Sell Your Digital Wares Through Edgeio Paid Content

Classified listings service Edgeio now lets you sell content through your listings. The new type of listing
called “Paid content” consists of the same listing Edgeio already
hosts, but comes with an embedded digital locker. Through the locker,
users can securely sell text, file downloads, and streaming media
through a widget hosted by Edgeio.

It seems a good fit for selling podcasts or research reports.
Affiliates can also grab the widget code to sell your product on their
own sites as well for a revenue share determined by the content owner.
Michael Arrington, the editor of this blog, is a founder and investor
in the company.

Digital lockers are nothing new. E-Junkie, Payloadz, Tradebit, and Bitpass (shutdown)
have done it for a while. However, Edgeio has the added advantage of
leveraging the paid listings through their existing listings network
and providing a very straightforward product.

It’s pretty simple to get started. You sign up to create a listing
like any other through the “Paid Content” link. Next, select your
content type, price (currency), affiliate percentage, and coupon code.
Finally, Edgeio lets you make a teaser “preview” for the content to
give buyers an idea about what they’re purchasing. Once completed, you
get some embed code and the listing is placed in Edgeio’s index, linked
to the page where the widget is embedded.

An example of one of the widget embeds is included below. The other
version of the widget initially shows visitors a teaser, until the
content is purchased and unlocked. Use the coupon code “vgforfree” to
unlock the content. To purchase the content, you need to sign into your
Edgeio account and to pay by credit card or PayPal. The content is then
unlocked for your Edgeio account.

Edgeio splits revenue from sales through the widget 80/20 in favor
of the content creator. The creator can then split that 80% for sales
through affiliates at any percentage they like.

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Web 2.0 Clones

Big Media Is Buying, Hearst goes Kaboodle

First it was News Corp., then CondeNast and CBS Interactive. Now
Hearst Corp. and Forbes have joined the Web 2.0 party, snapping up tiny
start-ups, and trying to capture the ongoing online shift of both
audiences and advertising dollars.

Earlier today, Venturebeat reported that Forbes was buying Clipmarks, a social bookmarking and clipping service based in New York. Now The Wall Street Journal
is reporting that Hearst has snapped up Kaboodle, another bookmarking
service that allows online shoppers to clip and save information, for
an undisclosed amount.

According to our sources went for
somewhere around $40 million. Manish Chandra, founder and CEO of the
18-month old start-up based in Santa Clara, Calif., declined to comment
on specific terms of the deal.

When I asked him why he decided to sell the company, he candidly
replied, that “the stakes are getting higher, and others [competitors]
are raising a ton of money.” What do that say, any exit is a good exit.

The company had about 2.2 million unique visitors in June 2007, having grown 20 fold since its launch. It had raised about $5 million in venture capital, and was in the process of raising another round when the exit opportunity emerged.

Chandra said that since a large percentage of Kaboodle users are
women, and the site has an e-commerce/shopping component, it fit nicely
with the larger goals of Hearst. He also added that the deal doesn’t
impact its deals with Conde Nast properties.

There is an interesting pattern in some of the buys by big media
corporations. They are not just buying pure-content, but instead seem
to be interested in content-enhancing tools that rely on communities
than individual content creators. Newroo, Photobucket, Reddit, Last.fm,
Clipmarks and now Kaboodle fit that profile.

This is a strategy not without risk. Big media companies have to
leave the acquired-and-their communities alone. Back in June 2007, Liz wrote about this trend of big media companies leaving the “kids” alone.

Acquirers, despite their enormous and asymmetrical
audience, money, and power compared to their purchases, seem like
awkward first-time parents afraid of hurting a baby. They are more than
conscious of their status as old farts swooping in and quickly turning
cool to lame.

From a Silicon Valley perspective, emergence of buyers outside of
the G-Y-M (Google, Yahoo, Microsoft) triumvirate is a good thing. Sure
it rules out billion dollar exits, but it ensures that there are more
buyers with cash.

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Leveraging Facebook To Compete With eBay Won’t Work

Buy.com made a splash tonight with their announcement of a new Facebook application called Garage Sale.

Facebook users can use the application to sell thing directly to
others via their Facebook profile. Buy.com charges a flat 5% commission
on completed sales (the seller will also have to pay Paypal or other
payment fees. The application says “thanks to Garage Sale, Facebook
users don’t have to leave their profile page to advertise and sell
personal goods.”

There are other Facebook applications doing nearly the exact same thing. Mosoma, for example, is one that I tested a couple of weeks ago. It also allows users to sell items on their Facebook profile.

There is an argument that a closed network is a better way to sell
items because the people who view the listing know you and, presumably,
trust you. That gets you over a big hurdle - eBay’s feedback system
provides information on the buyer and seller which helps them get
comfortable transacting. Without that feedback system to encourage
sales, it’s important that something else takes its place. In the case
of Garage Sale and Mosoma, user familiarity is the key.

But in practice this doesn’t work so well. Sellers are looking for a
big base of buyers to sell into to leverage the network effect. eBay
obviously does an excellent job of this. Otherwise there is no reason
they would command a long term leadership position with their high
fees. Buyers and sellers put up with the fees because it is the place
to go to conduct p2p transactions. The network effect perpetuates their
success and newcomers have a very difficult time gaining market share.

With Garage Sale and Mosoma, sellers can’t access this large pool of
buyers because only their friends will see the listings. And sellers
who are looking for a specific item are still likely to hop on over to
eBay and do a quick search. They’ll only buy from friends if they
serendipitously happen to catch site of an item in a friend’s news feed
that they were already looking for.

Microsoft experimented in this area in late 2005/early 2006 with their Live Expo product. Originally Expo was a way to buy and sell items to your MSN IM buddies, or coworkers at a company,
which is very similar to the Facebook experiments now being conducted.
But over time they seem to have expanded Expo to become a more generic
listing service. People want deep listings when they are looking for
something.

Closed networks work for some things, but they don’t seem to work
for trading physical goods. My bet is that Garage Sale and Mosoma fall
short of expectations, and that eBay is looking on with, at best,
bemused interest.

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Seven Ways To Make Money From MMOs

I just came across an amazingly handy list
of ways that online worlds make money, as compiled by Canadian game
developer Adrian Crook. His guide is limited to MMOs which are free to
play, so it doesn’t include subscriptions, the standard since 1984,
when CompuServe began charging $12 an hour to play Island of Kesmai.

While World of Warcraft dominates the subscription model, there’s
been a quiet-but-steady movement away from it; now developers employ
everything from Subscription Tier (play some for free, subscribe to
play more), to Merchandise/Expansion Packs (buy the related toy/game at
retail, play online free), to third party advertising (play for free…
after these words from our sponsors.)

On a hunch, I compared the Crook list to GigaOM’s Top Ten MMOs,
added WoW, and tallied up the users in each model. What follows are the
seven most popular revenue models for online worlds, in terms of total
number of users in each. The results, as they say, may surprise you…

• Advertising Deals: 14.5 Million
  (Habbo Hotel, 7.5 million; RuneScape, 5 million; Gaia Online, 2 million)

• Virtual Item/Currency Sales: 10.2 Million
  (Habbo Hotel, 7.5 million; Gaia Online, 2 million; Second Life, 500K; Puzzle Pirates, 200k)

• Subscription: 10 Million
  (World of Warcraft, 9 million; Lineage I/II, 1 million)

• Subscription Tier: 9.2 Million
  (RuneScape, 5 million; Club Penguin, 4 million; Puzzle Pirates, 200k)

• Merchandise: 4 Million
  (Webkinz)

• Expansion Packs: 2 Million
  (Guild Wars)

• Virtual Land Sale/Use Fees: .5 Million
  (Second Life)

As you’ll notice, several MMOs use more than one, and there’s a bit
of fudging, for simplicity’s sake. (For example, World of Warcraft does
make money through initial retails sales, though its dominant revenue
source is still monthly subscriptions.) And as always, I welcome
corrections. But the above is, I think, more or less a fair read of the
MMO market in the upper tier.

Seen this way, one point jumps out: just 10 million MMO players are paying mandatory subscriptions, while about 27 million players
are paying some other way– or not at all. Looking deeper, another
point: most of the non-subscription MMOs are aimed at teens and kids,
which is why the subscription model is probably on its way out. If you
want know which revenue model will rule in the next five years, look at
the MMOs that 13-17 year olds are playing now, and assume they’ll
expect to pay for future worlds in a similar way, when they get their
own credit card.

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Prosper’s P2P Lending Spreads To Asia

Peer to peer lending startup, Prosper,
is expanding operations to Japan and other Asian countries as a shared
partnership with Tokyo-based SBI Holdings, Inc. SBI will be helping
prosper navigate Asia’s regulatory environment. SBI Group has a market
capitalization in excess of $8 billion and consists of 65 consolidated
subsidiaries and 12 affiliated companies, including 9 public companies.

Prosper handles loans of up to $25,000 (the average funded loan is
$5,000), broken into smaller loans to distribute risk. Money for the
loan is then supplied by Prosper lenders bidding for the most
attractive interest rates. Prosper earns revenue by taking 1% of the
loan amount in fees from the borrower up front, and charging a 0.5%
yearly loan maintenance fee to lenders. Prosper currently has over $79
million in funded loans and more than 380,000 members. So far it
appears a lot of those members are logging on to pay off credit card
debt at a lower rate. Prosper’s backer, Benchmark, has also invested in
another P2P lender, Zopa.

It’s ironic to see these peer to peer lending startups expanding at the same moment the collapse of the sub prime lending market sends waves through the mortgage market. Similarly, these startups will be sink or swim based on their ability to effectively manage risk.

Prosper is managing risk by encouraging transparency, automatically
deducting monthly loan payments, and tracking reputations. Borrowing
groups are another risk management tool, both helping first time
borrowers get some initial credibility (and lower rates) while
encouraging the network to police itself by tying together their
reputations.

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Amazon vs. Paypal vs. Google Checkout

Amazon, in its bid to become the underlying utility of the new web world, today confirmed what had been rumored earlier: a payment service that will compete with PayPal and to some extent, the nascent Google Checkout services.

Just to be clear, Google Checkout and Amazon FPS are not building
their own payment service, where PayPal has a clear lead. Instead they
are using the credit card infrastructure to enable payments and online
transactions.

As a discrete offering, Amazon Flexible Payment Services (still in
beta) may seem like a me-too service. However, when juxtaposed against
the whole gamut of web services being offered by the company, it is a Trojan horse like strategy, one that can start to eat away at PayPal’s business.

It is not a surprise, that both Google
and Amazon want a slice of PayPal’s cake. In the most recent quarter,
PayPal had net revenues of $454 million, up 34% over the $339 million
reported in Q2-06. More importantly, PayPal Merchant Services
transactions jumped 57% to $4.92 billion globally from the $3.13
billion reported in Q2-06.

PayPal has become a defacto standard in the online transactions and
payment services, and for anyone to have a chance to beat them there
are two options: use money (and price) to lure the eCommerce players,
as Google is doing with its Checkout Service. The second option is to
offer a developer friendly service, that can allow developers to embed
a payment solution into their offerings. Werner Vogels, CTO of Amazon explains it best:

Using a capability called “Payment Instructions” developers
can easily create the charging model that works best for them. For
example, they can charge customers in small increments until their
accumulated balance reaches a limit, pay a percentage of a digital
transaction as a royalty, earn a commission on a marketplace
transaction, or allow one customer to pay for another customer and
limit their usage to a specific amount.

As developers who are already using Amazon’s EC2 and S3 web services
start to embed FPS, what they are doing is slowly shifting the momentum
away from using PayPal and other rivals. Allowing the buyers to use
their Amazon credentials to buy the goods (or services) from these
developers, they are also increasing their economic opportunity.

A small web-app developer can now build, host, process and get paid
for his efforts right over the Amazon infrastructure, without having to
spend money upfront. As Amazon Web Servies team notes on its blog:

Seriously, the 69 million active Amazon.com customers can
now use FPS to pay for the applications that you’ll undoubtedly want to
build. On the other end, the first wave of FPS applications will be
available very soon.

While I can’t put it as eloquently as uncov does, but I do agree with their thesis that this is going to cause major headaches for PayPal.

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