The encyclopedia · Software & IT · Product decision · 2000–2001
The CueCat: $185M in funding, given away free, swiped six times per device
Digital Convergence raised $185M for a cat-shaped scanner linking print ads to the web, gave away three million — and each was swiped fewer than six times.
Digital Convergence · 2000
What happened
Digital Convergence, a Dallas company, raised $185 million to build the CueCat: a cat-shaped barcode scanner that plugged into a computer's keyboard port and, when swiped across barcodes printed in magazines and ads, opened the matching web page. Investors included Belo Corporation ($37.5 million), RadioShack ($30 million), advertising firm Young & Rubicam ($28 million), Coca-Cola ($10 million), General Electric and E. W. Scripps. Each scanner cost about $6.50 to manufacture. The pitch was that print media could finally link to the Internet.
The devices were given away, not sold: Forbes mailed 830,000 to subscribers, Wired more than 400,000, Belo at least 200,000 to its readers, and RadioShack handed them out in stores while printing barcodes in its catalogs. Roughly three million CueCats reached American homes in 2000. The business model was licensing — every scan of a partner's barcode earned Digital Convergence a fee, and every scan told the company who you were, because each unit carried a unique serial number.
Almost nobody used them. Over seven months the average CueCat was swiped fewer than six times. Setup took about an hour: software installation, registration and a lengthy survey about shopping habits, after which the software parked an advertising taskbar on the desktop. The unique serial number, the survey and the registered domain digitaldemographics.com made the tracking plan obvious, and users pushed back — websites appeared with instructions for 'declawing' the device. In September 2000 a security breach exposed the names and personal details of about 140,000 registered users.
The usage figures were damning even for the dot-com boom: Wired counted about 60,000 readers using the device across three issues before ending its trial in December 2000; Forbes reported roughly 100,000 had tried it. The planned IPO was shelved as the market turned. In May 2001 Digital Convergence dismissed most of its 225 employees; in September, Belo wrote off its $37.5 million stake, and by year-end the barcodes had vanished from print. Investors lost the full $185 million, and about two million unused scanners reached a liquidator in 2005 — at 30 cents apiece.
Why it happened
- CueCat asked millions of people to adopt a new habit for an advertising convenience: an hour of setup, a registration survey and a tracking serial number, for a web page reachable by typing a URL.
- Free hardware made every user the product. Unique serial numbers let Digital Convergence log every scan, and once users understood the tracking, they stopped swiping or 'declawed' the device.
- The publishers who gave the scanners away never built content that made them useful; Wired ended its trial in December 2000, and the remaining barcodes led to pages not worth the trouble.
- Technical friction compounded the conceptual problem: a keyboard-port connection, mandatory software and an always-on ad taskbar made the device a nuisance on computers that were not yet always on.
The lesson
Free is not a price. CueCat cost users an hour of setup and a tracking serial number for a web page they could reach by typing a URL — the price was effort, and nobody paid it.
Aftermath
Belo wrote off its $37.5 million investment in September 2001, and the remaining investors lost the full $185 million. Two million surplus CueCats were liquidated in 2005 for 30 cents each. The device became a running punchline — PC World ranked it among the 25 worst tech products of all time, Gizmodo voted it the worst invention of the decade. Hobbyists kept it alive: the firmware was reverse-engineered, and surplus units were resold as cheap barcode scanners. The serial-number controversy became an early chapter in the history of consumer tracking, before the smartphone made scanning normal.
Sources
- CueCat — Wikipedia ($185M funding: Belo $37.5M, RadioShack $30M, Y&R $28M, Coca-Cola $10M; $6.50 unit cost; Forbes 830K, Wired 500K+ distributed; unique serial numbers, digitaldemographics.com; 140K users exposed Sept 2000; May 2001 layoffs of 225 staff; Belo write-off Sept 2001; 2005 liquidation of 2M units at $0.30)
- New York Times, 15 January 2001 (via Wayback Machine) — New Economy: CueCat struggles to link print to the web (Forbes 850K subscribers, Wired 400K+; Wired ~60K users across 3 issues, trial ended December 2000; Forbes ~100K tried it; security breach exposed ~140K; IPO delayed)
- Hackaday, 25 March 2026 — Retail Fail: The :CueCat Disaster ($185M from Coca-Cola, RadioShack, GE, Scripps, Belo; $6.50 cost vs $0.30 liquidation; 140K user data exposed on public server; 225 employees let go mid-2001; 'solved a non-problem')
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