Lowering costs
Friday, January 13, 2006
As I mentioned I'm going to move NewsMac Pro over to a PayPal/Aquatic Prime combination to handle payments and serials. Obviously this is a bit of a hassle, it requires fiddling with my PayPal account, making changes to my application's registration system, setting up stuff on my web server to issue serials to customers and i have to issue replacement serials to existing customers. Is it worth the time and effort involved? Well lets do the math and find out: All of the following are based on a $25 product that sells 40 copies in a month to keep things simple.
| Payment processor | Fee | Per-sale income | Monthly income |
| Kagi (standard) | 5% + $1.25 | $22.50 | $900.00 |
| Kagi (KRM) | 5.75% + $1.00 | $22.57 | $902.80 |
| eSellerate (<$15K sales) | 10% | $22.50 | $900.00 |
| eSellerate ($15-50K sales) | 15% | $21.25 | $850.00 |
| PayPal (standard rate) | 2.9% + $0.30 | $23.98 | $959.20 |
| PayPal (merchant rate) | 2.5% + $0.30 | $24.07 | $963.00 |
posted by Rory Prior @ 3:34 PM
14 comments
14 Comments:
I am very interested in this topic, how could you automate your PayPal payments if PayPal Website Payments Pro is available ony for US residents?
All via email?
You can have PayPal post a notification to your server (e.g. call a PHP or other CGI script) which can then generate the registration details and send the relevant e-mails, record an entry into a database and so on. All you need is a business account as far as I'm aware. I'll post more on this as I get further into the implementation.
Please do - I'd love to see a way of automating the registration + payment process which is (a)easy for you and the customer (b)scalable and (c)secure.
But I'm not so keen on PayPal. Doesn't this mean your customers have to be PayPal account-holders?
They don't need a PayPal account, they just fill in their credit card details and address like they would on any other web order form.
The main issue about PayPal IPN is that at the end of the process the user should wait 10 seconds in order to be redirected to the page you have choosen (or he has to click on a link). A more robust solution should be an automatic redirection, because during these 10 seconds delay the user could close the page or change URL. I find this solution a little risky...
The sample php script that comes with Aquatic Prime that links with PayPal sends the users registration details via e-mail when an approved payment IPN comes through, it shouldn't matter if the user closes their browser or navigates to another page.
The creation of a vendor independent serial number/"get your money"-framework is very interesting, and maybe there is even a "market" for such a framework: I would certainly shell out 100-250$ for such a framework, if it handles the serial numbers and the credit card stuff for me automatically and transparent. I would prefer to have the serial number automatically put into my application instead of copy&paste, but this is a question of personal taste. As long as I can focus on my business applications and not on serial numbers and credit card handling.
About doing the math: You have to see, that the esellerate stuff is really easy to include in your software and you already have done that... (Even they dont support MacIntel the way we would prefer). If now the new route you are going takes you 1 week to implement (40 hours) and you get 2.82$ more per copy (PayPal merchant vs. eSellerate >15k$) then you have to sell roughly 85 copies of the software until you break even. If you now assume, that a different serial number/"get your money" way has no benefit for your customer it might be better, to spend the money on more features or a new product.... (But I could be wrong on my thinking here ;-)
Anyway.
About that new product: here is a suggestion. Make your way of connecting to PayPal for the money and using the Aquatic serial number creation into a framework and make it available as a "product" to the developer community for whatever price you like (free up to lets say 250$).
About another new product: WuffWuffWare has an internal serialnumber/order/customer tracking software called WuffCustomer, which can understand the eSellerate mails and parses them into proper records (imported via drag&drop). I could imagine to throw that application improved and adapted to that new product above into the pot for the community...
Well it really shouldn't take 40 hours to implement, the Aquatic Prime framework can just be dropped into my app and then it's just a case of setting the registration module to validate against it instead of eSellerate's library. One of the cool things about AP is that it uses licence files rather than a name and password so you can just have double clicking the licence file complete the registration process. You have to think long term as well, it may take x number of sales to make up the cost of time spent implementing, but if you keep using AP and PayPal for years to come you've potentially saved yourself thousands of dollars each year.
In my example of just 40 sales a month, the potential saving is around $110. If you assume 40 sales each month of the year then that's $1320 a year in extra revenue you could be making.
In my experience, it's worth the extra work to use PayPal, and it gives you a bit more control. However, keep in mind that they also charge $0.25 "cross border" fees.
Doesn't paypal have a 2.5% 'spread' on their exchange rate. Doesn't this mean it will actually cost more than you think to get at your money in stirling?
When ever you do currency conversion someone walks off with some of your money, unfortunately it's just unavoidable who ever you go through.
Unfortunately the sample rates of 2.9 and 2.5% are incorrect - they're only for "within-border" transactions. Since Rory is in the UK, any sales to the US will incur higher percentage fees. Anywhere from 2.9-3.9%
The 30 cent per transaction fee is also a little slippery because it obviously accounts for a much higher percentage of a lower priced product. Paypay's schedule definitely favors high-dollar transactions.
eSellerate is a total rip-off (so is Kagi, mostly because of the brutal $1+ fee on top of the gross percentage), don't get me wrong. And PayPal is definitely the easiest thing to implement - simple as pie compared to so many other hoops you have to jump through with merchant accounts.
But it might be worth some time to check out merchant account providers. The cost breakdown does depend a lot on what your business is: prices you sell at, volume and where your customers are.
PayPal as a secondary payment system (for people who want to pay out of their PayPal balance is obviously a no-brainer. Do it.
Yeah there are some extra costs associated with PayPal even though overall it's still cheaper and allows faster access to your money. I'm probably going to be going with a new 3rd party service but I can't talk about it yet :)
Interesting article on how to get a merchant account - 10 hot tips
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