[Spambayes] Two Stage Plan

T. Alexander Popiel popiel at wolfskeep.com
Wed Dec 18 13:39:15 EST 2002


In message:  <BA264018.1AEB7%grobinson@transpose.com>
             Gary Robinson <grobinson@transpose.com> writes:
>> I'm currently working for a company in the transaction tracking and
>> aggregation business.  Transactions under about 5 cents still are a
>> net loss to the vendor, even with significant volumes.  The service
>> cost is high enough to keep the company afloat (that is, significant).
>
>Ah good. Now we can talk about something interesting.
>
>What is the basis of the 5 cents? Where does it go?

Alas, I'm not one of the financial guys here, so I can't say with
any authority, but here's my best understanding:

1. There's account setup costs.  These are variable, but typically
   fairly hefty for the vendors.  I would be unsurprised if there's
   a fair amount of milking going on here, but there is a minimum
   level.

2. There's data storage costs.  These tend to vary wildly based on
   who you ask.  I know that the big raid arrays are expensive,
   though, particularly when you get to dual or triple failure
   tolerance.

3. There's connectivity costs.  These are not particularly high
   bandwidth, but latency needs to be low and the reliability
   needs to be extreme.  Anything more than 3 second turnaround
   is unacceptable, and downtime _really_ hurts.  (The latency
   requirement might be relaxed if the only product is email...
   but for stuff like ringtones, customers get annoyed easily.)

4. There's billing costs.  Actually doing collections of the
   money is one of the largest expenses... even if it's just to
   a credit card.  Somewhere down the line (for typical consumers,
   at least), a physical mail is getting sent, a check is getting
   handled and processed... and this cost gets reflected up the
   line.  While processing fees are generally expressed as a
   base + percentage of the sum, if you do too many small
   transactions, then the credit card companies will start
   increasing the base (so cross-cancellation doesn't help much).

5. There's authentication costs.  Fraud is a noticable problem.
   Note that authentication is not necessarily per-transaction,
   but it is required on a statistically sufficient basis.

6. There's retrieval costs.  Outside audits in particular are
   expensive.

7. There's security and destruction costs.  The data has to be
   safe from prying eyes, and it must go away after certain
   lengths of time.  When it goes away, you must be sure it
   goes away... privacy liabiliy sucks.

Unfortunately, I don't have the information to actually put
values to any of these pieces.  I've probably left out a few
pieces, too.  Only the ambient office knowledge that "<5 cents
isn't worth it".  We really encourage transactions between $.75
and $3.00.  Above $3.00, we start imposing additional
authentication measures.

- Alex



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