IS OBOPAY ON TRACK TO BECOME THE NEXT PAYPAL?

By: Mike Bailey

August 31, 2007

Encouraged by the free icecream sandwich and complimentary $5 starter deposit offered by the friendly Citibank representative outside my office building at lunchtime the other day, I opened an Obopay (www.obopay.com) account to make and receive P2P payments over my mobile phone. I admit, I'm not sure exactly how often I'll use the service. The website says I'll "never carry cash again", which I doubt, but still I wanted to find out how many other people have been enticed to join the mobile phone payment revolution. You may recall that PayPal gave new customers $10 back in its early days (later reduced to $5) and attracted 1 million sign-ups a month!

Here’s what Compete’s data told me about how Obopay is doing so far. From April to July 2007, Obopay.com was visited by an average of 560,000 people each month; going from a standing start to a peak in May when, supported by dramatically increased referrals from the major search engines (top referring terms included “prepaid cards” and “send money”) and from MyPoints.com, visitors approached 1.2 million. In a typical month, about 3% of visitors to Obopay.com enrolled for the service; things appeared to be picking up in July as conversion that month was over 12%. This equates to monthly enrollments in June and July of over 27,000 mobile phone payment makers.

But, are consumers using the service once they’ve enrolled? Compete found that almost 58,000 people signed into their Obopay account in July. When they did so, they are most likely to be adding money to their accounts (16% of active customers did this in July), sending money (11%) or withdrawing payments (5%). Money can be added to Obopay accounts via bank transfer, charge to credit/debit card or direct payroll deposit. An interesting feature is the ability of parents to create accounts for their kids; presumably for distribution of weekly allowance by mobile phone. About 3% of account holders did this.

Hoping to take advantage of viral marketing, the site encourages current users to send invites to their friends and pays $5 for every outgoing invite. Compete observed that about 25% of Obopay's current customers send out referrals each month. Assuming each customer sends 2 referrals a month and half of invitees actually enroll, how long will it take Obopay to cross the “1 million customers” threshold? About 18 months. Of course, in the meantime, should there be a disruptive event – such as being able to buy a Coke at a vending machine with your mobile phone – that barrier may be broken a lot sooner.

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