ID Watchdog, Inc. (IDW-TSXV, IDWAF-OTC)
June 25, 2010 Issue
The Most Powerful Name In Corporate News and Information
With Identity Theft Being One Of The Most Reported Crimes In The Last Few Years, ID Watchdog, Inc. Is In The Right Industry At The Right Time Providing A Best-In-Class Three-Tier Solution That Sets Them Apart From The Competition
Headquartered in Denver, Colorado, ID Watchdog
is the only consumer-facing identity theft detection and resolution company
that provides patent-pending, three-tiered comprehensive monitoring,
detection and resolution to help protect consumers from identity theft.
Unlike its competitors, ID Watchdog scans thousands of public and private
databases each month in order to proactively detect identity theft problems
at their source. Developed with the assistance of national consumer advocacy
groups, the U.S. Postal Service; federal, state and local law enforcement
agencies, privacy experts, and state and local Attorneys General, ID
Watchdog's service is focused on detecting the source of identity theft
problems as early as possible, in as many places as possible, and taking
immediate corrective action on behalf of the consumer.
Prior to joining ID Watchdog, Mohan was a Regional Sales Manager at DataCert, Inc, a private legal software and services company. He has also held leadership positions in direct sales, channel sales, and business development functions at Callidus Software (NASD: CALD) in San Jose, California, and Trilogy Software in Austin, Texas. A former US Air Force officer, Mr. Mohan holds an MBA from The University of Pennsylvania’s Wharton School, with dual concentrations in Finance and Strategic Management, as well as a BS in Accounting from The Pennsylvania State University.
CEOCFO: Mr. Mohan, what attracted you to ID Watchdog?
Mr. Mohan: I was attracted to ID Watchdog because of the increasing prevalence of identity theft in the lives of everyday Americans. Identity theft has been one of the most frequently reported-on stories in the last few years - as a matter of fact, in 2008 it was the third most reported story in the media behind Iraq and the Presidential election. It was, and continues to be, a crime that impacts ten million American consumers every year, and I found no solutions in the market that were truly effective in helping consumers grapple with a potentially personally devastating crime. Since its inception, the identity theft industry has been characterized both by fear and a fundamental misunderstanding in the minds of consumers of what identity theft is, how it happens, and what can be done to limit exposure. Unfortunately, a few of the early movers in the space were more than happy to capitalize on these fears, marketing services that over-promised protection and under-delivered service. I was attracted to ID Watchdog because of their unique solution to addressing a complex problem. The founders spent years working closely with players on the front lines of identity theft – banks, consumer advocates, privacy experts, and all levels of law enforcement – to develop a comprehensive solution that could provide the broadest and deepest identity monitoring capabilities, as well as actually do all the work required to restore compromised identities on behalf of consumers. I felt the founders not only created a service that stood far above anything else available to consumers, and did it from a position of consumer advocacy and honesty that wasn’t readily evident from other market participants.
CEOCFO: What exactly does ID Watchdog do?
Mr. Mohan: We provide a suite of comprehensive identity theft protection, detection, and resolution solutions to consumers. Each month, we utilize patent-pending technology to monitor thousands of public and private data sources on behalf of our customers, looking for evidence of identity theft. If we detect any suspicious activity, our team of certified, in-house identity theft risk management specialists set to work putting a stop to the incident before it can spread, and restoring the customer’s records to their proper status. Despite what you might hear from some of the heavily advertised identity theft marketers, no one can prevent identity theft from happening. We believe that our solution provides consumers honest protection and true peace of mind – not only do we provide the earliest possible detection of identity theft, but if you do become a victim on our watch, we do all the work required to navigate the bureaucracies and cut through the red tape to set the record straight on your behalf.
Recently, we have developed a revolutionary new product that complements our existing suite, and hope it serves to overcome many of the hurdles we have heard consumers cite for not engaging a service like ID Watchdog. The new product, called idCheck, is a single-use identity diagnostic tool designed to answer one essential question – has your identity already been compromised? An industry first, the product is delivered on a stored-value card, and will be distributed nationally at big-box chains, grocery stores, convenience stores, and specialty retailers at a sub-$10 price point.
Although 5% of the US population is impacted by identity theft each year, oftentimes it doesn’t manifest itself in obvious ways for many years after the initial theft. As a result, many victims are losing control of their most valuable asset every day and don’t know it. Further, some consumers are not taking steps to protect themselves because they do not want to commit to an ongoing subscription service; others are simply not sufficiently comfortable with eCommerce. We anticipate that the concept of an affordable, widely available single-use identity diagnostic will appeal to this segment of consumers.
CEOCFO: How does that differ from the other well-known services?
Mr. Mohan: First, we are the first and only service that offers a single-use diagnostic tool, and the first to embrace the easy and intuitive stored-value card distribution model that has been employed so successfully by Apple with their iTunes gift cards.
Beyond that, two distinct characteristics differentiate ID Watchdog’s core service from our competitors – the depth and breadth of databases we monitor, looking for evidence of identity theft, and the fact that we include full-service, power-of-attorney driven identity restoration services, performed by certified, in-house specialists, as a component of our service at no additional cost to subscribers.
Most of the well-known services today are primarily focused on credit reports and credit scores, and market credit-related solutions. While that component is the most visible and relatable aspect of identity theft in the minds of a majority of consumers, in fact only 20% of all identity theft is credit-related. The other 80% involves fraudulent use of a consumer’s Social Security Number, tax fraud, medical identity theft, and criminal identity theft. Unfortunately, not only are these latter categories the fastest growing types of identity theft, but also the most damaging and the most difficult to recover from on your own.
To understand how ID Watchdog differs from competitive offerings, I think it is important to first understand how identity theft happens. Think about all the different transactions you have entered into or been a party to in your adult life. Every time you’ve ever gotten a new car loan in your lifetime, taken out a mortgage, visited the doctor’s office or hospital, opened an investment account, or even renewed your drivers’ license, you’ve voluntarily turned over everything an identity thief needs to inflict damage to a third party. Most of us have done this hundreds, maybe even thousands of times, in our lives. That data now exists beyond your control, and persists for years or even decades. This is where we’re all the most vulnerable, and organized, syndicated identity theft rings know it. Every day you can read stories about catastrophic data breaches at universities, hospitals, government agencies, and corporations, whereby large blocks of identities are compromised. At ID Watchdog, we offer a subscription-based service that employs patent-pending technology and business processes to constantly monitor a consumer’s identity across this widely scattered and difficult to access database archipelago. In the event we notice a change or inconsistency in your ‘baseline’ data – this can be anything from new address attached to your name, to a warrant issued for your arrest in a state in which you’ve never resided – we notify you and begin working to restore your records to their correct and uncompromised state.
CEOCFO: How do you have access to records of a bank or a department store which are not public info?
Mr. Mohan: The 150-year old US consumer data industry exists to aggregate, analyze, and productize consumer demographic attributes, primarily offered for sale to other businesses. Years of consolidation have resulted in just a handful of these aggregators controlling the vast majority of source data. As such, they have access to tens of thousands of distinct data relationships, and aggregate billions of data elements on millions of Americans each month. We have strategic relationships with several, most notably Acxiom and TransUnion, whose data access we leverage to deliver our core identity monitoring service.
There are five key elements of personal information that can be used by an identity thief to harm an individual – name, address, date of birth, telephone number, and social security number. These five elements – referred to as header data - are generally consistent across time and across databases. We constantly monitor these header elements for change, because manipulation of at least one of those elements is required for an identity theft to benefit.
While our customers can opt for detailed, active, and real-time credit monitoring as a part of our service, we do not access record-level transaction data unless two things happen: one, a change has taken place in that account’s header data, and two, you authorize us to diagnose the nature and extent of the issue and act on your behalf to fix it.
Therefore, in the department store example, we will know you have an account with Nordstroms, but will not know you purchased a size 42 regular men’s suit unless we detect suspicious activity in the account, and you authorize us to investigate.
CEOCFO: Who is using your services now?
Mr. Mohan: You might be surprised. I would intuitively look at the industry and think that subscribers to identity theft protection services must be high net-worth individuals with significant assets to protect. However, I have learned that this crime does not discriminate – just as there is no specific demographic characteristic that places one citizen more at risk than another, there is no specific demographic characteristics that define our customer base.
CEOCFO: How is business?
Mr. Mohan: Business remains strong, which is good for us but bad for the American consumers who remain exposed. Industry wide, about twenty million Americans subscribe to some form of identity protection, and we expect to see continued growth in the market that ranges anywhere from 20% to 25% annually over the next five years. That translates into more than 30 million consumers opting for protection in that timeframe, which I applaud.
A larger problem our industry faces is a crisis in confidence in the mind of the consumer. Recently, a well-known and heavily advertised identity theft marketer was fined $12 million by the FTC for engaging in deceptive business practices. FTC Chairman Jon Lebowitz went so far as to state that “the protection they provided left such a large hole that you could drive that truck through it,” referring to a TV ad showing a truck painted with the CEO’s Social Security number driving around city streets. Even more recently, it was revealed that the same CEO had had his identity stolen on 13 different occasions, while the service claimed to “prevent” identity theft. Consumers are rightly cynical.
We are in this market for the long run, and believe that by continuing to innovate, as with our idCheck single-use diagnostic product, we will overcome the industry’s trust issues.
CEOCFO: What about barriers to entry?
Mr. Mohan: In terms of barriers to new market entrants, I see two. One is developing deep, strategic relationships with the largest data aggregators in order to access the consumer data required to provide true 360-degree protection. The second barrier to entry is developing the capabilities to perform identity resolution and restoration on behalf of clients. Developing a corporate competency in identity restoration takes time. We are able to do it effectively because we have been at it since 2005, and have helped thousands of clients. To set up shop today and decide that you are going to provide resolution services tomorrow is not feasible for most new entrants.
CEOCFO: When you are clearing up a problem, are companies on the other end paying more attention because you are ID Watchdog?
Mr. Mohan: Yes. First, for the average consumer attempting to navigate the process on their own, there is a steep learning curve. Some cases would require more than 600 hours should the consumer attempt to do the work themselves. We have employed a team of certified, in-house experts for five years that do nothing but work with clients to restore their identities; we understand the process. We know exactly who to call, exactly what procedures need to be followed, exactly what documentation is required.
CEOCFO: What is the financial picture like for ID Watchdog today?
Mr. Mohan: We went public on the Toronto Stock Exchange in Q3 of 2008, one of only a small handful of successful IPOs in any North American market in all of 2008. We used the funds to further develop our best-in-class product, create brand awareness, and develop scalable sales channels. Two years later, we are still working to educate consumers, develop our brand in the minds of consumers, and maintain our product leadership, while becoming profitable. In 2010 we have been able to more fully incorporate operational lessons we have learned over the years, allowing us to operate the business more efficiently.
CEOCFO: Do you have some enhancements for the program?
Mr. Mohan: The major enhancement for the first half of 2010 was launching the single-use identity diagnostic product, idCheck, on a stored-value card in the traditional retail channel. Rollout will continue to ramp over the summer, and we expect idCheck to be available at upwards of 20,000 retail locations nationwide by year-end.
We also continue to invest in R&D for our core product line, to stay ahead of both the competition and, more importantly, identity thieves. Expect to see announcements regarding database enhancements at the end of Q2 and into Q3, improvements in our customer account management dashboard interface, and the addition of a fully-integrated online PC security suite, including anti-virus and anti-spyware protection.
CEOCFO: In closing, why should potential investors pick ID Watchdog?
Because we are focused on building value for the long run. We have a
best-in-class product, scalable and proven marketing channels, and are
running the business more efficiently than ever before. On a more macro
level, I feel consumers are beginning to understand that there are
common-sense do-it-yourself measures they can take to protect themselves
that are effective to an extent, but much remains out of their control.
Enlisting identity theft specialists such as ID Watchdog to protect their
interests is one less thing they need to worry about. They know that
million-dollar guarantees and promises of protection that seem too good to
be true, in fact, are. When consumers evaluate their options for true,
honest identity theft protection, we believe they will arrive at the spot
we’ve been occupying for years. And we look forward to serving them.
We believe that our solution provides consumers honest protection and true peace of mind – not only do we provide the earliest possible detection of identity theft, but if you do become a victim on our watch, we do all the work required to navigate the bureaucracies and cut through the red tape to set the record straight on your behalf. - Daniel Mohan
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