The Rising Star of M-Commerce
By Kathleen Lane, Thu Feb 08 00:00:00 GMT 2001
As brick and mortar stores and wireless Internet start-ups alike try to make money with m-commerce, one company is showing us the way. And at the same time, they are changing the way we listen to and buy music.
How many times have you heard a song on the radio and just had to find out the name of the artist? For the longest time, Fat Boy Slim's "Praise You" was taunting me. Each time I heard the hit song on the radio, I would frantically ask all those around me, "What song is this? What song is this?" Obviously I finally found my answer, but I would have been put out of my misery that much sooner if I had had access to StarCD's innovative service.
StarCD, or *CD, allows radio listeners to identify and purchase songs they hear and like on the radio through StarCD's Web site, fixed telephones, PDA's and even mobile phones. For mobile phone customers of Sprint PCS in the top 33 U.S. cities, Pacific Bell in San Francisco or CellularOne in Philadelphia, partaking in m-commerce is as easy as one, two, three - or in this case, star (*), two, three.
The scenario goes something like this: the listener hears a song they like on the radio, they press *CD on their mobile phone and then dial the call numbers of the radio station they are listening to. The listener is told the name of the song, the artist and is asked whether they would like to purchase the compact disk. Voilá. We have m-commerce.
I caught up with Humphrey Chen, Inventor, Co-Founder and Co-CEO of ConneXus Corporation, the company that makes StarCD, to find out more about his killer business model and how he sees StarCD's role in the revolution that is now taking place in the music industry.
TheFeature: First I must ask you, how did you come with the idea of StarCD? I envision that you were driving in your car one day, heard a song you liked, and eureka!
Humphrey Chen: Yes, believe it or not, something like that certainly did happen but with my girlfriend, and now wife, asking me "Who sings this song?". In fact the idea finally occurred to me during my daily swim as a first year MBA student in what was literally my personal think-tank. It was in the pool when the "eureka!" finally struck, far from a car but clearly the seeds for it had been planted long before.
TF: What is the technology behind StarCD? How does it work?
HC: When we speak, we all have a unique voice pattern. Similarly, all songs have their own unique pattern as well. We essentially have a database with about one million song patterns from which we monitor to identify the name of a song in real-time; this is the magic behind *CD. We don't rely on integrating with radio station playlists nor do we try to figure out what song is playing when a consumer is interested in it. Instead, we monitor and listen to radio stations 24 hours a day and identify the names of the songs continuously so that when a consumer does want to call in and look up the song, the only thing they need to tell us is what station they are actually listening to, either with speech recognition or via touch-tone.
Our back end was designed and built with scaleabiliy in mind; a telco-grade IVR (Interactive Voice Response) solution to field automated requests and an industrial strength CTI (computer telephony integrated) call center solution for Customer Service and New Account activations. We've also opted to go with an Oracle and Solaris back-end to deal with consumer demand in a heavy-duty manner.
I would also like to share with you that the Patent office felt that our service was unique enough to award us with a Patent, so we were happy to finally attain this.
TF: Can you explain the m-commerce part of the process? For example, how does StarCD get my credit card number and mailing address? What security measures have you taken to guard against credit theft?
HC: Sure, when a consumer looks up a song and decides that they would like to purchase it we check the ANI or callerID to see if a 4-digit PIN number exists. If one exists, then the consumer keys in their 4-digit pin# to complete the transaction. If no PIN# exists in our database then the customer is given the choice of either receiving an application form by fax or speaking to a live operator To fully secure the account from any potential credit card fraud, we track the ANI/callerID and the 4-digit credit number to validate credit card billing. We also allow consumers to log into our web site in advance to establish a *CD account utilizing our secured SSL connection. Security is quite important to us and so we have done everything we can to ensure the security of all information provided to *CD, whether it be via phone, wireless web or the Internet.
TF: Wouldn't it be cool if I could download songs from StarCD to my mobile phone, which of course, also doubles as a Walkman? When is this likely?
HC: Yes, in fact it would be even cooler if it was legal! For that reason, *CD has partnered with a company called HitHive, a B2B music provider that is actively negotiating with the major music labels and other wireless carriers to secure legal digital music distribution rights. Announcements are forthcoming (within the next few months). Clearly, Napster has woken up the music labels to this opportunity which was once perceived as a threat. Once HitHive label deals are announced, *CD users will be able to not only look up a song in real-time but then also be able to purchase and download it in real-time, to whatever their preferred device is; now this is what we call "instant gratification"! So the answer to your question is soon, in fact I wouldn't be surprised if it this feature is available in the U.S. by the third quarter.
TF: Gaining the cooperation of wireless carriers is obviously very important to the success of your business. Which carriers are now offering the StarCD service? Do you have any advise for other mobile service providers who would like to work closely with mobile operators?
HC: Yes they are important but we also provide alternative land-line access to *CD as well through local numbers like 222-SONG to allow anyone from home, work or non-*CD wireless users to gain voice access. Right now our principal national carrier relationship is with Sprint PCS. They currently provide us with access to approximately 8 million wireless subscribers on the voice side and at least 1 million WAP users. They've been a great partner to work with.
The way we look at *CD is that it's a service that consumers value and want. The majority of new growth in wireless will be with mainstream consumers like teenagers and spouses and *CD overlaps with them quite nicely - not to mention that business people enjoy music as well. From a business perspective the carrier benefits from the majority of airtime revenues generated using *CD, plus a share of the m-commerce transactions. The only cost to them is the half hour it takes per switch to translate *-2-3 to one of our dial-in numbers and the marketing associated with getting the word out to their customer base. All in all, a small price to pay for a value added service that can positively affect their churn rates not to mention their bottom line.
As far as advice on how to work with the carriers, stay lean and if you feel you have something that consumers will value, don't give up. It always takes longer than everyone expects. When consumers speak, carriers will listen.
TF: It is common knowledge that the state of wireless coverage in the United States is spotty at best. Are you worried that patchy coverage could affect the service you are providing?
HC: Not really. The vast majority of the U.S. population resides in the major urban/suburban population centers. Having *CD in 33 of the top U.S. cities probably represents something like 15% of our total geographical area and yet represents essentially 76% of the music listening audience in ths U.S. The spotty areas you refer to are primarily in sparsely populated regions of the United States. It's quite difficult to have complete coverage for a country the size of the U.S. The market for sparsely populated areas is always a difficult and costly one to serve. When I briefly worked at the FCC's Wireless bureau I did a study on the (LEO/MEO/GEO) satellite systems for Chairman Hundt at the time, and it was very clear even then, that the market was about to be overserved in too small of a market. So instead we're more concerned with getting the word out to the majority of the people first. But all in all, the spottiness you describe translates into areas where there are much less people so I'm not as concerned as you might think, at least for now!
TF: And now for the question everybody is dying to hear: so how successful is StarCD? Can you tell us how many compact discs have been sold? Any sales predictions for the coming year?
HC: And the drum roll please... As you might suspect, establishing a major national carrier presence is just step one of our overall plan. The days of blowing through wads and wads of cash for market awareness ala boo.com and pets.com, as well as the other U.S. firms who sealed their fates by advertising during the Superbowl, are over. We can no longer afford nor expect to achieve full market awareness on our own. Instead we must partner with not only major wireless carriers but also major radio broadcasters for in-kind promotion, major web portals, e-tailers and even streaming audio players. Only by doing so can we sufficiently get the word out to all our potential users.
Once someone begins buying through *CD, they get hooked and dare I say, addicted. It becomes so easy to buy that after awhile they can no longer fathom how they ever lived without the existence of *CD. Once the word is out, then we will all see how *CD can and will revolutionize the way people find out about and buy new music. *CD - the call for music!
Mr. Chen received his undergraduate degree from the Massachusetts Institute of Technology and upon graduation worked first in the consumer packaged goods industry at Information Resources. He then joined Price Waterhouse's Management Consulting Services group followed by the Information Technology group of Morgan Stanley, New York, before attending the Harvard Business School, where he earned his MBA.
Prior to founding ConneXus, Mr. Chen also worked in the Wireless Bureau of the Federal Communications Commission--during the PCS C-block auctions.