Tipjoy Social Tipping For Sites You Like

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A New York based incubator called Betaworks develops and invests money in promising Web 2.0 technologies.  They’ve announced that they have led a one million funding collaboration for startup Tipjoy Inc.  Tipjoy is a micro-payments processor, meaning they process payments as low as 1 cent, and they specialize in taking “tips” for websites like blogs or information sites as a means of income for those sites.

The idea is pretty simple: most sites that want to take viable donations through PayPal or another common online processor have to take at least $1 in order to break even on the transaction.  This means that smaller donations actually cost the site money to receive and are counter-productive.  Since users are more likely to donate very small sums of money continually rather than large sums occasionally, the ability to receive those smaller funds on a profitable scale is important to many not-for-profit sites.

Tipjoy facilitates this by allowing site owners, bloggers, and others to post “tip jars” on their site in which users can donate sums from a penny all the way up to thousands of dollars.  The money is collected via PayPal or (soon) credit card transaction.  Tipjoy aggregates the donations, so if one person donates to half a dozen sites for a total of $1.50, Tipjoy bills them that total rather than each individual, smaller total.  Even better, the tips are completely voluntary and payment of the tip is also voluntary, so users can ignore the bills or delete them at their will.

This also means that money is saved when the donations are paid to the site owner, who receives one large payment from Tipjoy monthly rather than many smaller, higher-cost payments from individuals. Their third bonus is that when a user leaves a tip, the user never leaves the site, which is not true of traditional PayPal or credit card donation links.

TipJoy charges about 10% in transaction fees, which is lower than the standard flat-rate plus a percentage most other processors will charge.  This money is taken out of donated funds directly before payment to the recipient and is only charged on funds actually collected.

It’s a great setup and a good idea, bringing electronic commerce a step ahead from traditional electronic transfers (credit cards and bank wires).  Tipjoy is currently hiring development staff and was founded by husband and wife team Abby and Ivan Kirigin.  Whether their business model can proceed past investment funding, time will tell.

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