Take the Money and Run

June 15th, 2006

The financial world for small and medium-sized Mac software vendors is going through some interesting changes. Rumors of Google’s GBuy being released on June 28 put me in the mood to expect a shake-up, and today I’ve learned that Digital River has acquired eSellerate, a very popular payment processing service for Mac developers.

Strangely, I can’t find any confirmation of the sale on the net. All I have to go by is this email note I received directly from MindVision/eSellerate, announcing the big changes and what I as an alleged customer may expect from it. Apparently Digital River is buying up companies so quickly that they don’t have time to update the web site. The press release page does contain an announcement of acquisition, but it’s for a different company. And it’s old news! That acquisition happened a full week ago!

What is an online payment processor, and why do small-timers like to use them? To accept money through the Internet these days you either have to have your own credit card merchant’s account, or else use a payment processor who deals with all the nitty-gritty of credit cards or bank transfer from your customers, and periodically sends you a check. James Duncan Davidson recently wrote about the risks of accepting online payments, where he points out that in addition to the administrative headaches, you also take responsibility for safeguarding (and potentially compromising) the user’s private credit card information.

The services provided by these companies vary, but at a minimum they all allow people of the world to give you money for your product or service. Many of the services also provide added value by automatically handling sticky issues like sales tax computation, serial number generation, annual reports, etc. eSellerate in particular has focused on adding value in the areas of integrating the sale and product activation into the application itself. These optional features allow programmers to put the ability to accept a credit card right into the application itself, and for the application to “phone home” to eSellerate with information about the computer it’s being installed on, to prevent multiple copies of the same registered application from being used at the same time.

Until today most Mac developers I know considered their options for payment processors to be PayPal, Kagi, SWREG, and eSellerate. Today those choices remain the same, but we sit in anticipation of what it means that eSellerate is owned by a juggernaut of the PC shareware registration market. I don’t really know what Digital River’s reputation is among vendors, I just know they’re big and relatively unknown on the Mac today.

In general I’m for changes and evolution in this, the “market market.” Things are pretty good for independent software vendors today, but there is much room for improvement. Hopefully the acquisition of eSellerate and the impending arrival of GBuy means we are about to enter an era of competitive innovation.

5 Responses to “Take the Money and Run”

  1. John Gruber Says:

    For what it’s worth, Bare Bones Software has been using Digital River for their web store for at least four or five years.

  2. Daniel Jalkut Says:

    John: Interesting – I guess it really doesn’t matter what platform you’re selling for if you handle all the sales on the web. I do appreciate the Mac-specific in-the-app sales solutions from some of the vendors, though. Anecdotally, a good chunk of users seem to like them, too.

  3. Rick & Sydney Says:

    Joel Ronning is one of the richest people in the world. Offhand he owns Walnut Creek CD-ROM, RegSoft, Reg.Net, NetSales (his former #1 competitor) and a whole slew of other companies. He’s trying to be the Bill Gates of online sales.

    Our experience with them is not good to say the least. They courted us ferociously (lots of expensive international calls etc) and then as soon as we’d signed they dropped us completely. Our contact was only our contact for the sales pitch – after that we got someone else. Who at first wasn’t bad, but he (Terry Strom) quit and went back to Washington state and some wife beater from Canada took over. This new guy had a solution for all enquiries from vendors: tell them to shut the F up [sic].

    We had one customer given the run around through three days and fifty five mail messages where no one would even sign a name at the bottom. This guy is still a good friend to this day but it took us a long time to unravel the guy’s brain after DR got through with him.

    Then there was the time DR thought they’d make a Halloween special. For anyone buying software there’d be a free Halloween screen saver in their shopping cart on the way out. Except the brainiac forgot to remember a lot of vendors didn’t have shopping carts as they only had one product.

    So first this secretary has to mail out these MS Word docs of about 400 KB each (no joke) to each and every vendor. Who in turn have to open them and put a single tick mark at the bottom – ‘I accept’ for the Halloween screen saver offer – and then send it back. And this is like way before anyone had broadband (but of course Joel had a T-1).

    So what happens is that our customers complain they’re trying to purchase our products and every time they get close to checkout their browser crashes. WTF? So we look at it. Sure enough, the brainaic code tries to put a value in a pointer that’s supposed to be for the shopping cart – except most vendors don’t have one. And you should know what happens when you try to access address zero.

    So we contact Chris Faris, our old sales rep, and tell him about this because the wife beater simply won’t listen. And Chris contacts the techie department.

    Who get back two days later to him to tell him to tell us there must be something wrong with our computer hardware [sic]. In fact they explicitly recommend we visit our local shop and have all our RAM chips replaced [sic].

    No joke. And this is only to impress that DR have never really cared about quality. No one ever thought they did. They just like to devour. Ronning is worth several billions. He’s doing good. But his company sucks the big one and in a few years 007 is going to have to travel through the snows of Minnesota.

  4. Anon Says:

    It should not be a surpise that eSellerate was sold to Digital River even though Steve Kiene, the owner of eSellerate/MindVision, promised his clients that would *never* happen. Over the last two years eSellerate has not be projecting forward on the track the company thought it would be on. Growth was slow and they still had the dot.com boom mentality. Employees were cajoled by the owner into believing they would all become the next tech millionaires once they grew to the point where the company could be sold. The eSellerate track, from day one, was to sell out to a large company but “have fun” while growing to that point.

    Additionally, the company was having serious issues keeping things cheery with the employees. Upper management started treating its employees as assets once Steve Kiene left as CEO. Upper management tried to figure out the best way to stoke the dying embers but the handwriting was on the wall. After a rejection of an initial DR deal two years ago along with some interest by Handango, it got to the point where eSellerate was ready to jump onto any buying bandwagon that came into town. Things turned drastically worse at the departure of Kiene as he went off to “retire” and start another company. Employees felt lost and that the company had forgotten its vision and that the creativity jumped through the window. Employees who bucked the system to try to fight back to a healthy attitude of creativity and innovation for the customer were either reprimanded or let go. Attitude was therefore kept in check with an iron glove from the top down.

    It will be interesting to see what happens now as the employees received a bit of the shares of the sale. There is a lot of fluff from Kiene’s blog about it (the sale) being for the employees. But a new taskmaster is now at hand and holding the ship’s reigns. There is no more dream of a sell out to a bigger fish. This is it. Unless DR understands the underlying problems that exist at the company and do a lot to reinvigorate the VISE product, sales will continue to wane and a mass exodus may be in store with regards to the employees. Time will tell whether the sale of eSellerate will be a good thing for Digital River. eSellerate already cashed out on its dream.

  5. Steve Kiene Says:

    I find it amusing how people post anonymously, yet try to act like they are speaking the truth. “Anon” apparently thinks he (she?) knows the real story.
    The employees got over half the proceeds (cash) from the sale. There was no stock involved.
    I didn’t retire and start another company. I stayed involved with esellerate in the background. I was as much involved in the operations of the company after I left as I was the two year prior to my departure.
    It would be stupid to “reinvigorate” Installer VISE. It’s a dead market.
    esellerate growth was not slow. The annual % growth outpaced everyone else in the market.
    We NEVER had the dot com boom mentality, that’s just plan stupid to even say. We never took outside funding, we never embarked on an explosive growth strategy. Our strategy was to put quality above quantity.
    No employees were let go because they “fought back”. One person was let go for performance-related issues and that person was simply part of the system operations group.

    The earlier comment about Joel R. being worth billions is just plan wrong. He’s worth at most $100M, and that’s only if he has made some amazingly lucrative investments with the sales of DR that he has sold. I estimate it’s closer to $70M.

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