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Mobile commerce loses Snaz

The mobile commerce software maker quietly files for bankruptcy protection after burning through its cash.

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
3 min read
Mobile commerce software maker Snaz had the big-name investors, a solid product, and business from some of the most powerful carriers and wireless providers in the United States. But this week, the company quietly filed for bankruptcy protection after burning through its cash.

Analysts and industry insiders say the company's failure to keep afloat is a telling sign about the state of mobile commerce in the United States--as in, there isn't much.

Mobile commerce is the act of using a mobile Internet device, such as a phone or personal digital assistant, to purchase a product. Snaz sold technology to carriers enabling them to offer mobile commerce for their digital subscribers. The company provided the software. There were about 350 merchants who said they wanted to peddle goods and services, such as CDs, books and clothing, in their wireless environment. Each merchant was supposed to pay Snaz about 10 percent of each purchase made.

Last year, when Snaz in its heyday inked pacts with Nextel, AT&T Wireless and Palm, Snaz co-founder Vikram Chachra may have predicted part of the problem. "We are enthused, since by 2003, we believe more than half of all Internet traffic will be from wireless devices," he told reporters.

The problem that Snaz and other mobile commerce companies are finding is that it's 2001, and consumers still shy away from using wireless devices to make purchases, industry insiders say.

"The market wasn't moving as fast as the technology," said Doug Bennett, a former member of the Snaz board of directors.

Repeated calls to Snaz were not returned. The company filed a Chapter 7 bankruptcy petition in a New York court earlier this week. Details of the petition--whether the company plans to shut down or wants to reorganize and is seeking a fresh infusion of cash--were unavailable. Some industry sources believe the company is hoping to sell off its assets.

Snaz investors were led by the Invus Group. Individual investors included Scott Flanders, chief executive of Columbia House Music. Robert Laiken, the chief executive of Brightpath.com, was also an early investor in the company although he later sold his share.

Keith Waryas, mobile commerce analyst for IDC, said the market research firm is revising its mobile commerce projections. As they stand now, IDC estimates that by the end of this year, there will be about $419 million trading hands through mobile commerce worldwide. By comparison, the total amount of commerce on the Internet this year is expected to be $273 billion. By 2005, mobile commerce was expected to hit about $39 billion, compared to $1.8 trillion in commerce done on the wired Internet.

But those projections were made based on a "blue-sky market" that has turned gray, Waryas said.

Other factors standing in the way of mobile commerce include the apparent failure of carriers to be able to meet an Oct. 1 deadline to install a way for police to locate cell phones. Many companies were hoping to use the same system to either market or sell products to wireless users.

Waryas said businesspeople hold the key. Once mobile commerce is adopted by these road warriors, consumers should follow, he said.

But even the businessperson might not be as willing anymore to conduct transactions using an Internet-connected phone.

In June of last year, a survey of consumers in the United States, Japan and six other countries conducted by market research firm A.T. Kearney, found that nearly a third of the people polled who owned cell phones planned to use the mobile Internet to make purchases.

Six months later, that figure has dropped to just above 10 percent of all cell phone users, according to A.T. Kearney.

"As with all things new, sexy and exciting, there is often a disconnect between the technology and how things really are on a day-to-day basis," said Mitch Mitchell, an A.T. Kearney vice president. "It happens in this business all the time."