I Do Not Normally Carry Press Releases…

… but I got an email today from a chap named Marco Bellinaso.    It sounded suspiciously like a press release, although fairly well adapted as an email saying “Hey, could you do me a favor and blog about me?”  Normally, I’d say “This is spam” and be rather miffed.  However, he at least went to the trouble to get my name right and connect the sales pitch tangentially to my main concern (pleasing my readers, who he correctly identified as prospects for his service), and he’s a uISV himself, so I’ll charitably overlook the unsolicited nature of the email and comment on the product.  Unfortunately, its not going to be a very positive comment.

The product is www.bytecommerce.com, which is another service for selling digital downloads through Paypal.  The feature set is fairly similar to Payloadz, e-junkie, and the rest of the gang — uses IPN, has expiring download links, supports license keys, yadda yadda yadda.  The interesting part of the pitch, which Marco Bellinaso seems to think is his competitive differentiator, is the pricing structure.  This should set off alarm bells in your head: “Uh oh, trying to compete with established firms only on price in software is kind of suicidal.”  But, hey, money is money and I have certainly made the decision on what e-commerce provider to use with money concerns playing prominently in my calculus. 

So here is their pricing scale: you pay Paypal fees, obviously.  Then, instead of paying a fixed monthly fee (e-junkie), a variable fee based on the amount of sales you have (Payloadz), or a commission (the Digital River companies et al), you give them every 20th sale in its entirety.  That logically works out to a 5% commission if you sell only one product, plus Paypal.  That would be, oh, $30-40 a month for me if you averaged it out.  This could potentially work out much better (or worse!) if you had multiple products, and we’ll ignore the fraud case where you put in a 1 penny item and “sell” it to yourself or a confederate for every 20th sale because thats incredibly dishonest.

So, yep, innovative pricing structure.  The problem?  Well, I don’t choose business partners based on innovative pricing, I choose them based on cheap pricing, if I consider pricing at all.  If my choices were Payloadz or the “traditional” shareware processors or this I would strongly consider switching (holding services available equal).  However, there is e-junkie.  $5 a month is less than 5% of gross sales for any number of gross sales greater than $100 a month, and thats been me since the second month I was in business.  So this might work well for someone whose side business is more of a casual hobby for them (well, even more of a casual hobby for them), but I can’t really recommend it based on price to anybody else.  And since apparently the pricing is the sales pitch, well, I have no reason to take a look to see if they can match e-junkie on a features comparison (which I’m going to assume is a no, since they apparently just launched). 

Here’s another non-trivial implementation worry: there is no convenient way to refund a credit card charge made by a third party to a third party (not a shocker, that).  Supposing I were to sign up for this and then the 20th customer asked for a refund, I’d be up a creek trying to get them money, rather than just clicking two buttons on my Paypal interface.

There are a trio of lessons here for other uISVs: number one, its a tough row to hoe when you try to compete on cost despite not actually being less expensive than your competitors.  Number two, “We’re the cheapest!” is only a competitive moat to the extent that you have some sort of structural advantage that will let you always remain the cheapest, like Wal-Mart does.  Number three, pricing is not good ground to pick a fight on in selling software (or software as a service, which is essentially what e-junkie et al are — you’re renting a Paypal IPN script on a monthly basis).

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