(October 10, 2007) A Silicon Valley startup that allows online buyers to receive products free if they buy something from other vendors has signed up 1,400 merchants and expects to have 10,000 on its roster within a year. “We enable multimerchant commerce,” says Alex Rampell, founder and chief executive of TrialPay Inc., which has already grown rapidly from a standing start in August of last year. Merchants are signing up at the rate of 10 a day, with 300 new ones added last month. Meanwhile, some 2.6 million consumers have signed up so far. Most of TrialPay’s merchants are sellers of software and other digital goods, but lately some online retailers have come aboard, as well, Rampell says.

The appeal of the service lies in the way it turns e-commerce browsers into buyers, says Rampell. With TrialPay, an online merchant can serve up one or more offers at checkout to a customer who balks at paying for a product but clicks on a TrialPay button. The offers, tailored to the customer’s demographic group, tell the customer they can have the product for free if she will sign up for the advertiser’s product or service. Advertisers like Discover Financial Services Inc., The Gap, Lancome, and Geico Insurance are using TrialPay to pick up new customers, in some cases receiving value worth a multiple of the price of the product they’re buying for the customer.

TrialPay has not had to recruit advertisers. Instead, they’re calling the Mountain View, Calif.-based company, says Rampell. “There’s no risk,” he says. “They only pay when they make a sale.” TrialPay currently works with 2,000 companies, though around 250 produce the most volume, according to Rampell.

The merchant receives a fee from the advertiser that equals a minimum bid set earlier by the merchant. The service works especially well with low-priced goods. “We can often yield [to the advertiser] up to 10 times the value of the product,” says Rampell. Merchants can come out ahead as advertisers bid on their products, pushing the fee they must pay above the merchant’s pre-set minimum. Indeed, sometimes the merchant may end up receiving a fee greater than the value of the product, depending on the value of the customer to the advertiser. In this instance, the result can seem perverse. “It’s a hard pill to swallow, but you’re better off not selling your product” in some cases, Rampell says.

TrialPay’s systems match offers to merchants and customers, run the competitive bidding, and manage communication between advertisers and merchants. In some cases, TrialPay hosts the offer pages. It doesn’t process customers’ card payments but takes account details on behalf of advertisers.

TrialPay, which assumes any risk of fraud in payments between advertisers and merchants, aggregates all fees and pays out monthly. Its own fee, Rampell says, varies widely, though he characterizes it as “a few percentage points at the high end.” Anywhere from 10,000 to 15,000 transactions flow through TrialPay’s system each day, a figure Rampell expects to “double or triple” within the next 12 months.

Rampell says he got the idea for TrialPay while trying to hawk software online with a previous company he had started. He grew frustrated that only about 5% of his customers were willing to buy his product. He figured, though, that these shoppers might be willing to buy something quite different from another company, from which he might earn a fee. Anything, he thought, was better than no sale. Soon after implementing the concept, he says, his conversion rate doubled.

The trouble was in managing all the details, which is where TrialPay comes in as a third-party supplier of a service that delivers consumers to both merchants and advertisers at the same time. “We’re at the intersection of advertising and payments,” Rampell says in summing up his new venture. “We’re advertising-supported payments.”