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. We’ll update with any additional information from the company. Bitpass is now in the TechCrunch DeadPool.
From: Bitpass Inc. [mailto:Support@bitpass.com]
Sent: Friday, January 19, 2007 5:52 PM
To:
Subject: Bitpass is Discontinuing ServiceDear 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.
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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.
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.
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.
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.
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
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
>>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…
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.
@ 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.
When is Techcrunch entering the dead pool? I hope soon. sigh
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.
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.
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?
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.
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).
“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.
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?
https://www.paypal.com/IntegrationCenter/ic_micropayments.html
There is the info about Paypal’s micropayment option. It looks to be good for items up to $12 in value.
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…
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…
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 http://www.e-gold.com
Mark
http://www.digitalmoneyworld.com
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),
shoppers pay by clickandbuy at the online store
you then send them a monthly invoice
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…..
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.
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
one website again is dying
* programmer of all natural breast enlargement
when you buy from Apple iTunes in Europe you are not purchasing from Apple, but instead from ClickandBuy
never could believe
oldtimerock from mm to inches conversion