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Hey, kids: Don't spend it all in one place
Editor in Chief
Children and teens are among the heaviest users of the Internet-a booming community that numbers more than 12 million today and is likely to triple over the next three years. But while kids are free to e-mail and surf to their heart's content, the barriers to purchasing merchandise online-most of which requires a credit card for purchase-leaves them precious little they can buy.
But iCanBuy.com, which went online March 19, is among the first to tap into the electronic-commerce potential of the so-called Clearasil crowd. "We want to set the full foundation for the rest of your life for managing money," explains Paul Herman, the 30-year-old founder and CEO of San Francisco-based iCanBuy, which is designed to introduce young people to the virtues of shopping on the Web.
The iCanBuy solution is not unlike an electronic piggy bank-one with all the amenities of a typical savings account. Each iCanBuy customer starts with a debit account funded by a parent or grandparent (in its first month online, the average deposit was around $50 and the average purchase was about $25). With parental permission, a child can access his or her money and spend it within preordained limits at any of iCanBuy's e-commerce partners, which include the likes of software merchant Beyond.com, PC Flowers and Justballs. "It's like when a parent gives their parent 20 bucks to go to the mall," says Josh Worby, vice president of marketing for Justballs in Kingston, N.J.
Since iCanBuy went online, traffic for the site has been building every week. While the company receives a percentage of every sale generated through its site, it has little allowance money earmarked for marketing expenses. So iCanBuy is getting the word out through traditional media outlets (rating mentions in The New York Times, Time and Business Week) and online. A mention in Yahoo's daily "What's New" listings generated additional momentum, but the strongest traffic-builder ultimately may be word of mouth. "Most teens and kids have about 50 buddies on their buddy list," says Herman, who hopes to sign up as many as 500,000 customers by year's end.
There are limits on what kinds of items kids can buy on iCanBuy-nothing with sex or violence or profanity. And for products considered "edgy" by some people but not by others, Herman intends to split the database in two-the full database and a second, Disney-like database-allowing parents to pick whichever they feel the most comfortable with. "We want to put the power and control in the hands of the parents and let them select," Herman says.
With iCanBuy, he adds, kids will be able to see the full range of things they can do with their money. Through its partnership with Atlanta-based Security First Network Bank, the money is federally insured, and children earn 2.57% interest on their savings. Links to other sites teach kids about Social Security and investing wisely, and Herman hopes to add an online brokerage to the site's offerings. "At any time, kids can click on the site to check how much money they have," he says. The site even encourages kids to consider donations to teen- and child-related charities such as the Child Welfare League of America and the American Brain Tumor Association.
Mindful of potential critics wary of turning children into shopaholics, the company took the initiative to approach the Federal Trade Commission and sit down with representatives of the FTC's Children's Advertising Review Unit, which monitors children's advertising and privacy units. "They were very appreciative of the parental permissions we have designed," says Herman.
For Herman, who bought his first subscription to Business Week when he was only 12, iCanBuy fulfills a longtime dream of starting his own business. "Kids form their financial habits by the age of 10," he says. "They're either savers or spenders. I'm one of those people who was a saver."
Although he hopes his new enterprise will put some money in his piggy bank ("The saving account is pretty low right now"), Herman is sincere when he proclaims that iCanBuy can teach kids that money is not something to be afraid of. "Parents have trouble talking to their kids about two topics-sex and money," he adds. "We'll leave the sex talk to Dr. Ruth."