It turns out there is more to the story behind the sudden demise of Tipjoy. The micro-payments service was trying to sell itself, according to a source with direct knowledge of the attempted transaction, and even got an all-stock offer from Facebook nominally worth around $5 million. The deal fell through when Facebook walked away.

But Facebook didn’t walk away completely empty-handed. It managed to hire Tipjoy co-founder and CTO Ivan Kirigin instead. After the acquisition negotiations fell apart, Facebook reached out to hire Kirigin. They made him an offer, and he accepted. It is not clear what he will be working on, but Facebook Payments would be a good guess.

Some investors weren’t too thrilled because Tipjoy was still in discussions with other potential acquirers (including Twitter and PayPal). But once Kirigin was out of the picture, the other interest evaporated, say our sources.

All of this brings up a real dilemma for small-app startups. If all Facebook or Twitter has to do is hire one or two key people instead of buy the whole company, then it will be hard to capture much value in the long run.

As for Facebook, building its own social payments platform makes a lot of sense. Kirigin and his co-founder (and wife) Abbey, spell that out in Tipjoy’s farewell post:

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. . . . 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.

Now Kirigin can try to prove that social payments can succeed within one of those larger platforms, Facebook, even though Tipjoy was better known as a Twitter (and blogging) phenomenon.

TipJoy did not respond to repeated attempts to contact them on this post.

Update: Abby Kirigin emails:

Erick’s accusation that Ivan took a job at Facebook while “Tipjoy was still in discussions with other potential acquirers (including Twitter and PayPal)” is absolutely absurd and totally untrue.

Of all people, it is Ivan and I who would have most loved to see Tipjoy acquired and our investors paid. That anyone can even insinuate that that is not the case shocks me.

-Abby Kirigin
co-founder, tipjoy.com

Perhaps the TipJoy founders should discuss this issue with their investors, who disagree, in a more private forum.

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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.

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If a website owner signs up with the promotional code “techcrunch,” they will receive double affiliate commissions for a full year. A pretty good deal considering that because the way the network works, it’s in your interest to have more site owners sign up. That’s because the larger the network is, the more likely it will be that users sign up for Contenture accounts. And the more that do, the more you’re likely to get paid.

Contenture users pay a minimum of $5.99 a month, but can offer to pay more if they choose. Site publishers keep 80% of the money coming in to Contenture, while it keeps the other 20%, which is a pretty solid deal compared to other monetization networks.

The core of the service is similar to the idea behind TipJoy. That is, users paying a small amount of money to a site owner. But Contenture goes further, allowing sites to switch to a full-on “freemium” model, giving them the option to toggle certain features on and off depending on if a user has paid.

But because it is based around a monthly-fee, we could be looking at a chicken-or-the-egg situation. Users may not want to sign up for the service because of the limited number of sites available — while sites not want to sign up because of the limited number of users. But Contenture has made it very simple for a site to install and use their service — it’s just a small snippet of JavaScript that can turn on or off features based on if a user visiting the site has a Contenture account.

This type of model is no doubt a gamble, but it’s an intriguing one. As I wrote about a few days ago, I have no problem paying a certain number of sites that I visit often and love. But those were all web services, and not necessarily content-oriented sites. The large web services are likely to want to run their own freemium models — like what Pandora is doing. Contenture would be perfect for content-oriented sites, but a lot of users have hang ups about paying for content on the web.

That’s not to say that won’t even change in some form, but today that’s a tough sell. Micropayments could be a key to unlocking such a model, but a monthly fee is a barrier to entry.

Disclosure: Contenture sponsored our CrunchCam for a few hours a couple weeks ago.

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Tata-tweet allows you to feed multiple Twitter accounts into one feed. When you do this, it will auto-append the name of the person tweeting to the end of the message. That means no more logging out from your account to send from the group account — and no more having to copy and paste the tweet if you also want to send it from your own. You can see this in action on the Y Combinator’s founders group account.

But there’s a slight catch: Using this app will cost you $0.99 a month. Yes, it’s a premium Twitter app. While those are a dime a dozen on platforms like the iPhone, they’re not so common on the web. And a monthly payment one is almost unheard of. But Tata-tweet is able to do it thanks to Tipjoy’s Twitter Payments API. This service extends Tipjoy’s social micropayment structure to the red-hot Twitter platform. And Tipjoy created this app to show exactly how it will work.

Pipping your accounts into Tata-tweet is easy, but you will have to have a group account set up that all of these tweets will be sent from. Once you have that, you click on the sign-up button and your TipJoy account is billed. It doesn’t require a credit card because TipJoy assumes that you’re good for the money. A word of caution: TipJoy will tweet out that you owe $5.94 (you have to sign up for 6 months at a time) for creating the new group account.

Tata-tweet is entirely open source, and you can grab the code at github. Tipjoy is running a contest through June 1 for the best apps created using this new Twitter Payments API — and according to TipJoy co-founder Ivan Kirigin, there are already plenty of good ones since Twitter is featuring it in the gadget box on the main Twitter homepage.

Kirigin bets that a lot of premium Twitter services will start popping up soon to make money on the popular platform. Yes, that will probably happen before Twitter actually makes any money.

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Inserting payments made through Tipjoy into your Twitter stream can be an invaluable way to spread the message about what it is you’re buying or donating to, much like sharing your activities, digital media you like and applications you use can spread virally through social networking sites like Facebook. With the Twitter Payments API, developers now have an easy way to integrate payment handling into third-party Twitter applications and potentially benefit from the network effect for all the people who use their service.

Making a payment involves posting a tweet under these formatting rules, e.g. ‘p $2 @robinwauters’ (thanks!). After posting, Tipjoy will record the transaction by using the Twitter search & REST APIs. Note that this is an asynchronous process, not immediate, although real-time transactions are also possible. For more information about how it works along with some examples, go here.

For now, this only works directly through Tipjoy accounts and PayPal, although the company is working on additional support for credit cards and checking accounts. Also worth noting is that transactions are currently only available in USD although other currencies are said to be on the way.

In any case, it’s a far more robust solution for micro-payments through Twitter than its competitor Tipit, which merely uses Twitter as a sort of relay between PayPayl account holders and the person or company on the receiving end.

The company, which was originally seed-funded by Y Combinator and went on to raise $1 million in Series A financing in September 2008, is currently running a contest for developers who use the API for their application, and is giving away some free schwag and one Macbook Air for the winner. Check it out here.

The startup will be posting ideas for applications on this blog and their own Twitter account, but we’d be happy to learn what you can come up with, too.

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For less than the price of a double latte, you can give clean drinking water to children in villages across the world. All you need to do is enter your Twitter ID in the widget at this link, and then fund a TipJoy account. You can give $5 to the Salvation Army or the Google Lunar X-Prize through TipJoy instead.

And you thought Tweets were worthless.

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Tipjoy, a Y Combinator-funded micropayment startup that launched in February, has closed a Series A funding round led by Betaworks, with The Accelerator Group and Chris Sacca also participating. The company hasn’t disclosed the exact amount of the funding, but says that it is just shy of $1 million.

Tipjoy offers as a basic micropayment system that allows bloggers to leave virtual tipjars on their sites, asking for donations from users who appreciate their material. The system can also be used to collect money for any number of purposes, including charity and digital goods.

To enable Tipjoy, site owners embed a small piece of code on their page, which is linked to their main Tipjoy account. To leave a tip, visitors need only enter their email address and the amount they’d like to give. Tipjoy then sends them an email with their outstanding balance, which they can pay off using PayPal (credit card support is on the way).

The system’s most obvious flaw is that users are never held accountable for their tips – nobody comes after you if you fail to pay off your Tipjoy debt. But promising the payment was voluntary in the first place, so there’s not much of a reason to leave a fake tip.

Here’s a sample Tipjoy Tipjar, offering one of the site’s press releases for 99 cents (all proceeds go to charity):

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How do you get more people top leave tips on blogs? Try to make your tip jar app into a platform that spreads the wealth to more people. Y Combinator startup TipJoy is trying to do that with a new platform API for Web applications that will let them share tips with users who contribute content. The platform is launching today in closed beta (the first 200 Web developers who mention TechCrunch in the application will get in).

TipJoy already makes a widget that bloggers can put on their sites to collect tips from loyal readers. Tips start at 10 cents, but readers can choose any amount. All they need to do is put in an e-mail address. Payments are made via PayPal (which takes 2 3 to 6 percent—TipJoy takes another 2 3 percent). With the new API, Web apps and sites that rely on contributions from the audience will be able to split up any tips with those contributors as well. The hosting sites will determine the split, but TipJoy founder Ivan Kirigin expects the most effective formula will end up giving the majority to the contributors. Some API partners testing the widget include bug.gd, Disqus, IJigg, OurDoings, and Weebly.

Below is an example of what a TipJoy widget looks like (any contributions will be donated to charity):

While I like TipJoy’s approach, the sad truth is that people in general are bad tippers, and that is doubly true for the Web. Since TipJoy launched in February, it has collected only 7443 (mostly 10-cent) tips totaling $2589.86 across all the 300 blogs that use it. And the payment rate is only 25 percent. Maybe if tip jars spread, that payment rate will go up. But don’t count on it.

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The fledgling startups listed below will present their ideas and initial products to investors at this spring’s Y Combinator Demo Day on March 18. Of the 19 companies in this batch, 10 have already launched and only one remains in stealth mode. Most of them have been in development for only three months.

Chatterous

Chatterous connects various forms of communication so that people can message each other regardless of the form they use most. Currently the service ties SMS, email, IM, and web together so that messages sent using one technology will be received by others using any of the other technologies. This works by setting up a group on Chatterous’s website and putting down all the ways your friends can be contacted. You can then start sending messages to them immediately, meaning that they don’t even have to change their own behavior all that much. Chatterous launched in public beta last week.

Addmired

Addmired provides the AddHer and AddHim social network widgets, both of which display two user profile pictures at a time and ask users to answer certain questions about them, such as “Who’s more popular?” The founders argue that their widgets are more appealing to social network owners than other widgets, because they help drive traffic within the social networks, not siphon traffic out of them. They look to establish service level agreements with some of the smaller social networks. We covered the service in February here.

Snaptalent

Snaptalent is an advertising network for job listings that uses IP detection to determine whether website viewers work or study at particular companies or institutions. It then displays listings from employers who want to attract workers from organizations known for their talent, such as Facebook or Harvard. See our review of the service from this week here.

RescueTime

RescueTime helps individuals and businesses track how they spend their time at the computer, and consequently, find ways to become more productive. The web-based dashboard charts application and website usage over long periods of time and shows you whether you’ve been reaching your goals. So far, 278 businesses have signed up for RescueTime for a total of 26,132 seats. See our review from last May here.

MightyQuiz

MightyQuiz is a user generated quiz destination and widget provider that we covered recently. Users are encouraged to answer trivia questions from a wide range of categories. They can also submit their own questions and embed them on their sites. The site is very sticky: the average session lasts 8 minutes (or 19 questions). As a comparison, the founders claim that Slate has an average session length of 4:22 and Wired has 3:34.

Tipjoy

Tipjoy is an easy micropayment system for the web. It has been designed to cut out the steps necessary for website visitors to leave small amounts of money for content publishers, such as bloggers. The Tipjoy button placed on a website asks for only an email address and by default registers a donation of 10 cents. The service is nearing 70,000 impressions per day and the founders are exploring different models for micropayments, such as employing them to finance high definition video on the web. We wrote about Tipjoy here.

8aWeek

8aweek promises to save you hours of time wasted each week on time-drain websites like Facebook and Drudge Report. The 8aweek browser toolbar will track your website usage, remind you of how much permitted time you have left on each restricted site, and even block you from particular sites once you’ve spent too much time on them. See our review from February here.

WebMynd

WebMynd provides a visual interface for reviewing your browsing history. The founders draw comparisons to Gmail – just as Gmail obviated the need to sort messages into folders by providing effective search and tagging, WebMynd renders it unnecessary to manually bookmark sites and organized them into folders because it’s easy to search and visually flip through the pages you’ve visited. WebMynd operates as a Firefox toolbar and has already indexed 8M page impressions. We wrote about them in January.

BaseShield

BaseShield will protect Windows PCs from malicious viruses and attacks by leveraging virtualization software. Its methods improve on existing anti-virus solutions by preventing all types of attacks, not just the recognized and documented ones. The service has yet to launch.

Insoshi

Insoshi is an upcoming white label social networking platform. It will differentiate itself from many of the other social networking platforms by taking a completely open source approach (think: WordPress of social networks). The software has yet to be released.

Mixwit

Mixwit describes itself as a combination of Slide and iTunes. While it has more ambitious long-term plans, it currently provides an easy way to make sharable mix tapes with songs found through the MP3 search engine Seeqpod.

Omnisio

Omnisio will help you annotate and share videos from any website. It will also add structure to the existing video content on the web. The service has yet to launch.

Deluux

Deluux aims to become a distributed Facebook, or an inverted Ning, by relocating the center of people’s online identities to their websites, which exist outside of any one social network. The service will facilitate the distribution of personalized content around the web and help drive traffic to these personal websites. It has yet to launch.

Wundrbar

Wundrbar wants to improve upon the search bar experience by providing users with powerful inline commands. The idea is reminiscent of YubNub but Wundrbar strives to appeal to a larger audience and to incorporate functionality that helps people manage their personal online accounts in addition to searching the web.

YumDots

YumDots wants to be the go-to mobile application for finding places to eat when out on the town. Its emphasis on using interactive maps to display information about local restaurants makes it more efficient than other mobile review services like Yelp’s. The service has yet to launch.

280 North

280 North will debut with a web-based PowerPoint clone called “280 Slides” that strives to mimic the desktop experience and features the ability to export presentations to PowerPoint format. The founders’ longer term goals consist of providing a JavaScript-based development framework for building desktop-like applications for the web. None of these services, however, have been launched yet.

Kirkland North
Kirkland North wants to take an infectious campus-wide game popular at Yale and Harvard last year and spread it to other campuses around the country. The Risk-like game pits sections of campuses against each other in a virtual battle for university-wide domination. While the founders have plans to roll out an integrated solution that can serve many institutions at once, they are currently rolling out individual versions of their online service, such as one for Stanford that launched only two weeks ago and already involves 20% of the campus.

Joberator
Joberator will help employers find developer talent by encouraging computer science students to refer their developer friends, of whom they have more intimate knowledge than any professional recruiter. Incentives for personal referrals are created by employers who list the bonuses they will pay to pay those who recommend candidates eventually hired. The service has yet to launch.

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New Y Combinator startup TipJoy is designed to make it even easier to get people to click that tip button. Readers are not required to create an account or have a PayPal account to leave a tip, so there is little friction to them getting started. If they want to leave a tip they just click the button and type in their email address. I’ve added a tip button below to show how it works – any money we receive we’ll be distributing back to other bloggers who add the button, and/or donating to charity.

If you leave a tip as a new user, you start to build up an account debit. You can eventually pay that off via PayPal (TipJoy keeps 2% 3%), although no one comes after you if you choose to skip out on the bill. You can also start to ask for tips on your own site, and anything people leave for you offsets what you’ve given to others.

The TipJoy site shows popular sites that have received a lot of tips, and you can also send any URL or email a tip directly as well. As a tipper, you can choose the amount you’d like to tip by default (starting at ten cents). Then, every time you click the tip button on a participating site, that amount is added to your bill.

If you want to cash out of your tips you can choose to either receive an Amazon gift card or donate the amount to charity. For now, you can’t receive cash since the company wants to avoid becoming a regulated money transfer service. In the FAQs they suggest they’ll be adding this functionality eventually.

I like the service because it creates a network around the idea of tipping for content. Users are both tippers and tippees, keeping a balance that they pay off eventually. I also like the fact that people don’t have to pay off that bill. It creates an interesting psychology where people find it very, very easy to leave the tip, and then may feel guilted into paying off the bill. At the very least, TipJoy is an interesting human psychology experiment.

The service has a number of options for integrating buttons and graphics on to the site. I imagine they’ll be adding plug-ins and other tools as well over time.

TipJoy was founded by Abigail Kirigin and Ivan Kirigin. The company blog is here.

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