EPC CIGAR COMPANY manufactures and distributes cigars that are hand-rolled in the Dominican Republic from Ecuadorean, Nicaraguan and Dominican tobacco. It has been in business since April, although the family that owns it previously ran a successful cigar company that was sold to Swedish Match in 1999.
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Chester Higgins Jr./The New York TimesErnesto Perez-Carrillo III, one of three family members who run EPC Cigars, decided to use the Internet and social media for marketing the business.
Did EPC Cigar Pick the Right Marketing Campaign?
To see how business owners with related experience assess EPC Cigar%u2019s plans and to leave your own comments, please go to nytimes.com/boss.
Related
Case Study: Looking to Expand, but Fearing It, Too (January 21, 2010)
THE CHALLENGE To develop a cost-effective and efficient marketing strategy to promote the company and its new brand, E. P. Carrillo, while building on the family%u2019s legacy.
THE BACKGROUND EPC Cigar, based in Miami, is owned and operated by the Perez-Carrillo family, whose Cuban-born patriarch, Ernesto Perez-Carrillo, established El Credito Cigars in 1968; its best-known brand was La Gloria Cubana. After Mr. Perez-Carrillo%u2019s death, his son, Ernesto Perez-Carrillo Jr., sold El Credito to Swedish Match in 1999, working there until March 2009. Mr. Perez-Carrillo Jr., 58, remains a big deal in the cigar world.
He was encouraged to start EPC Cigar by his daughter, Lissette, 36, a lawyer based in Miami, and his son, Ernesto Perez-Carrillo III, 28, a management consultant based in New York, both of whom had worked for El Credito while growing up. The three family members run the company, which employs 34 people in Miami and the Dominican Republic.
Its first product was a $13 limited-edition inaugural cigar released in December; it will be followed this spring by the core E. P. Carrillo line, which will be available in five sizes priced from $6 to $8.
Last year, Mr. Perez-Carrillo III, who oversees the company%u2019s marketing, hired an advertising agency, DeVito/Verdi, to develop a logo, labels, packaging and a marketing campaign to introduce the new company and its cigars. Mr. Perez-Carrillo III estimates that EPC Cigar will spend $300,000 on the campaign, which began in April 2009 and will run through December.
THE OPTIONS DeVito/Verdi suggested a range of traditional and new-media marketing strategies.
The traditional options included taxi-top advertising in New York City; commercials on cable channels like Comedy Central, Spike and VH1; radio ads in cities like New York, Los Angeles and Chicago; and print ads in publications like The Wall Street Journal, Forbes, Fortune, Yachting, Golf Digest, Wine Spectator and Cigar Aficionado. With the exception of Cigar Aficionado, these promotions would aim at casual cigar smokers and even nonsmokers willing to try the company%u2019s cigars.
The social media options included three Web site concepts: one involved a collage on the company Web site of live, online mentions of the company and Ernesto Perez-Carrillo Jr.; a second featured a world map (from Google Maps) on the Web site that showed the origin of real-time Twitter messages about cigars; and a third would use a Facebook page as the company%u2019s main online presence. In any case, the digital strategy would involve the use of Twitter, Facebook and Flickr.
THE DECISION Ultimately, Mr. Perez-Carrillo III decided to take DeVito/Verdi%u2019s advice and emphasize the Internet and social media initiatives. Ellis Verdi, president of the agency, calls social media %u201Ca natural place to go when you want to show something real,%u201D adding, %u201CIf you say it%u2019s real, people won%u2019t believe you, but the Internet lets you show it.%u201D
Mr. Perez-Carrillo III said his primary objection to traditional media outlets was the expense. %u201CFor the first go-around,%u201D he said, %u201Cwe put them off the table.%u201D The company, according to Mr. Perez-Carrillo III, will spend $40,000 on digital-media initiatives between 2009 and 2010, with the remaining $260,000 of its marketing budget going to trade shows, cigar-enthusiast events, point-of-sale material and some traditional media.
Social media allow the company to communicate directly with cigar buyers, retailers, tobacco growers and others with whom it does business, according to both EPC Cigar and its agency. This is particularly important as the popularity of once-fashionable cigar bars wanes and public smoking bans proliferate.
At the agency%u2019s recommendation, the Perez-Carrillos chose the Web concept based on Google Maps and Twitter. Thus, on the home page, Twitter messages about cigars %u2014 regardless of whether they are about EPC Cigar or raise health concerns about cigar smoking %u2014 appear on a world map that rotates to show where the messages originated.
The site%u2019s %u201CAbout Us%u201D section uses another world map to show places where EPC Cigar conducts business or has roots, thus honoring the family%u2019s history. The section also offers photographs and videos, including a vintage, black-and-white snapshot of Mr. Perez-Carrillo Jr. as a child in Cuba and modern videos of a Nicaraguan tobacco farm.
The site lists retailers that sell the company%u2019s cigars, with Google Maps indicating their locations, and more than 1,000 places to smoke, with recommendations contributed by visitors and by Cigar Places, a Web site for cigar enthusiasts. DeVito/Verdi is in the process of developing an iPhone application that will feature these cigar-friendly places.
The agency has encouraged Mr. Perez-Carrillo Jr. %u2014 and not his son %u2014 to use Twitter to build and communicate with the company%u2019s following. It is Mr. Perez-Carrillo Jr., said Tyler DeAngelo, interactive creative director of DeVito/Verdi, who is %u201Cthe face of the brand.%u201D
While Mr. Perez-Carrillo Jr. posts Twitter messages almost daily, Mr. Perez-Carrillo III maintains the company%u2019s Facebook page, where he posts articles and reviews and encourages fans to comment. There are also links on the page to the company%u2019s Twitter feed, YouTube videos and Flickr photos. Similarly, there is a box that pops up from the home page of its Web site that lets visitors %u201Cfollow Ernesto%u201D on all four social media channels.
THE RESULTS So far, only about 250 people are following EPC Cigar through Twitter and about 700 are Facebook fans. These numbers notwithstanding, the Perez-Carrillo family and DeVito/Verdi say they are satisfied with the campaign%u2019s impact.
%u201CTo have a lot of people talk about the limited-edition cigar after only a few months, in a market that%u2019s challenged, in an industry that%u2019s not really growing, is very exciting,%u201D Mr. Verdi said.
The campaign has %u201Cgenerated a lot of buzz so far,%u201D Mr. Perez-Carrillo III said. %u201CWhen we talk to retailers, to the end consumer, everyone pretty much knows Ernesto%u2019s gone on his own. They can%u2019t wait for him to come out with the core line.%u201D
One unexpected benefit is that Mr. Perez-Carrillo III has been using Google Analytics to track how many people visit the Web site and where they come from. He has discovered that almost one-third of the visitors do not live in the United States. %u201CI%u2019m talking to foreign distributors far more quickly than I expected I would,%u201D he said.
The 25,000 limited-edition cigars that EPC Cigar has been releasing monthly since December %u201Care selling extremely quickly,%u201D Mr. Perez-Carrillo III said. He projects sales of $1.5 million this year.
Saturday, February 27, 2010
A smokin' insight into social media. From The NYT: Case Study - EPC Cigar, a Start-Up, Using Twitter to Build Buzz
Now this is getting exciting... From The NYT: Cellphone Applications Let Shoppers Point, Click and Buy
Shoppers will soon be able to stand outside the designer Norma Kamali%u2019s boutique in Manhattan, point a phone at merchandise in the window and buy it %u2014 even late at night when the store is closed.
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Michael Falco for The New York TimesScanLife technology allows customers to scan bar codes on merchandise.
Ms. Kamali is at the forefront of a technological transformation coming to many of the nation%u2019s retailers. They are determined to strengthen the link between their physical stores and the Web, and to use technology to make shopping easier for consumers and more lucrative for themselves.
The main way they plan to do it is by turning people%u2019s mobile phones into information displays and ordering devices. Can%u2019t find the flour at the grocery store? Grocers will offer phone applications that tell shoppers exactly where to go. Is the department store out of size 8 jeans? Retailers want to make it simple to punch a couple of buttons and have the desired size shipped home.
Some supermarkets intend to offer real-time coupons while people shop. For example, a promotion for milk may be sent to a shopper%u2019s mobile phone the moment her cart rolls into the dairy aisle. Drugstores will offer loyalty programs on cellphones, not on plastic cards. And specialty chains will allow shoppers to breeze through the aisles compiling a wedding registry, just by pointing at merchandise.
It remains to be seen how readily shoppers will embrace such aggressive merchandising, which will generally require them to download free applications onto their phones and consent to being tracked electronically while in a store. But many stores are betting they will go along. After all, people already wander city streets guided by maps on their mobile phones. Why shouldn%u2019t the same technology lead them to the toilet paper in Aisle 3?
Hoping to use the technology as a competitive advantage, some big chains are reluctant to discuss their plans. The Sam%u2019s Club division of Wal-Mart, Crate & Barrel, Kerr Drug of North Carolina and Disney stores are among the retailers that confirmed they were testing various mobile technology or planned to do so soon.
Technology companies behind the products say retailers are sniffing around, with some planning limited introductions this year and wider deployments in 2011 or 2012.
Appropriately enough for a revered designer, Ms. Kamali is in the vanguard. A technology called ScanLife was installed at her boutique in recent weeks, and it already allows people to scan bar codes on merchandise and obtain details about the clothes through videos. The part about buying items day or night will come in another week or two.
%u201CTo say that I%u2019m excited is putting it mildly,%u201D Ms. Kamali said. %u201CI%u2019ve been in this business since the %u201960s and I have to just tell you, nothing %u2014 nothing at all %u2014 has been as powerful a change in the psyche of the way we do everything as this technology.%u201D
Other retailers have begun testing a product from I.B.M. called Presence. Shoppers who sign up can be detected as soon as they set foot in a store. That enables Presence to offer real-time mobile coupons. And tracking shoppers%u2019 spending habits and browsing time in various departments can help the system figure out who might be moved to suddenly buy a discounted item.
Presence can also make product recommendations. If a shopper was buying cake mix, Presence might suggest buying the store%u2019s private-label frosting and sprinkles, too.
%u201CWe%u2019re also able to do predictive analytics %u2014 predict what we think you might want based on what we already know about you,%u201D said Craig W. Stevenson, an I.B.M. executive who oversees Presence.
Cisco Systems, the supplier of networking equipment and services for the Internet, is also a leader in the field. The company%u2019s Mobile Concierge system is capable of connecting customers%u2019 smartphones to retailers%u2019 wireless networks %u2014 so a shopper could type %u201CCheez Whiz%u201D into a cellphone, then pinpoint its location in the store.
%u201CWe see the smartphone being used more and more in the shopping experience,%u201D said Dick Cantwell, Cisco%u2019s vice president for retail at Cisco%u2019s Internet business solutions group.
Beyond privacy worries, retailers recognize other potential pitfalls. If the phone applications freeze or give bad information, they will most likely frustrate consumers. So reliability will be a priority, a reason retailers are starting with limited tests. And as some executives said, many stores cannot yet afford such technology.
As the more daring retailers see it, the potential benefits outweigh the risks. More aggressive profiling of shoppers %u2014 along with a novel, entertaining shopping experience %u2014 could help increase sales. And the technology may help retailers save money by cutting workers, essentially substituting electronic guidance for store clerks. Motorola, for example, has stores testing kiosk systems that enable consumers to summon a clerk to a particular department or fitting room when needed.
A new Motorola product promises to eliminate loyalty cards, instead putting the program, as well as coupons, onto shoppers%u2019 cellphones. %u201CProbably by the end of 2010 we%u2019ll have 10 to 20 retailers up and running,%u201D said Frank Riso, a senior director at Motorola, adding that most of the activity will begin in 2011.
Many big retailers have already created cellphone applications that do more than just dole out coupons. Target, for one, has an application that can identify which store aisle sells nightgowns.
So far, many stores have focused on improving their mobile shopping sites, which some consumers use when browsing the aisles to see product reviews and specifications. Retailers like Sears and American Eagle Outfitters work with a company called Usablenet to optimize their mobile sites.
Jason Taylor, Usablenet%u2019s vice president for mobile products, said retailers began clamoring for improvements around Thanksgiving. The company is also working with a retailer, which it said it could not name, to enable shoppers to use smartphones to scan items in its stores, then add them to gift registries.
%u201CExtending the phone to use as a scanner in the retail world %u2014 especially gift registry, wish lists %u2014 you%u2019re going to see a lot more of this year,%u201D Mr. Taylor said.
In the end, though, stores may not have much control over the way consumers use mobile technology.
Some shoppers are already outwitting retailers, using mobile applications like RedLaser to compare prices in a physical store to those on the Web. (Such applications scan product bar codes through a cellphone%u2019s camera.)
Ben Aldern, 20, of Berkeley, Calif., went to Target recently to shop for headphones. %u201CI was ready to spend whatever I needed,%u201D he said, but on a hunch, he fired up RedLaser %u2014 and found the same model for less at Amazon, the online merchant.
%u201COnce I saw I could save 20 bucks,%u201D he said, %u201CTarget lost me.%u201D
Recommend Next Article in Business (1 of 51) � A version of this article appeared in print on February 27, 2010, on page A1 of the New York edition.
Hey, if it works for Walmart... DOOH Advertising | DSE: Walmart reveals 18-month results for SMART Network | Digital Signage Today
>DOOH Advertising
DSE: Walmart reveals 18-month results for SMART Network
Bill Yackey
%u2022 23 Feb 2010Walmart released critical information on the state of its SMART digital signage network this morning at Digital Signage Expo as part of the Digital Out-of-Home Advertising Summit. Following a keynote from MediaBytes%u2019 Shelly Palmer, three men who helped develop the network several years ago talked to a %u201Cstanding room only crowd%u201D about the network%u2019s uplift stats, notable campaigns and plans for the future.
%u201CWho remembers Walmart TV?%u201D asked Andy Johnson, creative director at Walmart. Many in the audience sheepishly raised their hands. %u201CNow, who has seen the SMART Network? The two could not be more different.%u201D
Anyone who has seen both networks would surely agree. Faded CRT televisions hanging from shoddy mounts high above the retail area were replaced 18 months ago with high-definition screens in portrait and landscape mode at shoppers%u2019 eye levels.
Johnson compared the two networks with the following lists:
Old Walmart TV network
1. Audience aggregation
2. 30 second ads
3. Single-channel CRTs
4. CPM-based pricing
New SMART Network
1. Helping shoppers shop smarter
2. Formats designed for retail
3. Zone specific screens
4. Lift-based pricing
Research also supports the SMART Network%u2019s success over its predecessor. Bill McMullen, senior vice president and general manager of Studio2, cited a recent Nielsen survey that said 40 percent of Walmart shoppers noticed the network, 32 percent recalled an ad on the network and 64 percent reported a %u201Cpositive experience%u201D from the network.
These percentages are impressive when one takes into consideration that the SMART Network reports 140 million impressions per week, with a CPM of $2-4. To put that in perspective, the Super Bowl reported 100 million impressions earlier this month.
The triple play
Walmart%u2019s premier SMART Network ad buy is called the triple play, where a campaign is shown on a large welcome screen at the entrance of the store, a category screen in departments and endcap screens on each aisle.
According to Johnson, it takes 21 seconds for a shopper to move from the door of the store to the greeting area where the welcome screen is placed.
%u201CThe welcome screen messages run about five seconds,%u201D Johnson said. %u201COf those 21 seconds, we%u2019re hoping to get at least five seconds of attention.%u201D
Category screens are %u201Ca few steps away%u201D from the products, and usually mounted above departments like over the counter drugs and frozen foods.
Endcaps, Johnson says, are %u201Cwithin arms reach%u201D and provide %u201Cthe one piece of info I need to make a buying decision right now.%u201D
Success
By all accounts, the SMART Network has been successful in the past 18 months, as it has proven to increase sales for many of the products that are advertised on it.
Walmart has a sophisticated back end system for its SMART Network that ties the digital signage into the point-of-sale system. Tying the two to each other allows Walmart to isolate the exact sales lift effects of the network%u2019s content, says Dave Debusk, VP of DS-IQ.
%u201CWe know what content is played on what screens at what stores at what times,%u201D he said. %u201CAnd simultaneously we know what was sold at those times.%u201D
Based on that data, Walmart was able to calculate the following percentage increases in store departments which feature the SMART Network.
Sales lift by departments
Electronics %u2013 7%
Over the counter TC %u2013 23%
Food %u2013 13%
Health/beauty %u2013 28%
Sales lift by product type
Mature item boost %u2013 7%
Item launch %u2013 9%
Seasonal push %u2013 18%
Price leadership (items on rollback) %u2013 6%
The future of the network
Debusk said that his company and Walmart are going to continue to work on isolating sales uplift and are already working on a program to optimize advertising.
The optimization of the network will allow advertisers to run multiple campaigns and let the network %u201Cdecide%u201D which ad is most effective based on point-of-sale metrics. The network can then automatically respond by running ads at times when they have proven to be most effective.
%u201COne product may sell better on the weekend, another is better during the week,%u201D said Debusk. %u201COptimization can realize that one product sells better on weekend and throttle back on it during the week, at the same time throttling up on messaging for a brand that does well during the week.%u201DRelated articles on this topic: DOOH Advertising
MediaShift . How Mobile Apps Are Revolutionizing Elections, Transparency | PBS
The importance of social media in politics was made clear by Barack Obama's 2008 presidential run. But there is a new frontier of Web 2.0 technologies that politicians and political groups are slowly starting to embrace: the smartphone app. These apps have the potential to reshape how politicians communicate, raise money and get out the vote.
The biggest player on the smartphone app stage is Apple's iPhone. But the BlackBerry, Android, Palm Pre and other smartphones are likely to play a growing role as well.
The age of political apps began in October 2008 when the Obama campaign released its free Obama08 app. It organized a person's iPhone contacts to enable supporters to call any friends located in important electoral districts. The Obama app also had a donation interface, news feeds, local campaign events, and a list of Obama's positions on major issues.
The impact of the Obama App on the campaign is hard to say. But, as we approach the 2010 midterm elections, other politicians and political groups have developed apps to advance their issues. Below are some app highlights.
Apps for Politicians
Newell for Congress App
A few politicians are already ahead of the app curve. The biggest name on the national stage with an app is Sen. Sam Brownback, who is running for governor of Kansas. The SamForGov app, like Obama08, was developed to engage voters and provide real-time information about the candidate. The same is true for John Kasich's Kasich for Ohio app, which is supporting his Ohio gubernatorial run, and Felton Newell's Newell for Congress app, which was developed to support Newell's campaign for California's 33rd District.
"I've received lots of feedback from people who I run into and I show them the app...that it does really communicate who I am as a person and what my campaign is about," Newell said in a phone interview.
Apps for Keeping up with Congress, White House
Aside from candidate apps, there is a category of apps designed to provide political enthusiasts with a significant amount of Web 2.0 capabilities. At the top of this list is the 99-cent Congress app (also available in Congress and Congress Pro upgrades).
Developed by Cohen Research Group, the Congress app is loaded with information on members of the House and the Senate, including photos, office addresses, contact numbers, website links, campaign news, and other details that put users in direct contract with the U.S. Congress.
Another big hitter in this category is the Real Time Congress app, which was developed by Sunlight Labs. Real Time Congress provides users with a number of information feeds related to House and Senate floor debates; a documents feature that provides immediate access to Congressional Budget Office, Congressional Research Service, and Office of Management and Budget documents as they are posted; real-time notices from the Democrat and Republician whips; and hearing schedules, among other features.Real Time Congress App
Finally, there is the White House app. Released in January by the Obama administration's technology team, it offers users access to information about the White House, from blog updates, video and photos, to news and a live feature with real-time data.
While the app hardly pushes the limits of what advanced smartphones are capable of, the White House app offers something more important in terms of the the "culture of no," which is how Peter Corbett describes the bureaucratic impediments to technological progress in Washington.
Corbett, CEO of the interactive strategy, experiential marketing and content creation solutions company iStrategyLabs, said the White House app is an example for other government agencies to emulate.Peter Corbett
"If the White House is using YouTube and building iPhone applications and is using idea sourcing platforms for letting citizens vote on stuff, that's giving all the other agencies permission and an example to follow for when they try and do new things for their constituents," Corbett said.
Apps for Democracy
Corbett and iStrategyLabs are engaged in an emerging category of apps that support open government initiatives. In 2008, Vivek Kundra, former chief technology officer of Washington, DC, and current chief information officer of the U.S. federal government, approached Corbett with a question about how to make the new open government data sets usable for the average citizen.
Corbett responded with the Apps for Democracy contest that offered technologists the potential to win as much as $30,000 in prize money for the development of apps that use the data catalog, and help government function better for citizens. When the contest ended, 47 iPhone, Facebook and web applications had been submitted. iStrategyLabs estimated they are worth more than $2.6 million to Washington.
That contest inspired Sunlight Labs' Apps for America contest and others in Germany, Belgium, Australia and elsewhere. More importantly, Apps for Democracy demonstrated that the technology development crowd has significant interest in participating in these kinds of initiatives.
"We see that there is a passionate local base of technologists that finally see a way to really apply their skills to the process of democracy and government," Corbett said. "Typically they [technologists] were never engaged. They are generally focused on what's going on on TechCrunch and Twitter and not really focused on what's happening on Huffington Post and C-SPAN. Now what we are seeing is because there is this way of tapping into citizen technologists, they are becoming much more engaged in democracy and America itself."
Walking Edge, Ballot Signing App
Technologists are already creating apps that can make an impact in elections and ballot initiatives. The recent election of Scott Brown in Massachusetts was aided by an app developed by Republican Web Development. The firm created an app for GOP candidates called Walking Edge. The Atlantic's Chris Good wrote that the app offered canvassers a database of where undecided voters and candidate-supporters live. The app used geo-location tools and Google Maps, and after canvassers made contact with a person they could update the database in real-time.
Exploring Conversations as a multimedia website examining the language of music for his graduate thesis project at Michigan State University.
Univision adds consumer touch points to fulfill 360-degree media strategy - Mobile Marketer - Television
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Univision adds consumer touch points to fulfill 360-degree media strategy
By Rimma Kats
February 26, 2010
Univision launches new mobile video series
Univision Interactive Media Inc. plans to extend its reach with the %u201CNovelas y Series%u201D mobile video series, which will be accessible via a WAP site and an application.
Viewers can watch the programming straight from their handsets. The initiative will also give consumers the latest novella news, celebrity gossip and behind-the-scenes footage right to their mobile phones.
%u201CUnivision continually strives to provide the best experience, content and information relevant to Hispanics, regardless of platform or device,%u201D said Kevin Conroy, president of Univision Interactive Media Inc., New York. %u201CAs such, all of our programming launches are all-inclusive, reaching today%u2019s user wherever and however they consume content.
%u201CThe Novelas y Series channel is a prime example of this, including online and mobile sites, a comprehensive community hub that will include robust user-generated content, as well as premier video content,%u201D he said.
Consumers can also view the new video series at http://www.video.univision.com.
The launch follows the Web site%u2019s originally produced webnovela, %u201CVidas Cruzadas%u201D (Crossed Lives).
The company decided to focus on a mobile audience and bring viewers novela programming from content producers around the world.
Users can view the videos on the Univision Video application which will soon be available on all top smartphone platforms.
Additonally, the "Novelas y Series" mobile site can be accessed via any Web-enabled mobile device.
The "Novelas y Series" site will have mobile advertising opportunities for brands trying to reach Hispanic consumers.The network feels that mobile Web site advertising is an effective way to reach its users and generate an immediate response. Sponsorships of the video content will also be available via the Univision Video application.
Univision%u2019s new channel will include third-party content from Azecta America, RCN Television and Dori Media Group. It will also feature original programming from Univision Interactive Media, as well as programs from the network%u2019s top shows and special events.
%u201CWe are proud to have a very loyal user base that recognizes the value of our on-the-go offerings and has shown high levels of mobile engagement and participation,%u201D Mr. Conroy said.
According to the network, %u201CVidas Cruzadas%u201D generated more than 2.5 million U.S. video streams and is one of the Web site%u2019s top two most watched online shows to date.
Univision had a live streaming of the Paz Sin Fronteras concert last year, which it claims is now its largest live streaming event.
%u201CUnivision Communications is the most powerful brand in Spanish-language media and we recognize that Hispanics are on the move now more than ever,%u201D Mr. Conroy said. %u201CAs such, we continually strive to provide the best experience, content and information relevant to Hispanics, regardless of platform or device.
%u201CThe launch of the online and mobile "Novelas y Series" channel allows our viewers the ability to access information whenever, wherever and however they can,%u201D he said.
%u201CThese types of interactive initiatives strengthen our position not only with consumers, but also with advertisers, publishers and Web developers.%u201D
Editorial Assistant Rimma Kats covers content, gaming, media, television, music and social networks. Reach her at rimma@mobilemarketer.com.
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Tuesday, February 23, 2010
In an app-mad world, we need better ways to pay. From Wired: The Future of Money - It’s Flexible, Frictionless and (Almost) Free
Cash in the clouds%u2014neither paper nor plastic.
Illustration: Aegir Hallmundur; Benjamin Franklin: CorbisThe Future of MoneyA simple typo gave Michael Ivey the idea for his company. One day in the fall of 2008, Ivey%u2019s wife, using her pink RAZR phone, sent him a note via Twitter. But instead of typing the letter d at the beginning of the tweet %u2014 which would have sent the note as a direct message, a private note just for Ivey %u2014 she hit p. It could have been an embarrassing snafu, but instead it sparked a brainstorm. That%u2019s how you should pay people, Ivey publicly replied. Ivey%u2019s friends quickly jumped into the conversation, enthusiastically endorsing the idea. Ivey, a computer programmer based in Alabama, began wondering if he and his wife hadn%u2019t hit on something: What if people could transfer money over Twitter for next to nothing, simply by typing a username and a dollar amount?
Money Over Time
A brief history of
currency technology.
%u2014Bryan Gardiner9000 BC: Cows
The rise of agriculture made commodities like cattle and grain ideal proto-currencies: Since everyone knew what a heifer or a bushel was worth, the system was more efficient than barter.
Just a decade ago, the idea of moving money that quickly and cheaply would have been ridiculous. Checks took ages to clear. Transferring money from one bank account to another could take days, as banks leisurely handed off funds, levying fees nearly every step of the way. Credit cards made it a little easier to pass money to a friend %u2014 provided that friend owned a credit card reader and didn%u2019t mind paying a few percentage points in fees or waiting a couple of days for the payment to process.
Ivey got around that problem by using PayPal. Since 1998, PayPal had enabled people to transfer money to each other instantly. For the most part, its powers were confined to eBay, the online auction company that purchased PayPal in 2002. But last summer, PayPal began giving a small group of developers access to its code, allowing them to work with its super-sophisticated transaction framework. Ivey immediately used it to link users%u2019 Twitter accounts to their PayPal accounts, and his new company, Twitpay, took off. Today, the service has almost 15,000 users.
That may not sound like much, but it sends a message: Moving money, once a function managed only by the biggest companies in the world, is now a feature available to any code jockey. Ivey is just one of hundreds of engineers and entrepreneurs who are attacking the payment ecosystem, seeking out ways small and large to tear down the stronghold the banks and credit card companies have built. Square, a new company founded by Twitter cocreator Jack Dorsey, lets anyone accept physical credit card payments through a smartphone or computer by plugging in a free sugar-cube-sized device %u2014 no expensive card reader required. A startup called Obopay, which has received funding from Nokia, allows phone owners to transfer money to one another with nothing more than a PIN. Amazon.com and Google are both distributing their shopping cart technologies across the Internet, letting even the lowliest etailers process credit cards for less than the old price, cutting out middlemen, and figuring out ways to bundle payments to sidestep the credit card companies%u2019 constant nickel-and-diming. Facebook appears to be building its own payment system for virtual goods purchased on its social network and on external sites. And last March, Apple gave iTunes developers the ability to charge subscription fees through their applications, making iTunes the gateway for an entirely new breed of transaction. When Research in Motion announced a similar initiative last fall at a session of the BlackBerry Developer Conference in San Francisco, programmers crowded the room, spilling out into the hallway. About 20 percent of all online transactions now take place over so-called alternative payment systems, according to consulting firm Javelin Strategy and Research. It expects that number to grow to nearly 30 percent in just three years.
But perhaps nobody is as ambitious as PayPal. In November, it further opened up its code, giving anyone with rudimentary programming skills access to the kind of technology and payment-industry experience that Ivey used to build Twitpay. The move could unleash a wave of innovation unlike any we%u2019ve seen since self-publishing came to the Web. Two months after PayPal opened its platform, 15,000 developers had used it to create new payment services, sending $15 million through the company%u2019s pipes. Software developer Big in Japan, whose ShopSavvy program lets people find an item%u2019s cheapest price by scanning its barcode, used PayPal to add a %u201Cquick pay%u201D button to its app. LiveOps, a call-center outsourcing firm, built a tool that streamlined payments to its operators, turning what had been a nightmare of invoicing and time-tracking into an automated process. Previously, anybody who wanted to create a service like this would have had to navigate a morass of state and federal regulations and licensing bodies. But now engineers can focus on building applications, while leaving the regulatory and risk-management issues to PayPal. %u201CI can focus on the social side of the business and not on touching money,%u201D as Ivey puts it.
PayPal is just the latest company to try to harness the creative powers of the open Internet. Google created a platform that lets anyone buy or display online advertisements. Facebook allows any developer to write applications for its social network, and Apple does the same with its iTunes App Store. Amazon%u2019s Web Services provides developers the cloud-based processing power and storage space they need to build applications and services. Now PayPal has brought this same spirit of innovation and experimentation to the world of payments. Your wallet may never be the same.
Rate of Exchange One US dollar translated into various virtual currencies.*
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* Values are approximate. Not all currencies are pegged to the dollar, and many are not intended to be exchanged for cash.
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