Mukesh Chatter is reversing the eBay model with an auction system that makes sellers bid competitively for buyers. MoneyAisle.com is the first service from NeoSaej, a new company founded by Mukesh and his wife, Priti, in Burlington, Mass.
The quest to find a good price on a high-definition television can be a frustrating and confusing experience. For most people, the process concludes with the purchase of a brand-new TV set. For Mukesh Chatter, that was just the beginning.
Chatter has a long history in the networking world. He founded Nexabit Networks, a developer of gigabit routers which was acquired by Lucent for $900 million in 1999; as well as Axiowave, which made routers for the telecom industry before folding in 2004. His newest venture began when he was trying to buy a 52-inch HD television set a little more than three years ago. Chatter was annoyed by the large variance in prices and the difficulties presented to consumers trying not to get ripped off. So he decided to develop an online auction which turns the eBay model on its head by having the seller bid for the buyer's business.
The result is www.moneyaisle.com MoneyAisle.com, which is launching Monday and is the first service from NeoSaej, a new company founded by Mukesh and his wife, Priti, in Burlington, Mass. MoneyAisle lets banks sell certificates of deposit (CDs), high-yield savings accounts and lending products, by competitively bidding against each other for the right to sell their products to individual customers. The technology will be expanded to other goods as well – like those elusive high-def TVs, says Chatter, who spoke with Network World's Jon Brodkin in advance of the MoneyAisle launch.
Tell me about the TV.
We went to Circuit City, Best Buy, went online to Shopzilla, and to my surprise the TV was costing between $2,800 and $4,200. I was saying to myself 'this is a commodity sold by thousands of dealers. Why should there be so much variation?' This was 80% variation from the floor price. I said there has to be a better way. Why is it constantly the buyer's burden to figure this out?
You say online advertising, such as that provided by Google, contributes to high product prices. Why is that such a problem?
All that money [for advertising] is paid in advance to Google. Everybody has to pay in advance, even though they don't know what the conversion rate is [in terms of how much business the ad will generate]. They have become a much larger and dominant piece of the puzzle than what they were three years ago. Truly, there is a Google tax, if you will.
There is a hidden cost which neither the consumer is benefiting from nor is the seller benefiting from. It's going to the middle man. As hard as it is to see Google as the middle man, because they're a great company, the fact is consumers pay for it and that was not the case three or four years ago.
And you're trying to solve this problem with MoneyAisle.com.
The idea is to have sellers compete for the buyer's business.
How is it different than eBay?
It's exactly reversed. EBay's business is buyer-centric. In our case the seller is bidding for the business of the buyer.
For an obscure product eBay is fine. But why for a commodity? That's the thing that beats the heck out of me. Why for something being sold by thousands of people?
So with your system, how does a bank 'bid' for a customer?
It's all automated. They basically enter the amount of money they need to raise, $10 million in seven days or whatever. Then they specify the highest interest rate they are willing to pay for a deposit product. Then they specify the target markets they are interested in. Then they specify what kind of maturity and duration of CDs they're interested in. They also specify what amounts they are interested in. Now they can precisely go after what they want and expand their market.
Lastly, they choose their bidding strategy, which allows them in a simplified way to dictate how they should be bidding. Should they be leading the market or trailing the market?
So they can decide to offer the lowest prices, or somewhere in the middle, and then your system automatically generates a bid?
And how does this work for a consumer?
If you want to invest $10,000 for six months, that message is sent to all the banks. It's all automated, there's no human watching it. The best rate is communicated back to the consumer, along with the name of the bank. The whole process takes two minutes.
There must be some pretty complicated algorithms behind all this.
Yes there are. This is innovative, for sure. This is something we did in-house, myself and a couple of other guys. These are complicated algorithms, no question, but they are very innovative and a cool way to solve the problem.
You're only doing banking now, but will this extend to other consumer products, like the HD television set that frustrated you?
Do banks like this idea?
We have 102 banks in our network right now without even having launched the product or launched the company. We have the state of California, Massachusetts, Michigan, Illinois, Wisconsin, Arkansas, a number of these state banking associations are helping us very actively.
What about the huge banks, like Bank of America?
No, they are not. I cannot imagine large banks playing in it. Small and midsize banks have the roughest time right now. They're getting squeezed on all sides, they can't collect enough deposits. This is a means for them to compete in a level playing field for larger players. We do not accept any advertisements. We collect a fee after the banks have succeeded.
Is this a departure from what you've done previously?
It is quite different. Previously I was in telecom, high-speed routers. This is more on the Internet side. Having said all that, this is highly math centric, there's a lot of cool technology involved in this.
Nexabit was a success for you. What happened with Axiowave, the telecom router company you founded? (Compare router products.)
That was closed down in 2004. It did not work. The telecom market had tanked completely by then.
After that, you moved into investing. Why'd you get back into the business of being a founder and CEO?
We were investing in some interesting start-ups in somewhat more exotic spaces including energy efficiency and medical devices. Along the way you get the itch to go back into the operating role.