Why an early QR code scanning technology failed miserably and lost investors millions.
In 1999 Digital Convergence released the CueCat, a cat-shaped handled barcode reader that enabled a user to open a link to an internet URL by scanning a barcode. This device attached to a computer through a USB port and was praised by many for it's possibilities. Investors like the Dallas Morning News, Radio Shack, Young & Rubicam and Coca-Cola together invested 185 million dollars in CueCat. Parade magazine, Forbes, magazine, Wired magazine, and Verizon Yellow Pages printed advertisements with CueCat barcodes. As the hype inflated around the CueCat, Digital Convergence mass-mailed free devices to certain mailing lists for almost a year, hoping that more advertisers would adopt barcodes in their ads, but in 2000 something happened which crippled the device's potential.
In the Wall Street Journal, Walter Mossberg criticized CueCat and said, "in order to scan in codes from magazines and newspapers, you have to be reading them in front of your PC. That's unnatural and ridiculous". PC World magazine described the CueCat as one of "The 25 Worst Tech Products of All Time". Jeff Salkowski of The Chicago Tribune said, "you have to wonder about a business plan based on the notion that people want to interact with a soda can," Debbie Barham of the Evening Standard wrote "the CueCat fails to solve a problem which never existed".
But What Really Happened?
The initial controversy started with privacy concerns over Digital Convergence collecting user data such as names, email address and zip codes. Several websites like digitaldemographics.com arose with solutions to block or encrypt data being scanned by the CueCat and sent to Digital Convergence. Tech savvy hackers blocking this data stream interrupted the revenue model Digital Convergence had setup. Skepticism over privacy concerns were validated in September 2000 by security watchdog site Securitywatch.com which notified the company of an exposure, leaking private information about CueCat users. This was not a breach of the main database however. An attempt to mitigate the exposure was followed by a 10 dollar Radio Shack gift care to those who's information was leaked.
While years passed and CueCat faded into obscurity 2005 marked the end when a liquidator offered two million CueCats for sale at $0.30 each in quantity of 500,0000 or more. The bar code scanner itself is still being sold on secondary markets like Amazon and eBay but are not longer part of the mainstream QR Code scanning ecosystem.
The evolution of QR code scanning with mobile devices has curved some of the problems CueCat faced and leaders like Microsoft Tag have delivered safer, secure and natural ways for users to bridge their digital and physical worlds. We should try and understand why CueCat failed and learn from their mistakes. Was it because of the 2000 dot.com bubble and advertising dollars being pulled out of tech? Was it because the technology was unnatural for users to sit at a computer and scan barcodes from magazines? Was it because the weak obfuscation allowed 3rd parties to hack at the software code?
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Wikipedia Article on CueCat