Ray Van Eng (06/05/97)                  

Like many high profile Internet-only software company, CyberCash is losing money big time.

Since the company's inception in 1994, it has depleted $47 million including a $9.2 million lost in the first quarter of this year during which it only generated a revenue of $155,000. However, that income is more than the total earnings for 1996 and 1995 combined (at $127,000 and $22,000 respectively).

Currently, the company makes its money through consulting services and from the 500+ cyber merchants who use its credit card clearing and electronic payment technology to collect from online shoppers. It certainly is not enough to sustain the company.

It is estimated that without new cash injection or outside help, the company could be out of business in less than 11 month's time at a present loss rate of almost $2.5 million a month amid staff cuts and expanses reduction.

However, Bill Melton, founder and CEO of the Renton, Virginia based firm is still confident about the future of electronic commerce on the Internet and thinks that online casino gambling and cyber adult entertainment present great opportunities for its flagship product, the CyberCoin micropayment e-cash scheme which is designed to handle low value online transactions from 25 cents to 10 dollars.

"Revenue from gaming and adult entertainment will be substantial in the early stage," Melton said in a recent interview. "These people tend to be impulse buyers and less price-sensitive."

In the heat of the moment in pursuit of a quick fix, for sure. Since e-cash is like cash, the exact transaction amount is extracted on the spot, consumers could also spend anonymously.

More over, there will be no chargebacks as is the case with plastics which consumers can call their card issuers to cancel payments. This kind of "shrinkage" in the porno trade can be as high as 30%. For that reason, Melton thinks merchants would welcome the CyberCoin system.

Besides the CyberCoin service, the company is optimistic about an electronic check payment system they have just launched to handle corporate purchasing. In two to three years time, Melton forecast that his company will derive 50% of its revenue from the CyberCoin operation, 25% from electronic checks, and about 15% from credit card clearing services.

And what does the future holds in the eye of CyberCash? The company is projecting $6 million in revenue for 1997, and $35 million next year.