Tipjoy, a startup that allowed users to easily collect ‘tips’ from their readers and fans in the form of small Paypal transfers, is closing up shop. Earlier this evening Co-founders (and husband/wife team) Ivan and Abigail Kirigin posted a note to the Tipjoy blog announcing the site’s shutdown. Users with an outstanding positive balance will be able to cash out, but the rest of the site has been turned off.
Tipjoy tried to make web tips feasible by lowering the barrier readers would have to clear as much as possible — to leave a tip, users only had to enter their Email address, with no credit card needed. The amount of money left to a site was effectively a pledge to pay up at some point down the line (Tipjoy tallied up your tips so you could pay them all at once). Unfortunately, users often didn’t take the time to tip at all, and those that did usually didn’t actually pay up.
The company launched last year as part of the Y Combinator class of Spring 2008 and while it saw steady improvements, like a new API in May 2008, it was seeing slow uptake. Later developments included an API that allowed users to send payments over Twitter, and a useful premium Twitter app called Tata-tweet. It also attempted to expand beyond tips to become a more generalized payment service. But despite a solid run, Tipjoy was unable to gain significant traction.
From the site’s blog (be sure to read their post if you have an outstanding balance):
We have decided against continuing to pursue additional funding. After a long and hard look at the market and the situation, we didn’t feel it made sense.
When we evaluate why there’s been so much hype about payments on Twitter, and yet so little traction for us (and even far less for our competitors) it is clear to us that the reason is that a 3rd party payment service doesn’t add enough value. We strongly believe that social payments will work on a social network, provided that they’re done within the platform and not as a 3rd party. “Simple, social payments” is *the* philosophy needed to do digital payments right, but once a service groks that, they need only to implement it on their own. We’ve been the thought leaders in this space, we see the hype and excitement, and yet we know very intimately the difficulties in gaining actual traction. The only way to get around this is for the platforms themselves to control payments – then all people wanting to operate on that platform would have to play along. We believe that a payments system directly and officially integrated into social networks such as Twitter and Facebook will be a huge success.
Thank you to everyone who has supported and helped us along the way.
If you have any questions, get in touch: help@tipjoy.com
Thanks,
Ivan & Abby – Team Tipjoy
Tipjoy has been added to the Deadpool.
An idea like this seriously got $1M in funding? Seriously? No … seriously?
I am with you on this one John C – As I was reading the article, I read the line “We have decided against continuing to pursue additional funding” and I thought to myself, I wonder how much they initially got…
…a million! Utterly insane!
I am actually speechless that some investors thought it was worth staking a million on this service.
Speechless.
Those were the days, huh?
$1 Million. Maybe they hosted a booze cruise to kick-off the funding. It is almost like a return to the early DotCom days. You could just add .com to the end of business and people would start throwing money into it without looking deeper.
ah, don’t we all wish.
I think these guys were on to something. I’m sure they learned a lot and they will get to use that experience moving forward. I wish them the best.
It’s a little disturbing that being “on to something” means you need millions of dollars. Software is free to write, and getting cheaper and cheaper to host. Bootstrapping is a much better idea if you are able to do it.
Software is NOT free to write. Someone has to do the work to write it. That time translates to money which is most definitely a cost. Hosting may be getting cheaper and cheaper but only cheap hosting. Good hosting still costs the same as it did years ago.
It’s people like you Max, that think that since there are so many developers, everything should be free. You forgot to include the developers still have to make a living just like everyone else.
You are wrong, time is money and software developing costs a lot but yes not to the tune of a million dollar project.
Ivan wrote on HN:
“We were advised (in retrospect incorrectly) to be ambiguous and say “raised under $1M” when the amount we raised was actually much less.”
I’m guessing they raised a couple hundred thousand, which technically is “under $1M”, which got turned into “just under $1M” by the press, which got turned into “a million” by people who read the press, which got turned into “over 1 million” by people who spread rumors, which will inevitably get turned into “they wasted millions of dollars on *this*?!?!” by people who like to chronicle the excesses of Web 2.0.
It was Jason Kincaid who wrote “The company hasn’t disclosed the exact amount of the funding, but says that it is just shy of $1 million.”
Someone’s integrity was tainted here. Either Jason’s or Ivan’s.
Ahhh the life of a blogger — who cares if its true? As long we get readers and comments like this — good enough.
Long live journalism — or not.
Tips are huge, and micropayments are much bigger. Kudos to TJ for trying to crack this market, the future winner could be the next paypal.
Whoa… didn’t see that coming. Solid product in many ways, and great luck in the future!
The thing that I never really understood about this ’service’ was that it tried to mix premium with freemium. Most users expect one or the other, and if your user base is consuming your content by allowing advertisements, most are unwilling to pay money.
Now if only consumers could think this way about cable tv (fees + advertising = suck ). If something has ads, it should be free. If you want to charge money, it better not have ads. IMHO
You are confusing free with subsidies.
If you wish magazines and newspapers had no advertisement, would you pay then $30 for a Time magazine issue? Probably not.
Advertisement has always played a major role in bringing down costs to end users, including cable TV.
In the case of TipJoy, I kind of agree with you. But most users don’t care anyway about the nearby ads on sites.
Aww shucks thats really sad, I liked TipJoy
ditto
It’s an interesting conclusion on the role of a third-party in any social network. i.e. eventual obsolescence by in-network enhancement (where eventual is a calculated risk assumption)
Geez. I was pullin for this one. I thought microtransactions would gain traction with the nonprofits eventually. Good luck on your future products.
Sad to see TipJoy go. Followed them from the start and liked the service. The uptake of their tipping service always seemed lackluster, but the model had merit. What I never quite understood was the attempt to tag along for the Twitter ride. I can see Facebook as a much more natural platform than Twitter for social, p2p payments. (And financial and payments related apps have absolutely no traction on Facebook either.)
tipit.to – with more or less the same model and service as Tipjoy’s initial – seems to be still up and running, but with equally poor takeup.
Also, to the folks wondering how Tipjoy was able to raise $1m: payments. As noted, they were heading for expansion towards offering a general social payments platform and anything to do with payments is simply costly. Building the basic stuff is relatively simple, but regulatory compliance has often horrendous legal costs and you often need at least something on your balance sheet to be compliant. And preparing for payment ops can easily be costly, too.
fyi, they are husband and wife team. cool. i mean, not for the deadpool, but them willing to team up and have zero income for a year is cool.
They got a million round of funding you really think they did not pay themselves during that year?
$1 million is not that much. I doubt they paid themselves much if anything.
a husband & wife team that burned through $83,000/month for a year.
Ah, to be so noble and selfless.
Just because they raised that much money doesn’t mean they spent it all.
Tipjoy Heads To The Deadpool!!!
That’s the point!
“Unfortunately, users often didn’t take the time to tip at all, and those that did usually didn’t actually pay up.”
Yeah, I was definitely one of those.
Interesting to see them hit the deadpool though.
I liked their payments over twitter idea, and returned to their site several times over the past few months, trying to figure out how it could be useful exactly – but never managed to. It seemed like a neat idea, and I get the feeling that it just needed some little twist to make it work.
Too bad it didn’t.
Maybe so, maybe not.
there are actually much better ways to reward a blogger or a post you like. recommending, mention it, spread the word will cost you nothing and will benefit the blogger much more than a few cents.
The problem with TipJoy was that it didn’t have a set audience. What they should have done is to convince power bloggers like Chris Guillebeau (http://chrisgui...u.com/3×5/) to use their service to accept tips from readers. Chris doesn’t put any ads on his site (he hates adsense) and still makes more money than most bloggers through his commercial products. On the other hand, he spreads a lot of good information for free, so a service like tipjoy could have helped him. Oh well.
compare the conversion rate of a street busker to that of a TipJoy partner – something was not going right in the conversions. maybe they should have had a flashy intro video on each TipJoy button telling the visitor why they should tip
Good on Ivan Kirigin for trying but I wondered what the hell a robotic engineer like him wasting his highly demanded knowledge on building something that script-kiddies do? I am sure that Ivan Kirigin could come up with some product idea related to robotics or related algorithms to robotics, which would be very competitive.
I’ve met Ivan and Abby this year at SxSW and talked with him about their plans and ours. I wasn’t very convinced with their foray into payments but there’s no doubt that they have advanced the field of tipping online.
We still think the entire field of social donations is very premature and going to go through significant development. If anything we are 1-2 years too early (which is better than being 1-2 years too late).
Advertising is getting more and more hollowed out. We don’t think it’s a sustainable way of financing for many initiatives though it may work reliably and with integrity in some cases, see: http://jontapli...-costs-of-free/
The media landscape hasn’t properly started fragmenting yet. This trend is going to play out. Some online publications have started (talking about) tipjars and/or charging for content. We still have to see how that plays out.
For some sites implementing this stuff themselves may pay off, they could also get in touch with us to see what is possible in this space.
People are only slowly getting used to paying for online content either up front or voluntarily. It remains to be seen for what content and services people will be willing to pay at all, but we expect this to increase (albeit slowly).
Outside of the media sphere, we are seeing the organizational models and online facilities for collective action starting to take shape. That is also very early stages and the whole dynamic still has to sort itself out but we believe this to be a larger growth area even than online media.
Integration into social networks is an important area but we believe there’s still a lot to be gained using API integration. We also don’t believe in sitting around waiting. Facebook is reputed to be working on a payment system for a while now, but there’s still nothing forthcoming.
We do believe that to be able to offer significant additional value it is necessary to control the payment process. We also started out using Paypal but quickly found out that Paypal is both too cumbersome and not reliable enough. That’s why we have made steps to integrate with a better payment provider and we’ll be launching that integration soon.
So I hope I made clear why we believe there is still ample opportunity in this field and why we are still going at it with TipiT. We should be relaunching the site in the next week or so with integrated payment and an easier flow.
In any case, my best wishes to Tipjoy and theirs for the future.
Alper Çugun
Founder of http://TipiT.to
Alper, I’m wondering if you had the same reliability problems with PayPal as microPledge, i.e. that PayPal don’t take too kindly to being cut out of their 20p per transaction revenue, or at least they don’t appreciate an intermediary holding income prior to disbursement, especially not in advance of goods received.
Is this what you meant by ‘reliability’? As opposed to their online service?
To all those with snarky remarks regarding burning through a million dollars in funding:
I have founded, funded (personally and through investors), and operated four startup companies, three of which were acquired, one of which is still operating. Further, three of those four were done with my wife as my partner and co-founder. So, I have some insight into what it takes to try something like what Ivan and Abby tried.
I fully realize that raising a million bucks *sounds* like a lot of money–especially to people who have never tried to raise money or been responsible for operating a company and making payroll. But in truth, it is often difficult to raise *only* a million bucks because for most investors, its too small an amount to justify the due diligence effort.
A million bucks burns very quickly in a startup with little or no revenue. It is not as easy as it sounds to take a million dollars and create a profitable business. And its a very very rare case where an entrepreneur raises a million bucks and then uses the cash to live high on the hog for a year.
I challenge each of the snarky commenters to describe how they have done better. I challenge each to relate a story about how they put their personal income at risk for a few years (or even a few months) for an idea they had. I challenge each to describe the jobs they’ve created and the number of people they have employed.
I suspect we’ll hear a lot of silence (if you exclude folks insecure enough to feel the need to flame me for my critique.)
We are in the midst of raising funds, living high off the hog is definitely NOT in the business plan! $1 million does seem to be a tough number, either too high for most angels or too low for VCs.
Get in the boat, Fredo.
*big kiss*
They should have shopped the technology around to a social network.
If he is so sure that these micropayments will work so well if they’re kept within the platform of a social network, why wouldn’t he try to sell his technology to one of them?
Do you know that they didn’t shop it around? Or that they won’t still shop it around? At some point, economic realities set in. Sometimes, one simply must move on.
I’m sorry to see them go. Micropayments of one sort or another are a tough thing to do. I was part of a team that tried with indiekarma.com.. we got some traction, but not enough to make it profitable.
We would like to invite any TipJoy users that were using the service for their fund raising to please try Twonate.com. We offer a similar service dedicated to fund raising via twitter.
Andy Seidl: 1 Techcrunch comment trolls: 0
Successfully raising money does not equal pay self a huge salary; as matter of fact “real” entrepreneurs often put themselves last on the payroll and use funds to invest in growth (people,technology,etc).
As for TipJoy I have no connection to them and dont know how they spent their capital but it’s annoying that majority of commenters here are destructive.
Don’t people inherently consume everything on the web for free AND expect it to stay that way?
I liked tipjoy. Nice name, good product. It’s too bad it never caught on. I think it was a great effort and maybe building this on an “honor system” was it’s downfall? By the time someone makes a conscious effort to make a payment or leave a tip, to get them to return to complete the transaction is most likely the biggest challenge.
The thing that seems to be missing from this discussion is the fact that Tipjoy’s “cash-out” system was erratic at best.
I sent someone $20 via credit card using the service but the recipient was unable to cash it out for over 2 weeks, even though I had already been charged. There was no explanation, no feedback or follow-up despite multiple emails, and only after I threatened to go to the FTC did Tipjoy actually transfer the money to her. A search on Twitter at the time yielded a number of other disgruntled users, so I know it was not an isolated problem.
Clearly Tipjoy had issues, and my experience makes me wonder if there’s a bigger story behind this shutdown.
Guess they reached the TIPping point.
Not a good week for Y Combinator:
snaptalent.com is shutting down too:
For the site:
From founding the company in 2007, we’ve had a crash course about the nuances of the online recruitment space. We’d like to announce that we’ve made a decision to move on from Snaptalent and return the majority of capital raised back to investors now than continue.
I remember trying to work out how they were supposed to make money and it was so convoluted I really couldn’t work it out. I know that’s why I never tipped anyone through them because I couldn’t tell exactly how much the person I was tipping would actually get.
I mentioned my frustrations in a tweet and they started following me. I explained the explanation on their website was pretty complicated and, while I may not be a financial expert, I’m not a complete idiot. They were nice, so I tried out their service on one of my blogs. Never got a single tip.