Posts Tagged ‘Washington Post’

Credit Cards and Financing the Next Big Thing

by on Wednesday, September 8th, 2010

The final provisions of the new regulations governing payment cards (credit, debit and prepaid) are now in effect. The new regulations limit certain penalty and other fees, require a minimum period before gift cards can expire and restrict issuers’ ability to market on college campuses and, in general, to customers under 21.

via adria.richards (Creative Commons)

John Berlau of the Competitive Enterprise Institute made the point that under the new rules Sergei Brin might not have been able to acquire the plastic he is said to have used to start Google. True or not, enshrined in modern folklore are the entrepreneur or filmmaker maxing out their credit cards to fund the Next Big Thing.

Implicit in these stories is that credit cards are the financing vehicle of last resort, something the new rules don’t change. But why should smart, dedicated, creative people ever have to fund business ventures with consumer credit? Why can’t they find more appropriate sources of financing?

Raising money from angel investors makes a lot more sense than using credit cards, but it just got a little harder. Most angels have to be “accredited investors” under the Federal Securities laws. The policy is to permit only the “wealthy and wise” to invest in presumably risky offerings since they are least likely to require protection against either unscrupulous promoters or themselves.

However, the definition of accredited investor was recently changed to exclude the value of the investor’s home from her assets for purposes of the regulation’s $1 million net worth test (an alternative test, which looks at income, has not been changed). Unless one of these tests is met, it doesn’t matter how knowledgeable and experienced a potential investor might be. And although the new rules may put some potential investors on the sidelines, it could have been worse. Proposed rules would have disqualified an estimated 2/3 of angel investors.

A newer alternative is “crowd funding”, in which individuals invest very small amounts to finance a venture (the Securities laws permit this). This model has proven especially popular in film financing, with communities such as IndieGogo and Kickstarter. In the tech world micro-investment communities include Grow.
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The Zavee takeaway:

  • Credit cards should be the funding vehicle of last resort.
  • Angel investments are never easy to come by and may have become a bit more difficult.
  • Micro-investment communities are an innovation worth exploring.

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Zavee, Privacy and Data Security

by on Tuesday, May 25th, 2010

When I was writing this post I wanted to link to Facebook founder and CEO Mark Zuckerberg’s op-ed in yesterday’s Washington Post. I had previously signed up for Facebook Connect for the Post so I was taken directly to the article. And I have a small confession: I don’t think I fully understand how Facebook Connect works and, more importantly, what its implications may be for the privacy of my information on Facebook.

Mark Zuckerberg at f8 2010 (Washington Post photo)

In his op-ed Zuckerberg admits only to “mov[ing] too fast” to introduce privacy tools that “were too complex”. Zuckerberg goes on to say that Facebook’s intention was to provide “lots of granular [privacy] controls; but that may not have been what many of you wanted.” The ability to fine-tune privacy settings seems like a good idea given the wide variety of content available on and through Facebook. However, the risk of missing something significant and inadvertently setting a control incorrectly may well outweigh the value of granular controls.

However, Facebook’s recent history of introducing, then modifying, changes to the platform, along with its enormous size and influence in the social media space, has created an environment in which not everyone is willing to take the company’s statements at face value (the comments on almost any post on the allfacebook blog are instructive). We believe that it is in the interest of everyone in the space – users as well as networks – for Facebook to get a better handle on how to develop, introduce, explain and refine significant changes to its platform.

It is axiomatic that users should control the amount of personal information they share, and with whom. I’m not sure there is one best way to ensure this, and granularity versus ease of use for privacy controls seems to me a debate worth having. Zavee is oriented toward the ease of use end of the spectrum. We provide very clear but fairly granular choices about who gets to see what information. Furthermore, all of our privacy settings default to the most limited distribution, which minimizes the downside risk for the user.

In addition to receiving credible assurances about the privacy of their personal information, users of social networks – especially social shopping networks – need to be completely comfortable that any financial information they provide will be maintained and transmitted with the utmost security. Platforms such as Mint ask for a wide range of personal financial information since Mint’s model is to aggregate that information and make it easier for the member to use. Blippy and some other sites require registration of a credit card, as their model involves sharing purchases over a social network. Zavee also requires registration of a credit card, although unlike Blippy Zavee does not share purchase details over the network.

Zavee has a number of safeguards in place to protect users’ credit card data. First, we use Secure Sockets Layer technology from industry leader Verisign to provide secure access to the platform for every Zavee user. That’s why our URL starts with “https://” and has a distinctive green band in the address window. You can see the Verisign seal in the footer of our site and can click on it to learn more about Secure Sockets Layer technology.

Second, we only collect the minimum card data necessary for the Zavee platform to function. Anyone who has ever made a purchase online, or even over the phone, knows that the merchant is required to collect not just the the card number, but also its expiration date and security code, and sometimes the zip code for the billing address. Zavee only needs the card number, so that’s all we ask for. Anyone who improperly obtained that information would still be unable to use the card for an unauthorized transaction.

Third, Zavee itself never collects or stores any credit card information. The card registration page may look the same as other pages on the Zavee site, but it isn’t actually on our site at all. When a user registers a credit card the card number is automatically encrypted and sent directly to our data provider, a company called TSYS. TSYS is one of the largest credit card processors in the world and maintains secure credit card databases for, among others, VISA itself. Once TSYS receives and registers the card number it sends a secure, unique identifier back to Zavee. Our system is set up to use only this identifier when we process shopper transactions, so the actual card number remains within TSYS’s secure environment. Our databases are stored in a secure facility in the US, but if anything happened to the card identifiers we would simply get a copy of the relevant database from TSYS.

The Zavee takeaway:

  • Overly complex privacy settings may have the effect of inadvertently decreasing actual privacy. No one should find that acceptable.
  • Zavee is a simple platform from a privacy standpoint and has simple, intuitive privacy controls that are designed to minimize user risk.
  • No one should ever be in doubt about the security of their financial data. Zavee uses industry best practices to protect the credit card numbers that members provide.

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Social Media Marketing Goes Mainstream

by on Tuesday, March 30th, 2010

Still think that Facebook, Twitter and the rest of the Social Media universe are just for geeks and kids? Think again. None other than The Washington Post ran a feature story yesterday about how marketers and their agencies are using Social Media tools for both word-of-mouth marketing and reputation management. Although the news hook for the story was a local (i.e., D.C.) restaurant joining one of the class action lawsuits against Yelp, the focus of the article was about how major marketers such as Chrysler, Sony and Domino’s are sponsoring tweets and giving samples to bloggers, as well as monitoring the Web for negative comments and reviews.

Entrance to The Washington Post

The Washington Post (via Dion Hinchcliffe)

The article cites Nielsen data that 70% of Internet users trust online recommendations and reviews (we cited the same study here), and quotes a Boston University professor as to why: “[C]onnecting with other consumers is more helpful [than traditional ad messages]. It’s more fun. Consumers love to interact.” The article also reports that digital word-of-mouth marketing is expected to top $3 billion a year by 2013.
The article describes at some length how marketers and agencies are using Social Media tools to influence customer perceptions, including by sponsoring posts and tweets. This is a controversial subject that has been discussed extensively online, including by us. Sponsorship raises issues about the nature of Social Media, including whether media such as Twitter will eventually become less effective if sponsored tweets become more prevalent.

Sponsorship also inevitably raises the issue of disclosure: when and how prominently to disclose, and whether even full disclosure can prevent consumers from losing trust in the communication and, by extension, in the marketer itself. All of the agencies mentioned in the story claim that they fully disclose any sponsorship, either with a hashtag such as “#ad” or some other signifier such as “(sponsored)”.

Interestingly, however, the Post reporter seems openly skeptical about whether the average user understands that these communications are sponsored. A writer for Time voices similar concerns. This is a perspective that we all would do well to keep in mind. Much of the online commentary about sponsored tweets and posts seems to focus on issues other than whether the consumer comprehends the disclosure. If it’s true that casual users might actually be misled (as opposed to merely annoyed) by sponsored tweets and posts, marketers should be extra cautious before launching a Social Media campaign that involves sponsored communications.

The Zavee takeaway:

  • It’s official: Social Media Marketing has arrived.
  • Users trust online recommendations and reviews. Let’s keep it that way.
  • Sponsored tweets and posts raise a lot of issues. If the risk of misleading consumers is one of them, it’s time to think twice about the tactic.

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