RealTime IT News

NetZero Shortchanged

NetZero announced plans to acquire RocketCash in a $35 million stock deal yesterday. The free ISP is looking to add RocketCash's e-pay technology and Gen Y eyeballs, but I think this land-grab shows a distinct lack of understanding when it comes to teeny-bopper buying habits.

Here's RocketCash's bread and butter in a nutshell. If you like to browse the information superhighway, but you don't have a credit card, simply surf on over to the RocketCash Web site. You set up a free online account, deposit your funds, and then it's shop till you drop.

At first blush, the set-up looks pretty intuitive; but here's where the system goes against typical consumer behavior. To deposit money into your RocketCash account, you'll need - you guessed it, a credit card. Or, you can add fundage to your account by snail mailing a check or money order. Which begs the question. If the fastest and easiest way to fund your account is using a credit card, what do I need RocketCash for? Or in this case, what does NetZero need RocketCash for?

Further complicating matters, once money gets deposited, teenage consumers are handcuffed to using RocketCash's select list of merchants. In other words, your real money gets exchanged for arcade or casino tokens, which only a handful of e-commerce sites will honor. Teenagers are notoriously fickle shoppers and they sure don't want to be spoon-fed where they can or can't shop online. And, consumers by their very nature have little interest in the house's funny money or the hassle of cashing in chips for real money at the end of the day.

To be fair, RocketCash has an extensive list of merchants to select from. But, when it comes to creating alternative e-commerce payment methods using a cyber-middleman, the concept has been around for years. And it's never met with much success.

Take rival Beenz.com for example. The start-up has eaten from the all-you-can-eat VC trough since its inception. A cool $30 million late last year, followed by $40 million earlier this month. So why is the company's top banana, Philip Letts, exiting stage left, leaving his co-founder Charles Cohen in charge? I'm guessing because he doesn't want to be left holding the bag once impatient investors realize the concept of "alternative" money is little more than a pipe dream.

The bottom line is, most people shopping online have credit cards. Those who don't, can get one. Consumers figure if it ain't broke, don't fix it.

Unfortunately, that's the least of NetZero's worries. The company is busy fending off a slew of rival free branded ISPs from Kmart to Ameritrade , not to mention insider selling that should make any shareholder run for cover. With an anemic share price, a brisk cash burn rate, and running negative gross margins, the future looks at best cloudy for the free ISP.

Any questions or comments, love letters or hate mail? As always, feel free to forward them to kblack@internet.com.

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