vendors from the user and sends the individual one monthly itemized bill. Qpass makes its money by charging a commission on the transactions, a figure higher than that normally charged by the standard credit card issuers like MasterCard and Visa."Our goal is a network of publishers with valuable, branded digital content and a high degree of synergy, for example, business or individual investing information," Willis said. "For us, STAT-USA is an important pilot customer." Rogers is "a real visionary and owns unique, branded content that people are willing to pay for. The key is shared success. Both the vendor and we make money when transactions flow," said Willis.While he declined to name names, Willis said there are several dozen firms in the queue interested in his service that Qpass will announce during the first and second quarters of 1999. His target is the entire business information category, and he estimated the total media industry in the United States — which includes the content makers — at $320 billion."We don't get in the way of the publisher's relationship with the consumer. We are only invoked as a service, and then we go away," Willis said. "There is no wallet to create, and no digital signature to confirm. Our goal is the fiction-free purchase, reducing the level of purchase friction as much as possible."The target of his service is the small- to medium-size company run on credit cards with no corporate librarian and a staff who are episodic buyers. According to data he quotes from Cyber Dialogue Inc. in New York, there are 12 million such users.For Clay Ryder, vice president and chief analyst with Zona Research in Redwood City, Calif., Qpass is heading into virgin territory, making possible a new market that amounts to a purchasing aggregator for intellectual property on the Internet.If you wanted to buy one article from a major magazine publisher or set up a monthly access subscription from an online vendor, Ryder said, you would need to set up relations with both suppliers. That becomes too expensive for the vendors. Enter Qpass, which manages the accounts, making it possible for the Wall Street Journal or Barron's, for example, which might be interested in selling individual units but can't afford to charge you $2 to do so now."Qpass targets the market that is used to paying for information," Ryder said. "No company in its right mind will pitch you for a dollar. But they would like to collect it. Qpass has a model that makes it possible for lots of companies to offer products in the small-dollar range. "But we are really talking about a new market here. As far as projections, we do not have a strong market concept for what Qpass is offering right now," said Ryder. And what about the security of the transaction? Ryder said what counts as an acceptable risk level is in the mind of the beholder. The bottom line, he said, will be the volume. "It may seem trivial, but the real measurement will be the volume. As a business, you always have to answer the question: Can they drive the volume sufficiently to cover operating costs?" said Ryder.CHECK THEM OUT...