Why Didn’t it Take Off? Pathology of a Floundering Web 2.0 Startup

Tipjoy is a web startup for tipping web authors/personalities funded by Y Combinator. It went live in February to decent press coverage. The concept is simple—if you see something you like tip the author by either clicking on participating author’s link, using the Tipjoy bookmarklet or going to the Tipjoy site and entering the URL.

It’s a good idea and the founders have worked hard to overcome a number of the inherent problems with small money transfers. However, there’s one little problem remaining. It’s not generating revenue.

On the main page of Tipjoy the technically savvy, but perhaps not as financially savvy, authors post their latest statistics:

 $2,519.01 (red arrow) is not a large sum of money. Compound that with the time period indicated by the blue arrow. Elsewhere in the site founders explain that they charge a 3% transaction fee. In other words they pulled in $75.57 over 4 months. Nice. Probably doesn’t even cover hosting fees.

Of course this isn’t the full story. There is likely between a few hundred up to a few thousand dollars sitting in accounts either waiting to be given out as tips or claimed by the tip recipients. With money markets at around 2.5% that may represent another $20 in interest. Thrilling.

It appears the failure to generate revenue has had it’s costs. The founders haven’t blogged for nearly a month—and previous postings are uninspiring to say the least. It seems that around the end of March the founders attention wandered from the site—after less that 2 months live! How many successful businesses ever got it right in that short of time? <Right now imagine a typical rant about generation Y’s failure to follow through>

 OK, now clear those thoughts. Generation bashing is never fair. Let’s look at the site itself.

 First, what’s right.

  1. Design: It’s an easy to understand, easy to use site. The color scheme is clear and inviting.

  2. Concept: The idea is simple and the implementation is straightforward.

  3. Technology: Excellently implemented. The site isn’t foundering through lack of technical expertise.

  4. Ease of use: It took about 15 seconds to sign up. Try it.

 So what went wrong wrong? Let’s disassemble it a bit:

Product: In my opinion the product stinks. No, not the idea. The idea is great. Not the implementation. It’s a solid web site. But the product. Let me illustrate. As you may know I live in Tennessee and it gets hot in the summer. A few years ago a deer got hit by a car along the road I drive to work. After a few days of that mid-summer heat that thing could be smelled from nearly a mile away. Some people may take from that experience that deer stink. Well, not all deer. Rotten deer. This product is rotten.

Tipping is a very abstract “product”. “Social well being” is probably as close as it gets. One evening my wife and I dined at our local Olive Garden and by bad luck ended up with a barely competent–if that–waiter. Luckily the lady serving tables near us was very good and bailed him out a couple times. Understandably his tip was very small. But on the way out the door I slipped her a couple bucks. She felt good and I felt good.

Replicating that experience on-line is difficult. Tipjoy is notably lacking in that regard. The main page is made up of a bunch of (dry) statistics. Hello, this isn’t Microsoft Excel! What are they trying to sell—business analytics?? Where’s the sidebar advertising how your Tipjoy data can be added to your Facebook/Myspace site? Where’s the banner that says “Show your girlfriend you really like her latest Facebook post?”. Where’s the “attach a message to the tip” feature? Tipjoy is a social site—it must market itself as a social service. It must integrate into life, or life will continue to pass by outside of it.

Advertising: People have to know about a site in order to use it. Tipjoy did enjoy good initial coverage from TechCrunch and other scattered outlets. However, it lacks long-term support. If I were them I’d contact as many bloggers and Myspacers (if that’s what they’re called—I’m getting too old school for that stuff) to include links on their sites. Tipjoy must become integrated into the social framework.

And one last thing. No credit cards? Hey dudes, it’s 2008, Web 2.0. Instead of “Coming Soon” it should say “transaction charge”. Leave the choice to the consumer.

Lesson: To succeed in Web 2.0 your site can not be an optional layer added to people’s lives. It must be inserted directly into the lives of the consumer. Until Tipjoy finds that recipe it can only founder.

Like this article?  Leave me a tip

 Disclaimer: I have no investment in Tipjoy, nor do I have any business relationship with the company. I don’t know the founders personally, but best wishes to them. I have only the greatest respect for anyone who has the guts to start a new company. My analysis may sound harsh, but remember that anyone who gets as far as Tipjoy is clearly a star.

Want the same analysis on your web 2.0 business?   See the about page for details


23 Responses to “Why Didn’t it Take Off? Pathology of a Floundering Web 2.0 Startup”

  1. Ivan Kirigin Says:

    Hi Jeff,

    I’m co-Founder of Tipjoy. We’re very much alive and well, and about to release some very exciting new features. You will hear more about them soon. We’re hiring, raising money, getting new office space, and still working hard to make the service better.

    The use of Tipjoy has been consistently growing, and we expect this to accelerate. Just as you said yourself, it takes more than a few months for a product to become huge. It’s an iterative process where we listen and learn from our users and continually add new features for them.

    We too believe in the social side of tipping. We’ve made it easy to see who else has tipping something, and see everything they’ve tipped. This is all syndicated with RSS. You can see the tips I’ve given here: http://tipjoy.com/userstream/ivankirigin/

    If you want to make your tipping public, change your settings here:

    The social side of the site is going to become much more interesting, especially as we add plugins to social networks so you can track what your friends are tipping on the sites you’re using most.

    Thanks for writing about us. We hope you continue to follow Tipjoy’s growth.
    Ivan Kirigin

  2. Charles Says:

    Interesting article. A couple of things you didn’t mention which I think are more fundamental to this start-up failure than the points you raise.

    Firstly the assumption of content being “free” on the internet is wholly accepted and assumed. The modern business model works very hard to find value in, and then monetise, giving away content.

    Secondly for an internet business like this to succeed it needs to be applicable globally if it’s going to take off. Tipping in the Tipjoy sense is a very American concept and this, compounded by the first point work internationally in my opinion.

  3. Meng Mao Says:

    Your Lesson was a non-sequitur from the reasons you gave for TipJoy’s floundering. Can you give some ideas for how they could have better inserted the concept of tipping directly into people’s browsing experience? Without it being super annoying?

  4. a Says:

    pretty amusing they only allow paypal. paypal already has a donate button you can add to your site. so tipjoy adds nothing?

  5. jdeuel Says:

    “pretty amusing they only allow paypal. paypal already has a donate button you can add to your site. so tipjoy adds nothing?”

    exactly what I was thinking, and PayPal already takes a slice off too, so the paypal donate button just works better.

    However, paypal has a long history of fucking legitimate users over so I can see people using an alternative like this.

  6. Sean Says:

    You focus on the execution but I thinkt he idea wast terrible from the beginning. Maybe TipJoy didn’t take off because people don’t want to tip bloggers — either because they don’t like paying for something that is free (and written by someone with a software dev job payking 10s of ks), or that they feel most bloggers don’t deserve tips.

    Clay Shirky has somewhat famously spoken against the viability of micropayments. He makes some pretty good arguments, though TipJoy has tried to overcome some of them: http://shirky.com/writings/fame_vs_fortune.html and http://www.shirky.com/writings/weblogs_publishing.html

  7. Mak Ossa Says:

    That was missed opportunity for those dudes. A lot of start-up never got the privilege to make it to TechCrunch…Well, it’s been only few months, they can still get their mojo back it they could get organized.

  8. research Says:

    Hah. Flys in the face of consumer research. People only tip out of guilt due to the expectations set. There is no such expectation in blogs or most of the internet, and because it’s anonymous you have no chance.

    Tipjoy will be a failure. Do you research next time morons!

    Oh, and isn’t it interesting that 1/25th of the tips since feb have been a single founders own money! Hah!

  9. Pratik Stephen Says:

    Interesting points Jeff!
    Liked how you got to the core of the “Tipping” experience…
    I can’t beleive they dont have a “Leave a message with the tip” feature… That should have been the second highest priority feature after getting the money transaction parts handled!

  10. Ajo Paul Says:

    Perhaps tipping is good for the future, you gain you pay. I would wish all the success to the founders. Yes its true not all startups can leverage on the Web2.0 wave, but nevertheless a start is a start.

  11. sdfx Says:

    The best advertising for tippjoy is to pay out the tips to the beneficiary – especially if they don’t expect the payment. Probably they will write about it no matter how low the tip was, generating free publicity.

  12. Rob Moir Says:

    The “message with your tip” thing is so fundamental.

    When someone sends me a message on my own (minor and irrelevant I know) blog saying “Great site, I liked the article on will you do some more about that in the future?” I consider that request very sympathetically. If they actually tipped me while asking for more articles on a certain subject I’m definitely going to feel motivated to give them what they want. At the very least, things like this should tell an author what people like about their site.

  13. axisos Says:

    wha???? leave a comment or email me at my blog axisos.wordpress.com

  14. Quirky Indian Says:

    That was quire insightful. And yes, hats off to anyone who has the guts to start a new company.

    Quirky Indian

  15. pubdomains Says:

    I had a quick look at tipjoy and in the process selected to tip a few just to test how the thing works. Now, I have 30c due to tipjoy 😦
    The concept may work out in one country but internet is global and unless tipping is a global phenomenon – the model may not really survive. Already there are folks breaking code and not willing to pay for legit software, how and why would anyone go about tipping for browsing content or reading a blog.

    Nice article, and I must say I am impressed by Tipjoy’s quick response too.

    Keep up the good work!!

  16. chrisber Says:

    The basic concept is flawed from the start. I think people generally resent the expectation of tipping for services that we already pay for, so the idea of tipping for something that is supposed to be free is never going to fly. What do bloggers have in common with waiters, hairdressers and prostitutes?

  17. kingstonchronicle Says:

    TipJoy I think will do well, as it has a cool name, also I think they make it personal so it has a different feel. All in all they are a new name and new style so the old may go out the window if it catches on on Facebook.

  18. cease Says:

    lets get real, whose gonna pay for whats free, unless its exceptional. Yes I donate to open source projects, thats because they offer a good service. If you really want to contribute to a blogger you click on a few of there ads. But paying a company to pay a owner of some content.. come on now.. just cut out the middle man. Terrible idea

  19. Dr. William Bennett Says:

    Tipping bloggers is a very lucrative field, but its potential has not been achieved. As soon as an infrastructure is in place and a directory of messagable tippable bloggers is created, lobbyists can use tipping to sway public opinion, congruent with the findings of Festinger & Carlsmith’s monumental 1959 that discovered the principle of cognitive dissonance.

  20. lubos Says:

    Great post, but I’m not sure if social aspect can save this business venture. first of all, content providers are not waitresses – they are usually highly qualified professionals in some particular niche. They won’t ask for tips from their users because that would make them look cheap and unprofessional. Besides that, they can sell ads and have solid business model if they want to.

    I predict that TipJoy will never take off. This is maybe hard to digest for co-founders but maybe it’s time to stop pretend that hiring more staff, raising more money and getting new office space will turn this thing into success story. It won’t.

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