“Going Directly At The Beast”—WePay Takes on PayPal with New Tools for Online Merchants

7/21/11Follow @wroush

WePay emerged from the Y Combinator venture incubator in late 2009 with a plan to make it simpler for people to round up money online from groups of other people; think of a carpool driver collecting gas money from his riders, for example. Well, you can still use it for that. But as it turned out, there was one particular category of money-collectors who really liked the Palo Alto, CA-based startup’s services: small merchants.

So WePay introduced a new product this week tailored especially for them. Called WePay Stores, it lets anyone set up a Web-based e-retailing operation in just a few steps.

The startup is marketing the service as a simpler, cheaper alternative to merchandising platforms like eBay, Shopify, Etsy, and Eventbrite. But most of all, it’s going up against PayPal—the eBay subsidiary known not only for helping consumers send and receive cash digitally, but for its payment processing services, widely used by e-retailers, government offices, political campaigns, nonprofits, and even banks.

WePay’s knock on PayPal is that it’s complicated and expensive to set up a merchant account and add PayPal buttons to an existing website. WePay says it only takes a few minutes to set up a store on its site; the startup will host the store for free, keep track of customers’ shopping carts, and handle credit-card or e-check payments when they’re done.

The startup keeps 3.5 percent of each transaction. That’s slightly higher than PayPal’s fee (1.9 percent to 2.9 percent, plus $0.30 per transaction), but the flip side is that WePay doesn’t levy any monthly charges or setup fees, the way PayPal and eBay do.

One of the first businesses to use WePay Stores is Startup Tees, which sells T-shirts bearing the logos of Silicon Valley companies like Heroku, Reddit, Hipmunk, and Dropbox. (It’s probably no coincidence that most of the featured companies are Y Combinator alumni.) “It literally took us a few minutes to build a store on WePay and drop it into our site—and it brought in a few hundred dollars of revenue within the first few hours,” said Zach Johnston, co-founder of Startup Tees, in a statement.

WePay has 33 employees these days, and has raised more than $9 million in venture funding from Highland Capital, August Capital, and individual investors. To hear co-founder Rich Aberman tell it, the startup isn’t shifting away from its original mission, but rather getting closer to its essence.

Even before introducing WePay Stores, the startup had already quietly dropped its early emphasis on group payments, Aberman says, having discovered through conversations with customers that the service’s real selling point was its ease of use compared to other online payment systems. Even users who really were using WePay to manage group payments didn’t think of what they were doing that way, he says: “They’re just looking for ‘the easiest way to collect money online.'” From there, he says, it was a short step to providing merchant tools for the subset of users who wanted to sell things online.

I interviewed Aberman about the news yesterday via e-mail; here’s the full Q&A.

Xconomy: Describe the changes this week.

Rich Aberman: For a long time, we qualified the PayPal comparison by saying that we’re focused on helping normal consumers collect money from friends, supporters, fans, members, et cetera, while PayPal is focused on helping merchants accept payments online for products and services. But today we’re going directly at the beast by announcing WePay Stores—a suite of tools intended to make it easy for merchants to sell items online. We found that our focus on simplicity and transparency resonates with merchants as well as consumers.

We think this is in-line with our current strategy of providing both payments (like PayPal) and the tools that people use to actually collect money—such as selling tickets, accepting donations, sending bills, and now creating stores. By handling both the payments piece and providing the tools that people need, we make it really easy for anybody to get up-and-running in under a minute, with no merchant account, technical ability, or even an existing website.

X: What happened to the emphasis on group payments?

RA: We don’t call ourselves a “group payment platform” anymore. We still serve the same customers—generally non-techies that want to get up-and-running quickly without all the complex bells and whistles—but now we just say that “WePay will helps you collect payments online without the hassle,” because that’s really the pain point that we’re solving.

X: Does the introduction of WePay Stores represent a major “pivot” for WePay, or just an evolution?

RA: Definitely an evolution. From day 1, the direction of our product has been determined by our users. We originally built a way to bill your friends or members for group activities, like bachelor parties and group vacations. What we found was that people came to our site looking for an easy way to collect money for various different things, but “collect money” meant different things to different people.

We found, very early on, that a lot of people really needed to sell tickets to their events, not send bills, even though the profile of the user was the same. Or that they wanted to collect donations in any amount rather than sell tickets. So our strategy evolved from: “Here is one tool for one use-case” to “We help you collect payments without the hassle by providing easy-to-use tools for any use-case.”

We found that some of our users were beginning to look for more “merchant-like” tools (i.e. they also wanted to sell things online). We thought it was a perfect opportunity to better service a subset of our existing customers, while at the same time busting into the merchant space, which we think is a green field opportunity.

X: Did the group payment idea prove to be too small?

RA: I don’t think so. You can build a billion dollar business servicing just groups that want to collect money online (organizations, clubs, teams, group travel, fantasy sports, etcetera). But I don’t think the best way to acquire these groups is to call yourself a “group payment platform” because that’s not how they self-define— they’re just looking for the easiest way to collect money online.

X: How and when did you discover that users were more interested in the underlying platform and its simplicity?

RA: We just asked our users why they chose WePay over other services. It always boiled down to the same things: it takes almost no time to start collecting money online, you don’t need technical ability, or an existing website or merchant account, and you don’t need to go anywhere else to get the tools that you need. Those points became our marketing messaging and they have since driven the development of the product.

Now we know how to answer the question: “How are you different from PayPal?” The answer: “We both help you accept payments online, but WePay holds your hand through the process of going from never accepting online payments to getting up and running with whatever tool you want.” If you want to sell tickets with PayPal, you have to plug it into Eventbrite. If you want to sell items, you have to plug it into Shopify or Etsy. If you want to accept donations, you have to put a button on your own website. With WePay, you can do any of those things in under a minute, and it just works. That message, in particular, really resonated with users.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

By posting a comment, you agree to our terms and conditions.