In its second-largest acquisition, Amazon buys the company for $970 million.
If the typical virtual retail store had a physical equivalent, it would not be a pretty sight: Shopping carts abandoned with items left unsold. A labyrinth of checkout counters scattered in all directions. And long lines everywhere in an endless stream of credit checks.
It’s not much of a way to run a business. Yet by some estimates, as many as 50% of all electronic commerce transactions are aborted prior to purchase. But by simplifying and streamlining the online shopping experience, CyberCash Inc., which bills itself as the world leader in secure-payment technology and services, aims to help change that. Its strategy is to bring merchants and customers together under the same electronic umbrella, where purchasing can be reduced to a single click.
CyberCash has big plans for its new one-click shopping model, InstaBuy. Since January, the company has raised $15 million in capital to support the launch of its latest payment processing system, much of which will go to marketing, sales and customer support.
“We are seriously committed to building InstaBuy as a brand,” says Ken Perez, senior vice president of marketing for CyberCash. In fact, CyberCash is banking on InstaBuy to reverse the company’s troubled fortunes and place it squarely on the road to profitability.
Founded in 1994 by payment systems industry pioneer William N. Melton, Reston, Va.-based CyberCash has led the way with a number of technological innovations, yet none have been enough to turn a profit. CyberCash lost close to $31 million in 1998 and has “one of the worst balance sheets in the e-commerce industry,” says Vernon Keenan, Internet analyst and founder of Keenan Vision Inc., San Francisco.
But over the last year or so CyberCash has all but reinvented itself, starting with its $55 million acquisition in March 1998 of ICVerify, a leading maker of electronic transaction processing software for the bricks-and-mortar universe. CyberCash hopes to convert ICVerify customers to the broad range of payment-processing products that remains the company’s bread and butter, beginning with its CashRegister service, which processes more than 3.1 million transactions a month for roughly 12,000 online merchants, and eventually ramping up to one-click shopping via InstaBuy. “If a merchant is happy with ICVerify,” asks James J. Condon, CyberCash’s president and chief operating officer, “why switch vendors for the Internet?”
With products that adapt to the changing needs of traditional and virtual merchants alike, and with a growing army of alliances assembled to take its technology to the masses, the new and improved CyberCash aims for nothing less than to streamline the business of buying products online. “We’re in the process of transforming our corporate identity beyond payments to a broader e-commerce identity,” Perez explains. “We want to be a market-focused company.”
Crucial to CyberCash’s goal of gaining mass distribution for its menu of offerings is teaming up with the appropriate partners, none of which are what Condon calls “Barney deals: ‘I love you, you love me, but nothing happens.’ ”
In March, for instance, Redmond, Wash.-based Microsoft Corp. named CyberCash as one of a dozen or so Microsoft Commerce Business Application Partners-basically a package of service providers that will facilitate the implementation of e-commerce for medium-to-large-sized business enterprises, including retailers. CyberCash executives hope that Microsoft will do for Internet commerce what Apple did for desktop publishing. “People ask us, Is Microsoft a competitor or a partner? And we say yes,” jokes Condon.
For nearly five years, CyberCash has invested heavily on the prospect that Internet commerce would eventually take off. Bill Melton, the company’s 56-year-old chairman and CEO, made millions off his most successful creation, VeriFone Inc., which revolutionized the point-of-sale terminal business following its introduction in 1982. (With the InstaBuy technology in place, Melton recently remarked, the task ahead is bringing merchants, banks and consumers to the table.)
CyberCash went public early in 1995, generating more than $58 million through an IPO and concurrent private placement. Soon after it launched a secure payment card service and followed that up with CyberCoin, a much-ballyhooed micropayment service that never caught on with U.S. consumers. Undaunted, the company introduced its PayNow secure electronic check service at the end of 1996 and diversified its payment-services portfolio with its acquisition last year of Oakland, Calif.-based ICVerify.
That purchase was spearheaded by Condon, 42, who joined CyberCash in 1997 from the information communication and entertainment sector of KPMG and added the title of president to his resume back in January. “While a lot of people get into the business with a great idea, it’s a long way to making that idea a reality,” says Condon, who boldly pledges that CyberCash “will be profitable in the year 2000.”
A lot rests on the shoulders of InstaBuy, which is gradually rolling out now following its online launch in February. “What we’re hearing from merchants is that a streamlined consistent checkout process is going to enhance just about any consumer’s experience,” says Denis Yaro, executive vice president of products and operations for CyberCash. “What we can do is to give the merchant the ability to use InstaBuy not only on their site, but anywhere else on the Net.”
Shopping made simple
Here’s how InstaBuy works: The first time a consumer makes a purchase at a merchant site with InstaBuy, he or she types their payment and shipping information into the merchant’s own form. At the end of the purchase, the consumer is prompted to sign up for the free InstaBuy service by entering a password for future use. The consumer’s information and password are securely stored under the auspices of a participating financial institution.
The next time the consumer shops at the same merchant or any other InstaBuy-enabled merchant, the InstaBuy window pops up on the merchant’s payment page, complete with the consumer’s purchase information-nothing more to fill out. Once the consumer enters his or her password, the purchase is complete.