Profile: Zipidee

Startup Looks to Sell All Things Digital

04 October 2007, 18:27
by Tomio Geron

A startup coming out of stealth mode is hoping to upend
the market for digital products in the same way eBay did for all types of
physical products.

Expected to launch in the next week or so, San
Francisco-based Zipidee will let companies sell videos, music tracks, ebooks,
mobile ringtones, software, games, and podcasts through its online marketplace.

The idea is to allow small to medium sized companies—and
individuals—to set up "stores" much like they can already do on eBay,
but merchandise on Zipidee will be limited to digital goods.

But unlike eBay’s auction system for physical goods,
digital download prices on Zipidee will be fixed by the seller, much in the way
that Apple’s iTunes store set prices for digital music tracks

Zipidee’s sellers will be able to control the price of
their goods and the method by which they will be distributed. Zipidee, founded
this February, is backed by Individuals’ Venture Fund, which invested in
Salesforce.com and Netlogic, as well as Novus Ventures, and Khalda Development.

Zipidee’s marketplace is initially focused on selling
"prosumer" content—especially instructional or educational
videos—that are professionally produced and often sold offline as DVDs. Zipidee
has signed up gurus such as Marcia Wieder of Dream University and Christine
Comaford-Lynch of Mighty Ventures, who bring legions of devoted fans.

But the challenge for Zipidee will be to attract a large
enough audience, when few online content companies have been successful charging
customers for content, said Greg Sterling of Sterling Market Intelligence.
People have often come to expect digital content and goods to be free, unlike
the physical products for sale on eBay.

"The theory of (Zipidee’s model) is right in the
sense of the so-called long tail and all the niche segments would seem to
support a subscription model," Mr. Sterling said. "In practice it’s
hard to get large numbers of subscribers. There are people out there who will
pay. The question is how big is the market."

Zipidee will have to offer a high quality product and
unique content that isn’t available elsewhere, he added.

Zipidee is also targeting offline DVD and educational
content distributors, offering to digitize their content. Finally, the company
is in talks with some large media companies about finding ways to monetize
their content. Zipidee said it is purposely avoiding most entertainment content
because heavyweights such as Apple and Amazon already dominate that market.

Sellers can decide whether they want to use Zipidee’s
proprietary DRM protection, and whether they want to allow users to rent
content for 30 days, purchase individual units or an entire collection at one
time. Buyers can also opt to download content or receive it as a stream.

The service allows more information for sellers about how
their products are selling—for example real time information—than iTunes does
with its monthly reports.

These various services will allow small to medium sized
sellers to easily get their products to market in a self-serve format, says
Zipidee CEO Henry Wong, rather than spending money to distribute it through
DVDs or other channels.

Zipidee is seeking to offer an alternative to both
existing pay models for content and free ad-supported models. On the pay side,
content creators—not to mention media companies—are often unhappy with iTunes,
which takes a large cut of revenues. And free video sites such as Revver and
Veoh generate substantial ad revenues only if their videos are massive global
hits.

"The online ad model is great for entertainment but
that requires massive viewing," Mr. Wong said. "For the content we’re
going after, the smaller niche audience, the price point is much higher."

Zipidee will charge a $1 listing fee and collect roughly
20 percent of the purchase price. Zipidee also has a number of
consumer-friendly features like an eBay-style ratings system.

Mr. Wong has a background in digital marketplaces, having
invested in AdECN, the online advertising marketplace that was recently
acquired by Microsoft.

As Mr. Wong knows from his work with AdECN, he needs to
pull in a large amount of inventory from sellers to ramp up his site into an
active functioning marketplace. If he can do that then, as with his Microsoft
exit, his marketplace could take off.

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