1/19/07.
Four year old online payment startup Bitpass
is calling is quits, via a mass email to customers. The message, which comes
from Mathew Graves and is reprinted below, gives no reason for the shutdown
although we can presume it is due to cash flow, or lack thereof.
Bitpass raised over $13 million in two rounds of financing, with the bulk of that raised in late 2004. But their business model of facilitating small purchases via stored value had few takers and transaction volume never ramped to sustainable levels. A recent major upgrade to their platform obviously didn’t do the trick.
----------------------------------------------------------------------
From: Bitpass Inc. [mailto:Support@bitpass.com]
Sent: Friday, January 19, 2007 5:52 PM
To:
Subject: Bitpass is Discontinuing Service
Dear Valued Bitpass Buyer,
We want to thank you for your past business, however due to circumstances beyond our control, we are discontinuing our operations.
We have partnered with Digital River to provide operational support during the period prior to shut down. As of today, January 19, 2007, all Bitpass Buyers with US dollar denominated accounts are being notified that they will have seven (7) days to spend any amounts that currently exist in their Bitpass Account.
During this seven day period, US Buyers will not be able to further fund their account.
On January 26, all US Bitpass Buyer accounts will be closed and Digital River will begin the process of refunding all unspent monies to the accountholder.
All account records and materials will be retained for 60 days and available upon request.
Again we would like to thank you for your business and support.
Matthew Graves
Chief Operating Officer
Bitpass Inc.
RSS
Feed Comments
- R.T.
Wasn’t
Bitpass one of Guy Kawasaki’s projects?
I’ve run
across there service a few times, but I didn’t see anything that they offered
that other services like PayPal didn’t.
BTW… Isn’t
this yet another service funded by Garage Technology Ventures? I’m interested
in seeing who the other VC’s are. Obviously you can’t win them all, and Guy is
definitely a great, um, guy… but that is an interesting “stat”.
yes, this
was one of Guy’s companies.
…my
comment probably came off as “anti-Guy”, which was not my intent. Looking at
the other companies in Garage’s profile, I think they have some clear winners
(one in particular - SimplyHired).
It just
goes to show that the success to failure ratio is high, but VC’s can definitely
outweigh the bad investments by having a single good investment (within limits,
of course). Getting that “good investment” is obviously the challenge/gamble.
- Stephen Sclafani
Robert,
BitPass,
Peppercoin and others specialized in micropayments (under $1). Micropayments
couldn’t be done with PayPal or traditional merchant accounts because of the
transaction fees. There was a belief shared by some that micropayments would
usher in a new revolution in e-commerce, in which content owners would be able
to sell their content for pennies to thousands of people and no longer have to
rely on advertising or a subscription models. However, micropayments never
caught on and the revolution never came.
Thanks for
clarifying, Stephen.
- ginchy
Yeah but
they did manage to string a completely impractical business idea (Looks like
micropayments mean microprofits LOL) along for four years. I bet that $13
million paid for a lot of scotch and hookers. Nice.
micropayments
are a crock…kinda like DRM, not needed. My company, Tamago, contacted
Peppercoin to see what they could do…and they wanted to charge us $0.45 for
every charge…Tamago sells digital content; where the user decides the price,
but most users sell their stuff around a dollar…oh yeah, get this…we would have
to do the integration ourselves. Now…we’re not stupid; so, we built our own
micropayment system; which does what most others do…aka iTunes and PayPal…none
the less, it was just funny that we we’re in discussions with a company backed
by a major bank/VCs which was going to charge us almost twice the going rate
per charge…these people just don’t get it.
deadpool
strikes again!
confirmed
- web2.0
is dead
- last man goes down with the boat.
Micropayments
are an interesting concept. I wonder if they will ever take off, and if there
will ever be a way to take the credit card companies out of the equations. I
know that they make micropayments very difficult if they are in the equation.
- Gloria White
Micropayments
could have been good if there were no other easier and better mechanism for
monetization avaiable.
Ad sense and the likes provided publishers with that mechanism.
Why would someone spend so much time collecting pennies from a thousand users when
you can get say $5 cpm from adsense or your own advertising program.
Surprised
it took this long. The people in Bitpass were mostly clueless about business
issues. They have been floundering for years unable to build critical mass in terms
of the number of the number of sellers and transactions. It’s impossible to
survive making 8-15% on on average sales of 25 cents - $3 per item without huge
volume. And they were never able to figure out how to get the volume.
I believe
Worldview Technology Partners had the majority stake in them.
January 19th, 2007 at 10:48 pm
Disclaimer
- I am the VP of iDistribution 2.0 for ClickandBuy LLC
Micropayments
are a profitable endeavor, provided the accompanying elements are in place -
1) alternative payment methods that provide incremental, non-cannibalized
revenue for the unbanked (approx 80m US consumers)
2) multi language and currency support to globalize the business
3) localized international payment instruments, as only 30% of Europeans use
credit/debit cards (as understood by the US market)
4) flexible platform that allows ease of integration to legacy systems as well
as modern architecture
ClickandBuy
LLC has been gaining market share and is the largest player in the European
market. 3i has invested $25M, Deutsch Telekom purchased 10% and Intel announced
Wednesday their investment.
My
interest was piqued by the comments above, as there are no implementation or
maintenance fees with ClickandBuy’s service and when you buy from Apple iTunes in
Europe you are not purchasing from Apple, but instead from ClickandBuy.
I believe
that the idea of a ’stored value acount’ for digital assets is flawed, as the
adoption of having money sitting in an account…unused…has never been
appealing…except in the arena of online gambling.
If one
looks closely, Intuit, Visa and others are actively recruiting personnel to
develop an ‘alternative payment’ services for the ‘under served.’ PayPal is
attempting to expand into Europe and Google Checkout has been unveiled.
All the best
January 19th, 2007 at 11:08 pm
Micropayment
has proved profitable in other industries, such as stock photography.
I think
Paypal released a micropayment plan as well, which may have contributed to its
doom. Plus, Google checkout has free transactions for a whole year.
Always sad
to hear about a company entering the dead-pool
January 20th, 2007 at 12:16 am
>>when
you buy from Apple iTunes in Europe you are not purchasing from Apple, but
instead from ClickandBuy
I don’t
believe this is true…
- Mark Trent
I don’t
get why people use services like BitPass or ClickandBuy. I can think of at
least 20 payment service companies that have gone under in the past two years
and each and every time their CEO’s think they are different or unique and yet
they are all the same. UPS for example invested in comerxia and where are they
today? Bankrupt and in fact no one has heard about it again. Fact is, the payment
service industry is a very lucrative business and if a business continues to
need investments to make a go of it because they aren’t turning a profit in the
first year then good luck because they too will be part of the dead pool.
- Jojo
@ Andrew
Michael
Just
because something works doesn’t mean it is profitable. Case in point: Bitpass’s
solution certainly worked - it just wasn’t profitable and the company could not
figure out how to make it so. And I happen to know that iStockphoto was one of
their biggest accounts.
One of the
big problems for micropayment companies is the fees that they have to pay to
credit card companies. Which they try to minimize by getting users to load $5,
$10, $50 at one time into a stored value account. Which as pointed out above,
many users don’t like to do.
Even
PayPal has to pay a transaction fee to the credit card companies when someone
pays via CC or loads their account from a CC. This fee is a killer for
micropayment companies. IMO, the only companies that will be able to make
micropayments work will be credit card companies. They and only they do not
have to pay the minimum fees to themselves for each transaction.
- Julia
When is
Techcrunch entering the dead pool? I hope soon. sigh 
- Jojo
Well
that’s a interesting post Julia! So what’s your problem? You’d rather keep
companies on the brink hidden? Are you a VC maybe? Afraid of losing your
investment? Or perhaps afraid that your teetering company might go under soon
and you don’t want to see its name here? But hey, even if Techcrunch bites the
dust (which I hope it doesn’t do), there will always be good old
fuckedcompany.com [lol].
I knew
this would happened. Paypal by far is the best and most secure online system
there is.
Interesting
idea this microfinance. Unfortunately i do not think it was implemented the
right way.
Unless or
until a hitter like eBay/PayPal, Google or Microsoft does this, forget about
any reasonable chance of success.
Microsoft
is in the best position in the micropayment business already in fact. Some have
mocked the Microsoft Points, but wait and see what happens if/when they link
this to AdCenter as they should. Then that would open the power of slicing
pieces of those points to publishers advertising outside the Live Marketplace
and there is gold in them thar hills.
The rest
of the small time micropayment players like Bitpass were deadpool bound the day
they were introduced because they lacked a base of customers to draw from like
Microsoft has through their ever growing Live network (five million plus).
visible.mobi
-
That’s the
good thing about entrepreneurship - if you think something isn’t being
implemented the right way, then you can go out and try it yourself. There are
plenty of examples where someone has thought “they’re doing this all wrong” and
then went on to start a successful competing business. There’s also plenty of
examples where people have said “that will never work, only X company can
dominate that”, only to be proven wrong (and many times over).
TDavid - I
wouldn’t rely on PayPal, Google, or Microsoft. Many innovations are found at a
much smaller level than that.
Just to
add… I’m not saying you’re wrong, TDavid (personally, I don’t think
micropayments would work even IF the big hitters made an attempt) - I just
think it’s not too unimaginable that a smaller startup could dominate the area.
Unlikely? Yes. Impossible? Not at all.
- Crab
I did some
work with the Bitpass folks. They didn’t fail from execution - they were all
sharp folks. The business model just wasn’t there.
- Bob Myers
I was
selling a library of 100 pieces of digital content (scanned magazine issues) on
BitPass at $2 each, and was making about $20/day. BitPass ended taking about
15% of that. The service worked well for me. PayPal is not an alternative since
it would take at least $0.50. Any ideas for replacement services? Any
experience with ClickAndBuy? Does Digital River (who apparently was providing
some of the infrastrcture for BitPass?) offer any micropayment-ish services?
- matthew
January 20th, 2007 at 10:07 am
good for
bitpass for exploring this. unfortunately, online ads can be annoying, but i
don’t know many people who would open their wallets to avoid them.
January 20th, 2007 at 11:51 am
Even
though paypal is not technically a micropayment outfit, they are just too
entrenched in the market. Even in 1998 it was clear they would be the online
payments winner. Google Checkout is the only possible competitor, and the only
reason Checkout may prevail is Google’s unwieldy market share (and its prominence
on their homepage).
January 20th, 2007 at 12:27 pm
“When is
Techcrunch entering the dead pool? I hope soon. sigh”. - Julia
Julia -
someone will need to be around to do the reporting.
Seriously
though, this is a worrying trend that can’t be ignored anymore.
- David Fox
January 20th, 2007 at 12:28 pm
TDavid -
Bitpass was working with nineMSN (50% jv with Microsoft) in Australia.
No mention
of Yaga, the subscription management service that Bitpass acquired. Yaga
reportedly spent through $30m of investor money. Looked like a good service but
their setup and fee structure probably met with much resistance.
Subs mgt
would seem to be an good opensource opportunity that a company like Digital
River could/should support - DR holds the credit card info and assures PCI
compliance. The community builds out the subscription management features we
all need.
hmmm…no
mention on their web site of shutting up shop: http://www.bitpass.com/
I assume MA fact checked?
- Nation
https://www.pay...ropayments.html
There is
the info about Paypal’s micropayment option. It looks to be good for items up
to $12 in value.
- Pär Boman
I actually
liked bitpass and used it a couple of times a year.
Knew I had
a bit of credit left on my account. But when I logged on there was no money
left. They apparently added a fee to accounts that had not been used for 90
days which took away my last $4 just for december… have a feeling they knew the
end was near and wanted to cash out from their users, not very fair and a very
bad way of doing business…
- Shii
Pär,
consider that they had $13 million in VC capital to pay back. Yes, that’s not
your fault, but they were trying to edge a little closer to breaking even… 
- Jojo
So who
gets the assets, the network, the user dB? Given that partnership with nineMSN,
wonder if Microsoft is interested? Maybe this won’t be a total loss for the
investors?
Adapt or
Die: The Bitpass Story
Nothing
you can’t do easier and cheaper with www.e-gold.com
Mark
http://www.digi...lmoneyworld.com
- TP McKenna
Attention
Jamy Nigri
My
attention was piqued by your post and it triggered a visit to your website. I
cannot make head nor tail or if. I suspect this website content is more geared
towards investors than users!
From what
I could glean (before I gave up),
Ÿ shoppers pay by clickandbuy at the
online store
Ÿ you then send them a monthly
invoice
Ÿ they then settle by direct debit,
card payment etc.etc.
Questions
1) What “alternative payment methods that provide incremental, non-cannibalized
revenue” do you support. e.g. how do you reach the unbanked?
2) How does the 3.9% + 20 cents card funding surcharge sit with the statement
“Most services of ClickandBuy are free! There are no registration fees or basic
charges”
I really
am scratching my head here…..
- pwb
January 21st, 2007 at 11:34 pm
Of the
three ways to monetize small things (ads, subscriptions, micropayments),
micropayments is the worst. The primary hurdles are a) consumers don’t like
making the purchase decision and b) being the service provider is not a
financially attractive business.
January 24th, 2007 at 12:18 pm
Hello -
Lemon
Obrien inaccurately reported on 1/18/07 (above) that Peppercoin charges $0.45
per transaction. As a Peppercoin employee I can attest that Peppercoin strives
to enhance the profitability of small ticket transactions and as such, our list
pricing is $0.10 per transaction. Feel free to contact me with any questions,
or email our Vice President of Sales for a personalized price quote - mtreco@peppercoin.com.
Best,
Jackie
Jackie
Walsh
Marketing Manager
Peppercoin
jwalsh@peppercoin.com
Jackie:
Sounds really nice you company, i was trying to surf on there, and wow…first,
only english web page, (i can help to translate it), a lot of people live in
poor latinamerican countries (like me), and that people is poor (like me too)..
your page sounds so sophisticated.. how i could make bussines with you in small
transactions.. wow.. sounds affraiding company, i believe, for that reason the
big companies (or whom pretend be) are unable to reach at small companies (like
mine) inclusive you sounds…”Email our Vice President” maybe your company must
try to be most customer close.. just an opinion
Alejandro from Mexico.
alxtapia@gmail.com