What does SBAY even do, and why does it sound so much like Commerce Planet? (SBAY)

Not only is Subaye (SBAY) a little late with their 10Q (good thing Monday, February 21st, is a holiday in the US, that gives their hotshot CFO, James T. Crane, a few extra days), but their retail investor base must certainly be clamoring for the magic “membership numbers”. But membership in what?

In a fairly breathless press release dated January 21, 2011 we are given some clues:

GUANGZHOU, China, Jan. 21, 2011 /PRNewswire-Asia/ — Subaye, Inc. (Nasdaq: SBAY) (“Subaye” or the “Company”), a leading online business services provider in China engaged in enterprise cloud computing, video marketing and business to consumer (“B2C”) online solutions announced today that its bundled cloud product (“BCP”) customers grew to 14,546 as of December 31, 2010, which represents an increase of $6.1 million in annualized revenues since the launch of Subaye’s new business model on September  1, 2010. The current level of 14,546 BCP customers generates a monthly run rate of approximately $6.2 million in revenues per month, or $74.4 million annually.

Awfully impressive, but just what is their “new business model” of B2C BCP?

Here is a description in SBAY‘s own, confusing, words. Enjoy their use of almost every possible buzzword!

Subaye’s new online business suite is offered to mid-tiered small and medium sized enterprises (SMEs) throughout Greater China. Previously, Subaye offered its online services as separate product offerings to entry level SMEs. In September, Subaye began to convert its video marketing  and cloud computing customers, which were previously paying a subscriber fee of approximately $120 and $100 per month, respectively. The   new bundled solution is now being offered for approximately $580 per month, which includes Subaye’s traditional video marketing services and cloud computing solutions consisting of online customer relationship management, online marketing, brand awareness and campaign management, as well as business administration solutions (i.e. human resources, accounts receivable, accounts payable, among others). In the next twelve months Subaye will be prioritizing mid-tier SMEs but will also attempt to convince a targeted 10% of its former video marketing  customers to utilize the new online business suite and agree to the new subscriber fee.

Could it be the same business model of Commerce Planet (CPLT fka CPNE) where James T. Crane was a director?

CPLT billed itself as a Software-as-a-Service (SaaS) outfit targeting Small and Midsized Businesses (SMBs). Now “Cloud Computing” is just the fancy new buzzword for SaaS and SMEs sound quite a bit like SMBs.

Here is a little bit of Commerce Planet in their own words:

Commerce Planet, Inc. is a technology driven online media, marketing, and fully integrated e-commerce company that offers media products, lead generation services, list database management, e-commerce solutions, web marketing, call center support and CRM tools to its client partners as well as through its own direct selling businesses. Commerce Planet offers turn-key business solutions through its network of online marketing & media division, membership sales companies, customer care and call center facility, and it’s newly acquired E-Commerce Dashboard™ System by Iventa. In combination these services address the needs of small – medium size businesses, B2B and B2C marketing programs, and custom solutions for enterprise clients worldwide.

What Commerce Planet was actually doing was selling the unwary a “kit” with information about setting up a business on-line, basically Ebay for idiots. CPLT then proceeded to charge their customers a monthly fee. A fee that kept coming every month, whether the customers wanted it or not. It is called “negative option”, where you have to do take action to STOP someone from charging you for goods and services you don’t want or need. “What a great recurring revenue model!” the CPLT boys must have thought to themselves.

What the FTC had to say about it when they shut Commerce Planet down, was a little different:

An online marketer of purportedly “free” Internet auction kits, which automatically charged unwitting consumers $59.95 a month for enrollment in an “online supplier” program for Internet auctions, has agreed to settle Federal Trade Commission charges that its actions violated federal law. The separate proposed court settlements with the company and two of its former executives bar them from similar deceptive conduct in the future, and require them to make specific disclosures to ensure consumers are aware of any recurring-fee plans (also known as “continuity plans” or “negative option plans”) for which they are signing up or being charged. The proposed court settlements also require the settling defendants to pay a total of what could be more than $1 million.

Read more about the Commerce Planet scam here and here. And here. Read the court documents here.

Crane had been involved with CPLT since 2007. In 2007, the shares hit a high of $69.60. By the end of 2008, less than 20c per share. And the last time CPLT traded, on February 10, 2011 the price was 1/10th of cent per share.

Now, your author has no idea if SBAY is pulling the same trick with its BCP B2C recurring revenue offering, but given the obvious similarities, and with James T. Crane involved in both, the question should be asked. CPLT‘s settlement with the government forbids them from pulling the same stunt again in the US. Is Crane repeating the CPLT scam, just in a more naive market, with less consumer protections?

The content contained in this blog represents only the opinions of the author. The author may hold either long or short positions in securities of various companies discussed in the blog. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. This blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.

One comment

  1. there is no coments for rabish like you write

    [@Damian – I think you meant to write “There are no comments for rubbish like you have written” which is quite ironic because you have commented twice. – Editor]

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