Going PostalManilla is one of 53 companies chosen by VentureBeat to launch at the DEMO Spring 2011 event taking place this week in Palm Desert, Calif. After our selection, the companies pay a fee to present. Our coverage of them remains objective.

Born out of one of the U.S. Postal Service’s biggest customers comes a threat that could speed the mailer’s inevitable death: Welcome Manilla, a startup backed by magazine publisher Hearst, which aims to put your bills online.

No, really. Online bill pay has been a pipe dream since before the Internet hit mainstream consciousness a decade and a half ago. From nascent 1990s-era dial-up services well into the broadband age, though, most consumers have opted to keep getting paper bills. If you’ve tried to pay a bill or update an account online, you know why: Banks, utilities, magazines and other bill-senders for the most part offer unnavigable Web 1.0 design nightmares and overkill security that makes remembering logins and passwords a headache.

Today at the DEMO Spring 2011 conference in Palm Desert, Calif., New York-based Manilla unveiled a service for managing household accounts. I’ve tried it, and it may just be sexy enough to get users to nail their mailbox closed for good.

Hearst digital executive George Kliavkoff, who’s been leading the startup as interim CEO after a career that’s included stints at RealNetworks, MLB Advanced Media, NBC, and online-video site Hulu, is similarly taken: He’s announcing today that he’s becoming the startup’s permanent CEO.

Here’s how Manilla works: You type in the name of a business. If Manilla recognizes it, you’re prompted to add your login credentials if you have them, or create an online account if not. (For businesses Manilla doesn’t know how to handle, it logs suggestions from users to add them.) Manilla then connects with the business, either through back-end server connections or by logging in on the user’s behalf, a process known either as “screen scraping” or “Web extraction” depending on who’s talking. It then displays reminders of upcoming bills and archives paid bills and other messages forever. And along the way, it quietly stops those paper bills from coming.

Yes, there are potential security concerns, but screen scraping has been practiced by similar account-aggregation sites for more than a decade and is now well-understood by most players. Manilla says it has a full-time employee devoted to security and good relationships with financial institutions. It may nevertheless have a challenge convincing mainstream consumers of the process’s safety.

I ran into trouble adding my Citibank accounts, but it turned out that was Citi’s fault, not Manilla’s, as the bank’s systems were experiencing outages. The main letdown was when I tried to add my magazine subscriptions. I subscribe to a half-dozen titles. Not a single one was connected with Manilla. Kliavkoff said his team is working on adding more.

My main complaint with the service is that it’s too secure. The signup process has persnickety requirements for passwords that I don’t believe add substantially to security while adding to user frustration. Recent research has shown that fussing over whether a password has capital letters or numbers doesn’t add substantially to security. Kliavkoff told me that this was a battle he lost with his security team. (George, let me give you the same advice I regularly dish out to my writers: Just win.)

The major win for me and Manilla came when I added my electricity and garbage bills. Since I was logged into those sites anyway — I rarely visit them, typically receiving a paper bill and then paying the bill online through my bank instead — I signed up for automatic payments. That, in turn, is how Manilla plans to make money.

Why is Hearst backing this mail-killing business, since — for now, at any rate — it sends magazines through the Postal Service? Along with those lucrative, ad-laden magazines, Hearst sends some 500 million pieces of transactional mail a year — bills and renewal notices, Kliavkoff explained. And that’s just one biller: Think of the bank and credit card statements, utility bills, and other account notices companies send out. A typical bill costs a company 73 cents to send.

Most account-aggregation sites make money by analyzing consumers’ spending and then suggesting that they switch to a cheaper provider. You can imagine why billers aren’t thrilled about sharing their customer relationships with those sites. Manilla doesn’t allow competitive offers on its site. Instead, it charges billers a small monthly fee for every user who switches from paper to online billing.

Kliavkoff expects to yield $2 to $3 in revenue a month from a typical Manilla user at very high margins. He wouldn’t say exactly how much he aims to charge billers, but based on some other estimates he provided, I believe it’s somewhere between a nickel and a dime per user per month. Comcast and Citibank have agreed to come on board, he told me.

Currently, Manilla is owned 100 percent by Hearst. Kliavkoff wouldn’t say if he plans to raise outside money, but he points out that when he ran Hulu, its TV-network investors sold 10 percent of the company to Providence Equity Partners. I’ll read that as a statement that he’s open to taking someone’s money. In the meantime, I recommend that you sign up for Manilla and see who’s taking your money. You might save a few trees — and your sanity.

[Image via Ideasincirculation.com]

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