There’s a lot of chat lately about the “two-sided market” issue regarding Kachingle (also colloquially known as the “chicken and egg” problem).
(see neunetz.com and Stefan Mey – both are in German; further discussion here:  Wie Kachingle das Henne-Ei-Problem angeht)

First, I’d like to mention that as the founder of Kachingle I have quite a bit of experience with this issue, having formerly been the Director of Standards at Sun Microsystems.  I also taught a course at U.C. Berkeley Extension on this very topic.  However the market for voluntary micropayments differs in that the cost of using multiple systems is trivial.

The market for micropayments actually profits from the fact that the media scene is so diverse. It’s all about social reputation within networks of content providers with similar interest. Most other two-sided markets needed large economies of scale to break-even with development costs, but micropayments do not need that – they can start from one niche and then jump to the next one.

Two-sided markets are subject to early tipping points (see articles by Brian Arthur the economist on this subject).  In fact, in pure economic terms, Kachingle is not in a two-sided market as in those markets both the buyers and sellers have price flexibilities, whereas in any voluntary contribution system only the “buyers” are paying a fee.  But no matter, it’s close enough of a description of the issue that we face.

There are many ways to get the market past this “chicken and egg” stage.   I lay them out here and look forward to feedback.

1. Require every chicken to lay its own egg.
2. Attract very large sites where even if just a small percentage of users join as Kachinglers, the overall number is still significant.
3. Develop an API for bulk upload of the Kachingle Medallion into communities that host their own blogs.
4. Work with partners that raise the visibility of the Kachingle solution.
5. Complete the implementation of the viral parts of Kachingle.
6. Other marketing efforts.

Continue for details…


1. Require every chicken to lay its own egg.

The implementation would be that every site that uses the Kachingle Medallion (widget) would also be required to become a paying Kachingler.  We considered making this a requirement but did not as there are many sites that are not “owned” by a single person (Carta.info, DailyCamera.com are obvious examples).  However, in practice, what we have observed is that nearly all of our site owners also become Kachinglers.  So this mechanism is already in place, although not dictated.

2. Attract very large sites where even if just a small percentage of users join as Kachinglers, the overall number is still significant.

We spent a lot of time last year meeting with very large sites, the major newspapers in particular.  In fact, just about every major newspaper contacted us!  In general the people responsible for the digital content were quite enthusiastic, but the senior management of these organizations were not yet willing to experiment with Kachingle.  They mostly wanted to take a “wait and see” strategy…as soon as a really big newspaper signed up with Kachingle, they would too.  So all it will take  is one innovator to tip many of them into the Kachingle egg basket!

3. Develop an API for bulk upload of the Kachingle Medallion into communities that host their own blogs.

This is in development and is a very promising route.  We have several large sites we are working with for deployment.

4. Work with partners that raise the visibility of the Kachingle solution.

Now that we have a live working product, we are contacting (and being contacted by) major players in the payment, blog, and general content platform space.  We are in deep discussions with quite a few of these companies and the results will be visibly shortly.  It does help us considerably to be here in Silicon Valley where many (but not all) of these companies are headquartered.  In some cases  we already know key people in these companies which has also helped us get traction.  This  effort could not be begun however until Kachingle went live as attempting to partner while still in closed beta is typically not successful.  Kachingle went public live in mid-February.

5. Complete the implementation of the viral parts of Kachingle.

We launched Kachingle without the viral components completed (e.g. email notifications, Twitter integration, Facebook integration).   All of these components are in development and will be released shortly.  Clearly reaching into users’ social networks is probably the most powerful way of attracting additional Kachinglers (and sites).

Why didn’t we wait to launch until Kachingle had the viral capabilities?


a. We felt it was extremely important to get our Medallion “out in the wild” quickly and learn about the various environments.

There is no way to “test” widget code without releasing it and watching its behavior, learning from that, improving the code, and then updating it.  We have had a fabulous 5 months (including alpha & beta and public versions) of experience now and modified our widget javascript code extensively based on what we learned from having it installed on our 130+ Kachingle-enabled sites.  According to experts in the jquery arena, “it’s the wild, wild west” out there on sites and blogs with multiple widgets jostling each other, interacting in unexpected ways, even competing for visibility!  Our widget needs to not only play well with the other tens of widgets that can be on a page, but also hold its own and defend itself against unruly and misbehaving widgets.  We have now updated our Medallion code (this happens automatically, our sites rarely need to do anything) and our Medallion is quite robust.  We are also in the process of rewriting it to allow for some fun, great new features (new Medallion sizes, different way the drop-down menu works) that we will be rolling out soon.

b. We built the financial system first, and made it rock-solid, then put it out live for final testing.

We felt the most important attribute for Kachingle was that the system was financially transparent and fair and completely reliable.  So we built that part of the system first, and released it early so that we could carefully monitor the system and address any issues before it became wildly popular.  I am happy to report that the system has performed flawlessly — both the code and the system environment.  I attribute this to our very careful attention to detail and the incredible work by our CTO (Frank Spies) and CIO (Andreas Junge).  So far Kachingle has not had a single bug in the financial flow of the money, not been down for even a millisecond since the beta launch in November (except for a half hour of scheduled down-time for the database conversion in February).

6. Other marketing efforts.

We are also working on other marketing efforts, some of which cannot be fully revealed yet.  But already we have numerous prestigious sites in important niches (see the blog posting “Investigative Journalism Organizations Embrace Kachingle“) and we are leveraging those successes.

—————————————————————————————————————

I would like to point out that Kachingle has only been public for two months, since mid-February 2010.  We ran a closed private beta starting in November 2009.  So for being just two months live we are very pleased with the visibility and traction we are getting!

Voluntary contributions”, “social micropayments”, “social cents for digital stuff”, “crowdfunding” — whatever you want to call it is a brand new concept and a business model that is only possible because of the internet.  It will take time for the market to appear and then evolve.  Kachingle is a like a brand-new baby eagerly out in the world, exploring its surroundings, listening, and learning to talk and interact.

Thanks.

Cynthia
Founder and Chief Kachingler
cynthia AT kachingle.com
skype: cynthia.typaldos
my kachingling