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While in Germany Flattr is quite popular because of the publicity of Peter Sunde aka brokep of The Pirate Bay, the older but a bit less known competitor Kachingle is also gaining traction. We've been been having a quite detailed chat with the chief executive officer (CEO), Cyntia Typaldos. Of course we wanted to know how she feels about paywalls for websites and how the funding of websites could take place in the future.
Lars Sobiraj: What about introducing first yourself and how you became part of your company?
Cyntia Typaldos: I am the inventor of Kachingle, and the founder. I am also the author of our patent application.
I first got the idea of Kachingle in May 2003. That month my best friend, Laura Haydée Gutierrez, was diagnosed brain cancer. Laura did not speak good English – she was Argentine – so she asked me to research her condition. I spent every free moment that month searching the internet for information about brain tumors. I read medical websites, patient blogs, discussion boards, non-profit sites and so on.
I gathered up a lot of valuable information, put it together in a short document, and gave it to Laura. This information was incredibly useful since neither of us, nor anyone in her family, had any knowledge about brain tumors. When I finished my compilation I wanted to go back to the sites I had visited the most, where I had found the best information, and sprinkle $100 across them, not as a donation to cure brain cancer, but in thanks for being there and providing information. I wanted to let these sites know that they were valued, and also make sure that they were there for the next person.
But I had no idea which sites of the hundreds I had been to were the ones that I found the most useful, that I went to again and again, it was all a blur. So that was how I first came up with the idea that there should be an easy way to reward internet content and service providers with a small amount of money.
While I’m sad to tell you that Laura died several years ago, it is still very satisfying for me to have Kachingle become a live service and fulfill this need I discovered while helping her. And one of the sites I visited often, which gathers up a list of clinical trials, is now Kachingle-enabled! (Musella Foundation for Brain Tumor Research and Information) There were several other online experiences that also helped me conceive of the details of Kachingle. I describe them in this video – History of Kachingle.
Lars Sobiraj: What is the idea behind your service?
Cyntia Typaldos: The Idea Behind Kachingle
Kachingle is built around 5 Principles.
- User-centric
- “No mental transaction costs”
- Leverage existing social networks
- Financial transparency
- Fun
Let me explain each one.
User-centric means we always take the side of the users (we call them Kachinglers), not the producers, and not even Kachingle itself. These principles guide every design, policy and business decision. For instance, given that users are voluntarily paying for something that is free, we feel they need to get something in return. We enable our users to build a powerful real-time persona around the producers that they support. The users get recognition for supporting free stuff. This also means we let them choose how they want to build this reputation – they can use their real name, a made-up name, a special name on a site-by-site basis, or be completely anonymous. And as another example, it means that our widget, what we called the Medallion, is designed to contain a “voice” so that it makes sense for a user to be associated with it. For instance, as a user I want to be able to show others that I value (and support) Carta.info, or a specific author on Carta.info. On the Kachingle blog a user can support the whole blog, or/and just my posts! The Medallion is designed this way because it’s what makes sense from a user-centric Point of View.
“No mental transaction costs” means that for our users, we figure stuff out for them and make it super-easy to use the system. Now, when I talk about users I don’t mean early adopters. I don’t mean bloggers. Those kinds of people will jump thru hoops and even enjoy doing so. But for “social payments”, for Kachingle, to become successful, and for online producers to make real money, ordinary people have to become users. Ordinary people don’t want to be fooling with filling accounts (that’s why we do subscriptions), or worrying about how much money to contribute (that’s why we only allow $5/month initially), or actively managing their money flow to reduce PayPal or other payment system transaction fees (we manage all of this for them). Ordinary people just want a very, very simple system that is “fair” based on their values. And that pretty much runs automatically with very little effort on their part. That’s also why with Kachingle the user just has to turn on our Medallion once, to add it to their list, and then we do the rest (by counting daily visits). Constant button pushing and turning stuff off and on is just too much trouble – digg for example after 6 years at $40M in investment only has about 250K active diggers.
Leverage social networks means we are not building a destination site. We are a background service and will become visible on Twitter, Facebook and other places where users congregate with their colleagues and friends. Our Twitter application is in the final stages of testing and our Facebook application is in development. So you won’t see us attempting to displace these wildly popular social networking tools but rather augment them with real-time real-life online consumption behavior.
Financial transparency is near and dear to me. We believe that when users are making voluntary contributions for free stuff they have a right to know how much money that producer is making. But even more important, we’ve built into Kachingle a bullet-proof mechanism such that every single user can prove that every single penny was appropriately distributed. This part of my Kachingle invention is perhaps the one that I am most fond of – I call it “outsourced auditing”. What this means is that when each user’s $5 is distributed to the sites they selected (at the end of their month, based on usage), both the user, and the sites, and in fact the entire world, see the same page of where the money came from and where it went. So it can easily be proven that the money that came into Kachingle from that user went to the sites they selected since otherwise those numbers could not be displayed on the same page – they wouldn’t add up properly! I felt this was critically important in Kachingle that I didn’t have to tell users just “trust me” – they don’t have to trust me at all, on both sides, users and producers, they can see the exact money flow. Given the scandal with Kiva, the popular internet microlending platform, and many other systems that have 3rd parties in the middle, I wanted to be sure there would never be any doubts or questions about the transfer of money. I believe this outsourced auditing has many applications beyond social payments.
Fun. Kachingle is meant to be fun, not work. We don’t want people to be agonizing over how to spend $5/month! Or even when we allow them to put in more money…it can never be that they have to think about how to distribute it. It just has to be fair. Of course it’s always fun to see what you are doing – it’s fun to see what your friends are doing. Over time we plan to add a lot of game type of features to Kachingle, primarily as part of our Twitter and Facebook applications.
Lars Sobiraj: What exactly is the difference to Flattr or other competitors?
Cyntia Typaldos: Regarding competitors – there aren’t any! Right now there are two companies with live services in the social payments space – Kachingle and Flattr. There is also a French company called Rue89 working on a social payment service.
All three of us were recently on a panel in Paris (Kachingle was represented by Yves Huin, Director Kachingle Europe).
The biggest competition is not each other but
1) lack of a “social norm” for paying for free stuff online,
2) paywalls,
3) a very big player, e.g. Facebook, entering the market.
Our services are not the same, and I personally believe that each will be successful, and even co-exist. I believe each service will appeal to a different type of user (e.g. early adopter, regular person, etc.) even for the same producer. So all companies currently in the social payments space are helping to grow the market, to create awareness, and discourage paywalls.
Differences between Kachingle and Flattr – there are a legion! That’s why I’m so confident that our systems will end up co-existing, even thriving together. I will leave it up to industrious bloggers or journalists to really delve into the differences but here’s a few at a high level.
Kachingle is all about the user (the Kachingler) building a real-time persona or reputation based on the online content and services that they support. That’s why we are not creating a destination site (like digg) and instead pushing our users’ info thru Twitter and Facebook, and why we are always user-centric. A side-effect of our social payment system is that producers get paid – but the primary incentive has to be for ordinary people to get involved because they personally get something valuable from kachingling.
For a Kachingler to build this persona, it needs to be around a “voice”. This is why a Kachingle Medallion is not designed to be for a specific one-off item. The Kachingle Medallion is designed to be spread across a group of items, pages, videos, music, and so on that a user sees as a single entity e.g. all of the blog posts by me on the Kachingle Blog, the sports section of the NYTimes, the music of a specific musician. Right now most of our sites are using just one Kachingle Medallion but larger sites can easily have many different Medallion IDs if they have multiple “voices” for their site.
Financial transparency is a key element of Kachingle. Every penny is accounted for and publicly visible. We believe this is required to build trust and confidence in a system where money is flowing behind the scenes. And it also saves us money because we have essentially outsourced our auditing to our users and producers!
At every possible opportunity, we minimize that actions and choices that our users have to make. We don’t want them to have to be fooling with managing their money (this is supposed to be micropayments and life is just too short!), pushing buttons, making choices where a decision is a burden instead of a joy. Early adopters love choices but ordinary people just want the system to work in a fair, easy-to-understand, no-hassle manner.
Lars Sobiraj: Why that limitation with five US Dollars at maximum each month?
picture on the left: Cynthia and her dog Bunny
Cyntia Typaldos: Given that we are user-centric, and users have NO experience with social payments and what the norm is, we didn’t want them to suffer “mental transaction costs” in trying to decide how much to contribute. Everyone has a choice of $5, or $5. Sort of like the Model T which came in black, or black.
At the beginning what’s most important is bringing users into the system, not the producers making money! I don’t think this key point is well understood. The amount of money any producer will make at the beginning should actually be small because we don’t want to scare users away by making them think they should be contributing a lot of money. These are micropayment systems for heaven’s sake and people should be thinking of Pennies, not Dollars or Euros or Pounds. What we need is to get millions of people putting in very small amounts -- not a few hundred thousand people putting in large amounts. So the $5/month sends a powerful message to the users and the market that it’s enough…that $5 is fair and fine and all that is required.
Of course, later on, as users become familiar with Kachingle and social payments become a social norm, we will split the voting from the contribution and encourage them to contribute more than $5!
A great book about why more choices are actually not beneficial to users is “The Paradox of Choice: Why More Is Less” by Barry Schwartz, which I highly recommend.
Lars Sobiraj: How many users do you have in Germany? Even if it's a lot younger, why is Flattr so much more popular here in Germany?
Cyntia Typaldos: While we don’t report on the number of users directly, because we are a transparent system, anyone can see the number of sites (e.g. Medallions) and the amount of money that has been earned by each, right on our website (e.g. micropayments for Carta.info).
However, what we are doing is creating a new social norm, and by its very nature this will take time. But we are patient and doing all sorts of activities that will convince ordinary people that making voluntary contributions is what people who are like them do. But just like getting people to fasten seat belts, or stop smoking, this will take time and numerous exposures to the concept. A great book about changing behaviors is “Influence: The Psychology of Persuasion” by Robert B. Cialdini.
What’s most important is that the concept of “social payments” as a new social norm starts to seep into the public consciousness. We believe we are being very successful in implementing this first step: Kachingle Medallion views now reach 750,000 per day, growing at 100% per month.
Lars Sobiraj: Most websites getting donations by using your service are coming from Germany. Are German readers different compared to others?
Cyntia Typaldos: About half of our producers are from German-speaking countries (Germany, Austria, and Switzerland). It came as a surprise to us that these are the early adopters, although maybe it shouldn’t have given that three people of our core team are originally from Germany -- our Chairman (Jens Horstmann), our CTO (Frank Spies) and our CIO (Andreas Junge)! When I went around Silicon Valley building my team, many people said that getting people to pay for free stuff was just a crazy idea. By my German colleagues said “yeah – let’s do it!”
But I think there is an even better explanation that Robin Meyer-Lucht of Carta.info mentioned to me. He felt that since advertising wasn’t as successful in Germany as in the U.S., that the producers were willing to be more experimental. That’s the best explanation I have heard so far…you might want to ask him to describe it further. Or toss in your own ideas! It really is sort of a mystery!
Lars Sobiraj: If only 85% of the donations reach the owners of the websites directly, what could you do to improve this part? In Germany many people are complaining about the extreme high fees of PayPal. When will it be possible to fill out a debit order for the regular bank account? (this would reduce the costs a lot.)
Cyntia Typaldos: With Kachingle, we guarantee that 85% of the money that goes into the system actually ends up in the pockets of the providers – not stuck in an account on our system that still has to go thru a PayPal payout fee.
85% is an excellent throughput – Amazon in its new deal with publishers provides only 70%. And always keep in mind that the 85% is actual money transferred from Kachinglers to Producers and not stuck in an account where additional financial fees have to be paid to pull it out. So for every $5 that goes in from all users, $4.25 is actually money paid out. That includes all transaction processing fees – ours and PayPal’s. And we do a Pay-Out at the $3.35 threshold every single month for every producer. We designed Kachingle so that micropayments actually make sense and that even at small amounts producers make real money – only 15% of what goes in is taken out by Kachingle and PayPal combined.
To get fees down this low, we used PayPal APIs [API = application program interface = a way for two different websites to talk to each other directly] both on Pay-In and Pay-Out (their micropayment service on the Pay-In, and their Masspay service on the Pay-Out) AND we negotiated with them to get dramatically reduced rates on both Pay-In and Pay-Out. So we can do a Pay-Out at any amount – even a penny! For marketing reasons we decided to make the threshold $3.35 – the (approximate amount of a Starbucks grande iced latte).
The point is that we don’t leave this management of the PayPal fees in the hands of the users because:
1) users need to be able to put in small amounts of money e.g. $5 and still have the producers receive a goodly portion e.g. 85% -- we believe social payments will only take off if the system is down to this micropayment level,
2) users can’t access APIs,
3) users can’t negotiate with PayPal,
4) users typically don’t want to have to be managing their money carefully in order to get their transaction fees low – they have better things to do!
5) users care about how much of their money actually ends up in the hands of the producers – this is similar in concept to “fair trade”,
6) producers shouldn’t be forced to keep their money in the system until quite a bit of money accumulates in order to not get slammed by high transaction fees when they pulled it out.
It is rather complicated – dealing with and managing financial transaction fees always is! But we put a huge amount of thought and design into our implementation to make sure that even at very small amounts transaction fees don’t eat up much of the money flow. Leander Wattig wrote this up at a high level: Ein Herz für Erzeuger.
Regarding using a debit order from a regular bank account. This actually works now, although the PayPal interface is poorly designed and confusing. If you as a user have set up a PayPal account and made a transfer from your bank account to fill that PayPal account, that money is used for the Kachingle subscription. We do have an issue with PayPal though in that they require German users to also provide a credit card for subscriptions, even though that card is not used if there is a balance in the PayPal account! This credit card requirement by PayPal for subscriptions ONLY occurs in Germany and we are working closely with PayPal’s subscription product manager to make their system better.
I invite Kachingle users and others to contact me directly with any feedback on this issue (and any other issue of course). This has been an unexpected glitch in the payment processing but we are confident that PayPal will work diligently with us to make their system friendlier to micropayments, and to German users! We have partnered with PayPal – they have 15M users in Germany alone – and we are very pleased with their responsiveness to our issues. PayPal is eager to be a big player in the micropayment ecosystem.
Lars Sobiraj: Some publishing houses see a chance of survival by building up paywalls for their content. You once said everything which is digitized will be napsterized, do you still agree? Will they be sorry to do so?
Cyntia Typaldos: Well since I’m the one that said that “Everything which is digitized will be napsterized” so I would have to agree! Now is a great time to ask that question as The Times in London just went behind a solid paywall at the beginning of July. The next few months will reveal a lot about how successful paywalls will be.
Here are two great posts on this topic written by Steve Outing: "No, I’m not ‘against’ people paying for online news" and "The Times vs. Guardian strategies: uber-dumb & smart".
Lars Sobiraj: Nowadays everyone is used to getting everything for free. Do you think it will be possible to convince people to invest money into high quality content?
Cyntia Typaldos: Yes, as long as the amount of money is small, there are “no mental transaction costs”, the system is fair and financially transparent and fun, and the user gets to build a social reputation in return.
Lars Sobiraj: I heard an API for Wordpress, MySpace, Twitter and Facebook is in the making, but isn't Kachingle already a sort of social network on its own with the social feedback?
Cyntia Typaldos: We have built a Wordpress Plug-in for the Medallion already. Our Twitter application is done and in alpha testing. MySpace and Facebook applications are in development.
Lars Sobiraj: What will the internet look like in five or 10 years? A world full of barricades, anarchy or something in between? And where will you be?
Cyntia Typaldos: Wow, this is a hard question. Just predicting the next year is impossible, much less 5 or 10 years out! However I do believe social payments will become the norm in 5 years or so for about 30% of the internet population. And users will value the reputation they get from doing social payments enormously as it can eventually be used as a basis for discovering great information, music, films, applications, or discovering sympathetic colleagues, or even finding a date!
Lars Sobiraj: Okay, let's wait and see what will happen in 10 years. Let us simply hope the best. And thanks a lot for your extreme extensive replies.
Lars Sobiraj am Samstag, 10.07.2010 16:41 Uhr
Tags:
flattr
kachingle
typaldos
rue89
Bitte hier diskutieren: http://board.gulli.com/thread/1576342-kachingle-interview-mit-cyntia-typaldos ...
Ganz ruhig, die deutsche Version hat nur einen Moment zum Veröffentlichen gebraucht ;) alles wird gut. ...
Seit wann gibt es denn komplett Englische Beiträge? Diejenigen die sich schwer tun mit Englisch werden ein Problem haben das zu verstehen, selbst mit Google Übersetzer... ...
Voluntary donations vs. obligatory paywalls. In addition to advertising revenues, micropayment services are getting a more and more important source of income for bloggers and the operators of commercial websites. Recently we spoke to Kachingle CEO Cyntia Typaldos [url=http://www.gulli.com/news/kac ...
Lars Sobiraj am 10.05.2012, 13:17 Uhr
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