John,
I read your work on the Yahoo! thread. It's very thorough and insightful. The Virtual Spin deal was rolling (maybe spinning) around my head today, and your comments locked the loose pieces together.
There were a couple factors I was trying to piece together:
1. The Virtual Spin service fees are tiered according to the number of items you sold in the store, and they were fixed.
2. I was trying to reconcile this with David Gallagher's comments on the e-commerce engine they were developing, Affiliate Direct, which effectively acts as a toll road: for every sale, a percentage of those sales drop straight into QSound's lap (or was that Lab?). Mr. Gallagher made it clear that the factors involved in their e-commerce initiative were completely consistent with their current business model, that is, to put up the initial capital, and then have the rest of the work be done be done for you (i.e. continued stream of royalty payments).
It's an ideal business model, but it's critical to set up as many "streams" as possible. It's just like a financial consultant that gets "trailers" for every sale that's closed. Get enough of those, and he/she has got it made for life, with no further need to put up great amounts of "capital." Afterwards, it's just a marginal amount of extra capital to keep getting the income stream afterwards.
So the question was: how do you make an extension of your business model by buying a company that earns revenue on flat-fee basis?
For starters, they expect that most of Virtual Spin's existing client base of 1,000 will upgrade to QAP 2.0 when it is released in July.
Voila. So they migrate their existing client base over to the new model.
A couple things I would like to clarify to help dissolve some of my ignorance:
1. I'm not familiar with the above acronym, so I'm assuming your reference to QAP is the Affiliate Direct program?
2. To what extent does the Affiliate Direct program cover the whole e-commerce process? Does it just take care of the buy, sell, and payment process? Does that then leave the store display setup for Virtual Spin?
3. How about the current payment process? Isn't Cybercash somehow already taking care of that function?
As you can see, this recent acquisition has raised quite a number of questions, but the answers in many cases would seem to point to a potentially even brighter picture for QSound.
Regards,
Rainier |
