PayPal Subscriptions Cannot be Transferred

[System0]

I have been doing a lot of research and testing with PayPal recently. During my research, I found that subscriptions can never be transferred from one account to another.

I am hoping to monetise more of my forums by adopting a subscription membership model, so this is obviously a concern for me. It means that if I ever sold one of my forums in the future, I could not transfer those subscriptions to the buyer. Members would have to cancel their subscription and subscribe again; which would undoubtedly lead to a big reduction in total subscriptions.

I spoke to PayPal on the phone about this today. They clarified that there is no way in which subscriptions can be transferred. You cannot change the email address, you cannot create a second account. It is tied to you. No ifs, no buts.

I spoke about this on my blog earlier. To me, this could be a major problem if I ever chose to sell one of my forums. I could see the value of my forum greatly reduced because of it.

For example, say your current subscription income from your forum is $5,000 per month. Perhaps this would value your forum at around $150,000 (based on current income, traffic, content, potential etc). If someone did purchase the forum, they may see subscription drop significantly, at least in the short term. This would devalue your forum greatly because it takes it longer for the buyer to recoup their investment. Perhaps the value of your forum would drop to $100,000 because of this.

I would love to hear from those of you who charge members a monthly or yearly fee.

Do you think this is just the cost of using PayPal, or do you think it would be wise to look alternative payment solutions in which the account could be easily transferred to a new owner?

Kevin

 

[Paul B]

Don't you have a PayPal address/account for the site?

When you sell the site, you also sell the site PayPal account.

 

[System0]

I have a unique email address for subscriptions. One that uses the forum domain. That email would therefore be passed to the buyer.

However, the lady from PayPal confirmed that subscriptions are tied to an email address and an account ID. I then queried whether I should setup a separate business account for it. She said that it would not make a difference as that account could not be transferred.

I asked whether there was any solution to this at all and she said that the only solution is to ask all members to cancel their subscription and sign up again. I can only imagine the frustrating in developing a discussion forum to a value of $300,000 and then realising that it is only worth half of that because members have to re-subscribe.

 

[Paul B]

I don't understand.
Just hand control of the PayPal account to the new owner.

 

[System0]

They advised that this was not allowed.

I am unsure as to why this is the case. I can perhaps see the reasoning behind this with a personal account, however businesses change hands frequently, so you would expect them to facilitate any changes in a company's ownership.

A quick search on Google seems to backup what I was told on the phone today.

https://www.paypal-community.com/t5...tions-from-one-account-to-another/td-p/433141

As the buyers would technically be paying a different account, subscriptions and billing agreements are non-transferable without re-subscribing. Understandably, you'll want to avoid subscriber loss, so you may want to switch over existing buttons to direct them to your new account, and then either transition your existing subscribers en masse at some point (after much advanced notice) or allow them to expire and then re-sign up.
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http://www.sitepoint.com/forums/sho...-to-transfer-paypal-advertising-subscriptions

Unfortunately, no there isn't. You'll need to get each advertisers to subscribe again using the new owner's button. Paypal accounts aren't transferable.
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[System0]

From a technical point of view, I can understand why a personal account is not allowed to be transferred.

Imagine you recently sold your mobile phone on eBay for £400. What happens if the buyer claims that the product you sold them was faulty and wanted a refund. Would the new owner of the account be liable in a situation such as this?

Perhaps this is not the reason, though I imagine that PayPal do not accounts to be transferred to simplify issues such as this.

 

[Paul B]

Forums are bought and sold all the time.

Irrespective of whether PayPal permit accounts being transferred to new owners, I suspect it has happened thousands of times.

I am not condoning it, if it is against PayPal's T&C's, just stating the obvious.

 

[System0]

I have sold many forums myself

I hope that there is a way around it. I am just trying to avoid any major problems for myself in the long term.

You would think that you could create a second paypal account, unregister your other email addresses from the 1st account, add them to the second account, and then transfer the main account to the buyer.

PayPal seems to be the easiest payment solution for many people, which makes it an obvious choice for receiving payments. Though it could be worth looking into other options such as 2checkout if it means that an account can be transferred easier at a later date.

 

[digitalpoint]

There is no way around it... The user entered into an agreement to pay YOU, not someone else. If PayPal allowed subscriptions to be transferred, it would cause all sorts of issues... like people just selling PayPal subscriptions (without a site). All of a sudden users are getting automatically billed by "Shady Porn Company XXX" because the subscription they agreed to pay to a completely different person/site was sold.

Obviously there are legit reasons why you would want to transfer a subscription, but all the bad stuff that would crop up by allowing it just makes it not possible.

 

[System0]

There is no way around it... The user entered into an agreement to pay YOU, not someone else. If PayPal allowed subscriptions to be transferred, it would cause all sorts of issues... like people just selling PayPal subscriptions (without a site). All of a sudden users are getting automatically billed by "Shady Porn Company XXX" because the subscription they agreed to pay to a completely different person/site was sold.

Obviously there are legit reasons why you would want to transfer a subscription, but all the bad stuff that would crop up by allowing it just makes it not possible.

Yeah I can see the reasoning behind it. I realise that rules like this are probably in place because of incidents that occurred in the past.

Obviously, from a website owner's point of view, it can cause problems if the website is ever sold.

I am sure there would be a way to work around it. For example, they could offer a bonus to people who resubscribed and then worked out the value of the website based on how many people did etc.

 

[digitalpoint]

You'd also have a balckmarket of sorts where hackers simply try to steal your subscriptions. You wake up one day and are like, "Damn, where did all my subscriptions go?" Or in the case of business accounts, where multuple people are managing the PayPal account, you could have disgruntled employees just take all the subscriptions. Either way, there are just so many ways it could go badly...

Definitely best to focus on how to get users to sign up under a new subscription rather than trying to get PayPal to allow you somehow (like incentivize it somehow like you mentioned).

 

[System0]

Agreed. There are a lot of problems that could arise from transferring an account.

I have no desire to sell my forums anyways - just trying to cover all bases

One thing that I do think XenForo needs to improve is the the confirmation page. Ideally, I'd like Auto Return to work with single payments so that I can integrate an affiliate tracking script and tracking code for Google Analytics etc.

 

[wedgar]

I don't understand.
Just hand control of the PayPal account to the new owner.

I wonder if PayPal can't transfer control because it may be tied to a governmental tax ID number.

 

[tkdchamp]

Hi,

I've actually bought a site last year, which had a PayPal account attached to it, with recurring subscriptions. It's true what's stated above, with the exception that you can transfer business accounts WITHIN the country. It actually turned out that the seller and I were both from the same country and could therefore do this. However, it still considerably influences the value as the account can not be transferred to a business in another country. It was probably because of that that a lot of potential buyers could not go through with their offers.

The first thing I did was setup a new integration with another payment provider. This has been running for almost a year now and all new customers are signing up through that. The PayPal subscribers will slowly be phasing out whenever they choose to leave the service. Also - I had a few of them ask for invoices and - since PayPal invoicing is a complete nightmare and the previous owner had not setup VAT handling in PayPal - I asked those subscribers to switch over to the new payment provider.

All in all PayPal is just a nightmare to deal with. They could accomodate these kinds of transfers, but they're not really interested in you as a customer. I feel most people use them, because their fees are low, but if you take into account what you get for those low fees then it's really not worth it.

With a decent payment provider you will get:

1. the ability to transfer the account (like stated earlier in this thread this can be worth tens of thousands of $$$)
2. proper VAT & invoice handling
3. more payment methods
4. fraud detection and handling
5. payment card expiry notifications and follow-up (if you have hundreds of subscribers you want this taken care of - I assure you)

And probably there are a few more things I've missed.

If I decide to sell this site later on, then I'll probably put a clause in the sales contract that forces me to transfer the income on the PayPal account for a year or so. You could do this in combination with escrow of part of the sales price. This assures the buyer that you will release those funds and he has time to switch over the subscribers. A lot of those will most likely remain (in my case) as they've been with the service for much longer.

Hope this helps anyone in the future.

 

[Mike Edge]

I don't understand.
Just hand control of the PayPal account to the new owner.

Nope, that is against the terms of service. I discussed this with Paypal when I sold xF Host. Even when you open a business account, you still put in information as a individual first and then tie your business name to it, this is why Paypal does not verify if a business is real or registered as all accounts are DBA to the account individual. When you log in, even business accounts greet you as your name followed by your business name. Due to this, all payments and subscriptions are an agreement to you, the individual of the account, so someone else accepting the payment would be a void agreement. This is exactly how Paypal explained it to me when discussing how to transfer Paypal to the new owner of xF Host.

 

[Paul B]

I'm sure it has never happened before...

 

[tkdchamp]

I'm sure it has never happened before...

It has happened before, but PayPal has checks in place to determine where someone is logging in from. If you hand over a German PayPal account to someone in South Africa - that raises a red flag and your account will be blocked.

Now - I'm not saying you can't "talk" your way out of this, but I wouldn't attempt it.

Like I described - I took over the PayPal account and had the business name changed to reflect mine. All this was coordinated with PayPal, but it took me 4 weeks and countless hours before I was able to take any money out to my account. In the meantime the account had been blocked several times and I was on the phone with them on almost a daily basis.

Since then I don't even pursue the purchase of sites any more that have recurring PayPal subscriptions as most of these are in the US and my company is in the Netherlands. It's just not worth the hassle.
I actually had a major deal fall through due to this because I couldn't take over a PayPal account in South Africa. It turned out that setting up a company there takes something like - forever.

 

[Anthony Parsons]

To be perfectly honest... if you sell your site and the new owner has those issues, then that is their issue, not yours, the seller. You cancel all subscriptions, handing them off to the new owner any difference they have between sale time and expiry of a subscription, then the issue is theirs to own and recover from.

When you sell a site you typically move the site to their server, their IP, so forth... this alone could reduce the traffic and such, which is outside your control, just as it is with current subscribers choosing, or not, to resubscribe with the new owner.

Purely my opinion...

 

[tkdchamp]

To be perfectly honest... if you sell your site and the new owner has those issues, then that is their issue, not yours, the seller.

Actually it is your problem, because it will affect the value of your site. The new owner (if he does any due diligence) will know there will be subscription fall out because of all this.

 

[Anthony Parsons]

And that is a risk you take, not something you can ascertain will happen. That is no different from buying a physical business, say restaurant that is doing awesome, changing the management who then changes some recipes, and all the customers stop coming that used to come. Or... just due to change of management, some customers stop coming.

You can't predict with accuracy what customers will do in the future. You could sell your forum, cancel subscriptions, the new owner does a better job and they get more subscriptions... or they do worse and get less. There is no right model for such prediction.