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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NetZero Shortchanged
