Portal founder builds file distributor
Kitze, founder of Xoom.com and NBCi, buys MagnaCash
By Thom Calandra, CBS MarketWatch
Last Update: 3:41 PM ET Sept. 4, 2001
SAN FRANCISCO (CBS.MW) -- The founder of Internet portals Xoom.com and NBCi on Tuesday said he was buying an online payments company for an undisclosed amount.
Chris Kitze said his Yaga Inc. would acquire MagnaCash from United NewVentures, an Internet unit of airline UAL Corp. (UAL: news, chart, profile). United NewVentures obtained MagnaCash through its acquisition of Internet marketing company MyPoints.com in July.
Kitze in 1999 oversaw the merger of community Internet company Xoom.com with online assets owned by television network NBC and CNET's Snap.com. The San Francisco company, NBCi, suffered several rounds of layoffs, shrinking revenue and a plunging share price. General Electric's NBC last month purchased the roughly two-thirds of NBCi (NBCI: news, chart, profile) it didn't own for $2.19 a share.
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Kitze on Tuesday said MagnaCash would let content creators distribute their material for payment via www.Yaga.com, a peer-to-peer content delivery system. Kitze and Vijay Vaidyanathan, another former Xoom.com executive, started Yaga a year ago. The California company, which joins users' computers in a file-sharing network designed to quicken computer-download times, has about $22 million of funding from several investors, including venture capitalist firm Draper Fisher Jurvetson and publicly held Internet company InfoSpace (INSP: news, chart, profile).
Kitze, Yaga.com's chief executive, contends that only one in four Internet content companies is profitable in the United States. "Content companies are serving up ads and material for less than the cost of their bandwidth," Kitze said. He hopes to use MagnaCash to provide entertainment companies, independent producers and artists with a way of selling their audio, video and other large files to consumers.
MagnaCash lets digital content distributors get paid via credit cards and bank accounts without setting up merchant accounts.
"We want to enable people to get paid from their Web sites," Kitze said. "We are going to enable people to make money off their Web sites through pay-per-view and subscription Web sites."
Online payment systems are far from an accepted service on the World Wide Web. Flooz.com, which used online currency as gift certificates, and Beenz both halted operations last month.
Two of the largest person-to-person payment systems derive much of their business from online auction users. Billpoint is part owned by auction site EBay (EBAY: news, chart, profile) and by California bank Wells Fargo (WFC: news, chart, profile). A competitor, PayPal, operates a credit-card based system that is accepted on EBay.
Kitze declined to provide a purchase price for MagnaCash, saying only, "We got a good deal." He also downplayed Yaga's growing list of competitors in the area of online content distributors, some of them modeled after embattled file-sharing pioneer Napster. These include Peer Genius, Kontiki, Blue Falcon, Radiance and Red Swoosh.
"We are focused on payments for legal digital goods," Kitze said. "We believe, as we did at Xoom.com, that online users self-organize into communities of self-interest, and we hope to develop channels that let serve those users." Such channels might serve the Indian American community or other users looking for their own entertainment networks on the Web.
Yaga, which has about 35 employees, later this year will begin charging users, but not content creators, a monthly fee to use the network, Kitze said. Yaga will have 100,000 trial users by the end of September, Kitze estimated.
Thom Calandra is Editor-in-Chief of CBS MarketWatch. |
