Wednesday, April 22, 2009

Revised look at BMP - Bill My Parents

Bill My Parents- New Investor Media link

I have to tell you the first time I heard the idea back in June, IDAE was pursuing its other business plan simultaneously called Bill My Parents, I knew it was a home run. Jim Collas calls Teen, Tween credit/debit cards and payment systems the next frontier, just like cell phones for kids 10 years ago, and I must agree.

Like one financial guru once said "If you want to be extremely wealthy, all you need to do is find out where everyone is heading and get their first" IDAE is doing just that, putting themselves in a position to be first to market with a viable teen payment system.

Currently, Socialwise has focused the majority of their resources to Bill My Parents (BMP) because the management believes the BMP platform has a higher ceiling and marketability.

With a little research, its easy to see why.

Whats Bill My Parents?
BMP simply will allow a parent(s) to verify and approve/ disapprove a transaction of an item their kid(s) have requested. The next phase will include a debit card for kids that gives parents an enormous amount of control, and keeps it simple and convenient.

The first priority will be building an online store using a top retailer like Amazon to sell top selling products and offering the BMP platform as a payment option. This is perfect, since they will not need to try and find top sellers, or stock items, just use the retailer to promote their BMP product! Then BMP will get a cut of the sale, around 10%.

Lets break down the market.

First off parents are far more likely to buy non essential items for their kids then themselves, even if it means sacrificing their own desires. This is true even in a down market.

Lets look at one area of focus for the BMP product: video games, a multi, multi billion dollar industry.

Think about marketing a video game. Currently the video game companies need to try to target a small group in their advertising approach. Generally they cannot advertise to parents, since parents really dont always know which games their kids like. So what they stick with is marketing to late teens to early thirties to capture the market that will respond to the ad and have money to buy the product. This is their main market. Of course younger groups will see an advertisement and bug their parents till their parents buy it for them, but this is only a bonus.

You must note, some of these games, and gaming systems will sell out in hours or days. We are talking MILLIONS of copies at $30-$60 each (not including gaming systems and controllers which can easily hit $400 or more)

So what if a gaming company could advertise directly to the 10-18 yr. old group? Basically BMP solves this problem for every company in this situation. They can market right to the younger kids and advertise "Buy this now with BMP". With the excitement about this market, IDAE has secured lots of discounted ads. This is a nice first step.

Now lets put this into revenue terms, since really thats all we care about.

From the numbers that have been thrown out there, the big target for payment systems is 3 Million users. This is using other companies who have been acquired. With the BMP application alone, this could translate into about $900,000,000 in acquisition value alone, or better yet $18+ per share. (this does not include Ideaedge's social gifting platform only BMP)

How realistic is 3MM users?

With the marketing plan using the social networking platform, typically a “hot” application can reach over a million users in days. With the top applications reaching tens of millions in weeks. I think 3MM users through social networking and other ads in a reasonable time is VERY realistic. In fact, as great as this application is, I believe 3 Million is a very small number to the overall market. These are not hopeful numbers, but very realistic.

Now the other part of the BMP plan.

Bill my Parents Debit card:

Personally I think this is the golden Egg. The crème de la crème of the youth payment systems. A way to give your kid money, without giving them your card (Got your attention now?) Imagine loading your kids card with $200 and being able to:

- block undesirable merchants

- specify a safe merchant list that they can use,

- limit amounts at any merchant,

- monitor the card

- …oh and FREEZE (or unfreeze) the account at anytime with a simple text message or email. (When your kid gets grounded, why should they have the ability to spend money?)

Now add being able to simply add amounts to the debit card and parents have full control. These cards can be used anywhere MasterCard is used. Imagine the possibilities. I think this is where the company is headed for the long term. This in fact is a viable payment system for young people.

As far as numbers and profit, The market figures value at $1000 per user is reasonable for payment systems. So this means in terms of acquisition, 1MM debit card users would value that part of the business at 1 Billion. As far as profit, I haven’t been able to find any solid numbers, but you figure someone charging $1000 a year on average would be reasonable. (Note: this can be used for all a child’s purchases over a year, from school clothes and supplies, to gifts for friends and family). Credit card companies charge merchants anywhere from 1.5%-3%+ for transactions, so I would think realistic revenue from that would be anywhere from 0.5%-1%.

5 Million users = $250,000,000 - $500,000,000

10 Million users = $500,000,000- $1 Billion

I don’t see why the profit wouldn’t be at least 20% maybe higher given the outsourcing that Socialwise has (I think they are figuring at least that). If thats the case we are talking profit in the $50MM to $200MM plus range.

Compare just this one small part (the Debit card) of Socialwise to "Heartland Payment Systems"

Heartland does 85MM in EBITDA and still holds a market cap of over $300MM! (thats after a 50% decline in the last 8 weeks.)

Alone if the Socialwise Debit card achieved the numbers above and translated into a value of 350MM in market cap, that would spell out over $7 a share.

Are you beginning to see the big picture?

Now add that to the BMP platform (not to mention social gifting) and the numbers are staggering. This is a legitimate multi billion dollar company.

I think what is really exciting is this is just one business plan of IdeaEdge's that they are executing, and does not include social gifting which I already hit on earlier. Combined there is no reason in my mind they wont be able to rival a payment system such as Paypal.

Feel free to comment and ask questions.

Check out the site
Bill my Parents

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