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Most applications that are more complex than a simple single-user or utility program have a central database that is maintained and used by more than one user in a company. In this case, you can charge the customer by the number of people who need to use your application. That charge can be a one-time fee, an annual fee for on-going maintenance and support, or both. The user can feel that they get certain cost-saving benefits from this approach, as a sitewide license (if you have one) would be prohibitively expensive. But they need to decide how many users they want. This can start conversations and debates inside a company that can slow down the decision to buy your product. Also, you will need to have some way inside your application to control the number of users. And some automated way to increase the number of users if your customer decides they d like to add another seat. So while this approach may seem to offer users some flexibility in their purchasing decision, there are technical problems you need to solve.

a community. There was a recession in 73 and Hewlett-Packard had to cut back 10 percent. Instead of laying off 10 percent of the people, they cut everyone s salary by 10 percent and gave us one day off every two weeks. So basically they said nobody goes without a job. And I like that sort of thing. So a bunch of Apple engineers and marketing people got to benefit from going public. Otherwise, they d have no stock at all. Mike Markkula kind of felt that some of these people didn t deserve it; some people shouldn t get stock. But I disagreed with him on that. Nobody stopped me, so I did it.

Livingston: But you still kept enough stock for yourself to buy a house, right Wozniak: The money I got from Apple employees, I used to buy a house. It

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was kind of an early state to be selling out 15 percent of your stock, but hey, that was a great opportunity for me. When I designed the Apple stuff, I never thought in my life I would have enough money to fly to Hawaii or make a down payment on a house. So it was huge deal for me.

There are a few applications that users might use only once or very infrequently. A health or psychological assessment would fall into this category. Or an analysis of financial condition such as retirement planning. After users get the information or feedback they re looking for, they may never run the program again. Or they may run it at irregular intervals and appreciate only having to pay per use. These users might be more amenable to paying a fee to get information as opposed to paying a charge to purchase software. From the users side of the table, it looks like they are buying a service rather than a product. This pricing model works particularly well for web-based applications where you can charge the user s credit card for each use of your program.

PayPal was founded in December 1998 by recent college grad Max Levchin and hedge fund manager Peter Thiel. The company went through several ideas, including cryptography software and a service for transmitting money via PDAs, before finding its niche as a web-based payment system. That service became wildly popular for online vendors, especially eBay sellers, who preferred it to traditional payment methods. PayPal went public in early 2002 and was acquired later that year by eBay for $1.5 billion. PayPal was started during the Internet Bubble, but it was in no sense a Bubble startup. Its success was a direct reflection of the intelligence of the people who built it. PayPal won because they built a better mousetrap. With any new method of moving money comes new forms of fraud. In large part, PayPal succeeded because it could deal with fraud and its competitors couldn t. The software that Levchin and his team developed to combat fraud runs quietly and invisibly. To this day, PayPal doesn t talk much about it. But Levchin s software was just as much the reason for PayPal s success as a more visible product like the Apple II was for Apple.

Livingston: Tell me a little about how PayPal got started. Levchin: The company was really not founded to do payments at all. My focus

in college was security. I wanted to do crypto and stuff like that. I had already founded three different companies during college and the year after, which I spent in Champaign-Urbana, where I went to school. Then, in favor of not doing graduate school, I decided to move out to Silicon Valley and try to start another company. So I was hanging around Silicon Valley in the summer of 98 and was not really sure what I was going to do with my life. I was living in Palo Alto, squatting

Figure 2-13. Splitting a large quad into smaller quads (left) and quads intersecting with the camera frustum (right)

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