Internet Billing Co. Ltd., whose strong ties to adult Web sites made it a troublesome property for InterCept Inc., will soon be sold for the second time this year, now to the owner of an auction site who envisions it as the next PayPal.
InterCept, a bank outsourcer and payment processor, sold iBill to Penthouse International Inc. in March for $23.5 million, including the assumption of $22 million in debt. Penthouse, which combined the payment processor with Media Billing LLC, announced Friday that it had agreed to sell iBill and Media Billing to Care Concepts I Inc. for $55 million in stock.
Penthouse is to own at least 19.9% of Care Concepts, which describes itself as a media and marketing holding company.
Care Concepts, of Pompano Beach, Fla., runs the IBidUSA.com auction site through its iBid America Inc. subsidiary.
Gary Spaniak Jr., Care Concepts’ president, said in Friday’s press release announcing the deal that the integration of iBill and his company’s auction site will be “similar to the combination of PayPal and eBay.”
eBay Inc. and its PayPal Inc. subsidiary have become a powerful combination in Internet commerce since the San Jose auction giant acquired the person-to-person payment engine in 2002 for $1.5 billion in stock.
iBill currently gets 78% of its revenues from adult entertainment Web sites, but iBid’s auctions are more family-oriented. Many of its auctions list gift certificates to restaurants and other small businesses.
Cathy Beardsley, a senior vice president at iBill, said in the release that this deal demonstrates iBill’s ability to grow into the mainstream payments market.
She cited as examples existing customers in the online dating and video game markets. “As Internet categories expand and new ones are created, we expect iBill’s business in selling and managing online subscriptions to increase exponentially,” she said.
Gwenn Bezard, a senior analyst for the Boston market research firm Celent Communications LLC, disagreed. “My initial reaction is to laugh at such a claim,” he said.
Mr. Bezard said that if iBill is to succeed under Care Concepts, it has to avoid some of eBay’s practices. For instance, it would be wrong for it to sever the payment outfit’s connection to high-risk customers, he said. (eBay had PayPal stop processing for gambling Web sites.)
“I would see iBill making good money focusing on the adult-content segment of the market, but they will never be as big as PayPal,” Mr. Bezard said. He said iBill can thrive in this niche, but “there is a difference between creating a $20-, $30-, $40 million company” in a niche market “and becoming the next PayPal.”
Though the New York-based Penthouse was able to make a deal to sell the company just four months after acquiring it, iBill’s previous owner had a harder time of it.
InterCept, of Norcross, Ga., tried to sell InterCept Payment Solutions earlier this year , but some potential buyers said they were not interested as long as iBill was a part of the package. (InterCept Payment Solutions was sold to Pay by Touch of San Francisco, also in March.)
iBill’s clientele and chargeback rates earned it high-risk status from Visa U.S.A. and MasterCard International. Some observers said that was one of the reasons that InterCept was unable to secure financing last year in its bid to go private.
