for newcomers
seminal links:
the Wave system
wave.com
wave.com
the "trusted client" paradigm, as validated by:
(1) actions by Intel and IBM to establish "hardware on the client side" as a requirement for secure e.commerce;
(2) decisions by HP and IBM to place transactions at the edges of networks (at points of consumption); and
(3) formations of consortia like the TCPA (the Trusted Computing Platform Alliance, promoted by Compaq, HP, IBM, Intel, and Microsoft).
trustedpc.org
the Wave-Sarnoff-Fantastic adaptation of digital television broadcasting as a fat pipe for digital datacasting -- a broadband solution having no "last mile" problem:
wavexpress.com
a lay demonstration: a simple, inexpensive way to set up and test a WaveAccount with the web-based emulation of EMBASSY:
parlex.tripod.com
client-side metering:
Is your electricity metered at Con Ed, or at your house? Why?
The Wave system for e.commerce combines encryption and metering capabilities to provide a comprehensive solution for the secure distribution of digital content to users at their personal computers, set-top boxes, or other devices. It enables microtransactions at the point of consumption. Amounts can be computed down to a fraction of a penny. Content can be distributed by wire, over the air, or on physical media. Users need not be online or tethered to a network. When they find content that interests them, they can try, rent, rent-to-own, or buy.
The Oxford English Dictionary on CD-ROM costs $400. I have a genuine need to use it five times each year. If I can "rent" it for a reasonable cost-per-actual-use, I will. If I can access it outside of a well endowed library only by buying it outright, I will make do with something else. Thus, if it is WaveEnabled and available for one dollar per use, I will spend $5 per year where I will not spend $400 up front. The publisher wins, Wave wins, the maker of the WaveEnabled platform wins, and I win.
A CAD/CAM application costs $300,000. I have a genuine need to use it for 15 hours each year. If I can "rent" it for a reasonable cost-per-hour, I will. If I can use it only by buying the whole thing, I make do with something else. If it is WaveEnabled and available for $500 per hour, I will spend $7,500 per year where I will not spend $300,000 for all the years to come. The publisher wins, Wave wins, the maker of the WaveEnabled platform wins, and I win.
The Wave system represents a new distribution channel marked by the economic virtue of distributed metering. A fair and efficient meter is good for everybody. Wondering whether people will use the system misses the point that users will go after the content they want. Wave wants to provide a distribution mechanism that produces microtransactions that are so efficient that everybody benefits -- content seller, platform seller, and end user. People do not drive around looking for parking meters. They look for good parking spaces. Build fair and efficient parking meters and they will be used by people acting in their own interests. Wave's chip-based, client-side solution creates a win-win-win-win for content provider, platform builder, end user, and Wave. The value of the efficiency it brings to the distribution process can be shared among all sides of an e.commerce transaction.
People sometimes question the commercialization of digital content. The Wave system should not raise frightening specters of nothing's remaining "free" on the net. The ordinary forces of economic incentive and disincentive -- supply, demand, competition, innovation, aesthetics, regulation-or-not, taxation-or-not, etc. -- will operate to make digital things flow according to their economic value just as material things do. The Wave system will make digital content that is worth paying for flow more efficiently than it has in the past. Things will be more readily available, on more flexible terms, with better protection of intellectual property rights. The economies induced by Wave's new distribution channel will yield savings that can be shared by all players in e.commerce transactions. But the Wave system is not going to spoil the frontier freedom of the net.
on privacy:
People sometimes question whether the Wave system poses a threat to privacy. I argue that it poses an enhancement. The security and privacy values of Wave's system do not depend on -- nor do they necessarily promise -- anonymity. But they will allow me to conduct e.commerce without fear that a credit card or personal information will be compromised, or that either side of a transaction might not receive its due, and without having to reinvent the transactional wheel again and again. I do not demand anonymity. I understand that my seller deserves to know who his buyer is. In fact, I want him to know who I am. I want to be able to assert my identity as his buyer, a holder of certain licenses or warranties with respect to his product. Wave's system is good for my privacy as a user of electronic commerce and a consumer of digital things. It can identify me to the entity on the other side of a transaction as "trusted" -- and it can leave it at that. It can say, in a virtual sense: "You can trust this guy. He purchases licenses to use intellectual property. He has bona fides. He maintains regular sureties. And he has met your specified prerequisites to engage in this transaction." My EMBASSY (the client-side Wave system in my platform) and its WaveNet know these things about me. I can regulate the degree to which they hold these things as confidential. I know why I am trusted. My EMBASSY and its WaveNet know why I am trusted. But the entity on the other side of the transaction does not need to know why I am trusted. It only needs to know that I am trusted. And I hope to have my EMBASSY vouch for that.
This does not even get to the values of client-side security and ongoing customer relationships -- consider the financial services industry, alone -- perhaps the more important drivers of mass deployment.
the "Claugus fallacy" of Wave's business model
Somebody circulated talking points propagating the canard that Wave's business model is to charge 40% for doing what Visa does for 3%.
Somebody needs to snap out of it.
Can Visa provide a hardware-protected solution that operates on the client side of a transaction system (without an ongoing tether to a network) in which you can securely store whatever feature of your digital personality you wish, including (for example) your credit card information, such that you do not need give it out for each transaction?
Wave is not hawking some mere payment mechanism. Ask Claugus about durable protection of copyrighted digital works from piracy. Ask him about the emerging "transmit, then select" mode of datacasting. These are not two-dimensional transactions we are talking about. Consider the needs of the creator of the digital content, and of the distribution channel, and of the end user. Wave will meet them all. To cling to a Visa fixation would be a mistake.
Wave has a hardware solution that is distributed on the client side. Wave does not merely handle electronic payments a la Visa. Wave does not supplant Visa. Wave's slice is not being "tacked on." Middlemen who add no value are being cut out. Economies in packaging, distribution, rights management, record control, and piracy-prevention capture savings that translate directly to the bottom line. Even with Wave and the platform and the crypto partners taking an aggregate of some 44% (25 points of which is Wave's), the content provider nets more than under the status quo. Please allow me to quote from a post on Raging Bull by DooWopGuy, who said it better than I:
"Whether it is Wave providing the solution, or someone else, we are making a major transition in the way digital content is distributed. The old rules for distributing books, magazines, music, games, and video will apply less and less over the next few years. The reason is simple and the case is compelling: economics. Publication, distribution, storage, and physical sale of these items is expensive and slows down time to market. Digital distribution is significantly cheaper and much faster to market. The percentage of a sale that will be given up by the content provider or aggregator is probably about the same as in the current, physical delivery model, but the delivery will be more secure and less exposed to fraud of all kinds. Equally importantly, the total market will expand, because consumers will be more likely to buy smaller increments that aren't worth selling in the current model.
"If the shorts want to argue that Wave and the OEM splitting 50% of larger transactions is unrealistic, then they have a case. In fact, it's an argument supported by Wave when they talk about a sliding scale in which their percentage decreases as the transaction size increases. But that, in my mind, is a "So what?". The beauty here is that I will be able to buy all kinds of digital content for under $2 that is simply not available to me today. And, I will be able to buy it from sources that don't exist today because the cost of entry into the physical distribution business is too great."
future valuation model
The CEO of Wave Systems Corporation, Steven Sprague, has said that WAVX eventually will be valued according to a per-user model. As an example, take the per-subscriber valuation of America Online. AOL is said to have about 22 million subscribers and has a market capitalization of about $153 billion. Thus, the market capitalizes the value of AOL at almost $7,000 per subscriber.
Constructing such a valuation model for Wave requires four basic assumptions concerning deployment, use, market perception, and float.
--- First, one must assume a number of WaveNabled devices deployed.
--- Second, one must assume a use factor (i.e., the fraction of users who will "activate" their WaveNabled devices) --- for AOL, the 22 million figure. The product of the deployment number and the use factor is the number of client-side revenue nodes.
--- Third, one must assume a capitalization factor (i.e., the value that the market will assign to each client-side revenue node) --- for AOL, the $7,000 figure. The product of the number of client-side revenue nodes and the capitalization factor is the market capitalization.
Fourth, one must assume a number of common shares outstanding. The quotient of the market capitalization divided by the size of the float is the share-price.
These assumptions are not easy to derive. But playing with them can illustrate the relative sensitivities of the four basic variables. To facilitate such a "what-if" process, I have developed a simple spreadsheet. You just plug in your four assumptions --- deployments, use factor, capitalization factor, and float --- and it spits out the share-price.
I have WaveNabled this valuation spreadsheet as a 10-cent .SMO (self-merchandising object). You can find it here:
parlex.tripod.com
By tapping your WaveAccount for a dime, you get the spreadsheet, Wave gets a nickel, and I get a nickel. If 20,000,000 Wavoids participate, I will be a millionaire and Wave will have more revenues. Your basic win-win, eh?
Best wishes,
John
parlex.tripod.com |
