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