When we came up for the idea that is now ClusterShot one of the reasons we opted to build it like we did was that the buying and selling process on stock photography sites was very cumbersome and could be downright intrusive (i.e. uploading a scan of your passport). We wanted to simplify things, make it easier to put your photos up for sale and make it easier for anyone to come along and buy them. We did just that and ClusterShot has been operational for the past 17 months.

Over the past two months we have been building out some pretty cool features. We've built a pretty amazing set of customization tools for our pro account holders. These tools will allow them to control the look and feel of their pro-stores (i.e. http://danjames.clustershot.com) using simple tools. We're quite proud of what we've built. We decided to launch that new feature in conjunction with a complete overhaul of our payment system. We wanted to streamline it and make it easier for buyers of photos and pro-subscriptions to walk through the checkout process. To do this we worked with Paypal's Website Payments Pro platform. We built it all, tested it, and we were to launch all of these new features on this coming Wednesday.

On Friday it came time to tie up loose ends on the features. One of the last things to do was to upgrade our business Paypal account to the Website Payments Pro service. We filled out the simple application form and waited the one to two business days. The news came yesterday and it really caught us off guard.

Paypal has deemed that we are an escrow company, or at least are operating an escrow service for freelancers. Now this wouldn't be so bad if being an escrow company didn't come with piles of paperwork, government regulations, posting bonds, etc..etc..etc.. After hours of research we've deemed that it is pretty much impossible for us to continue operating in the fashion we have been. The laws are too strict, the requirements too great.

As a result of being deemed a true escrow service Paypal has restricted our account until this is figured out. Pretty much that means they've made ClusterShot dead-in-the-water. We cannot pay out from our account and we cannot receive money into our account. We were very angry with Paypal for the first few minutes but after exploration and further understanding we agree with them.

So what is so wrong about being an escrow company? Not much but the opportunity for fraud and money laundering is quite high. That is why it is so tightly controlled. A fictional example:

Mr. Mob man takes a crappy photo with his point and shoot. He posts it for sale for $1,000.00. Mr. Mob's “friend” buys the photo for 1,000.00. ClusterShot gladly makes the sale, keeps 12% and sends Mr. Mob a nice clean payment of $880.00.

We pretty much unknowingly built a money laundromat. Escrow law, no matter how quick the transaction, comes into play when a third party handles the money in a transaction between two parties for a fee.

We can honestly say that no money has ever been laundered through ClusterShot. The largest sale, which we know to be legit, was $500.00. Our average sale is in the $25.00 range.

So where does this leave us? We have a few choices:

• Give up. Throw in the towel.
• Become a full-fledged escrow company, licenses, bonds, and all.
• Change our business model so that we are not an escrow company.

We're not yet ready to give up. While we haven't had raging success with ClusterShot it is fun and it is slowly building. We've always said we were in this for the long haul.

Becoming an escrow service/company seems like a very narrow and unlikely path. Most likely it is not even possible for a little Canadian company like us to become a licensed and bonded escrow service doing business in the USA or other parts of the world.

All we are left with is the idea of changing up our business model. While as crappy as that seems we're almost excited about the possibilities.

Over the next few days we're going to be looking at how we can make smart and meaningful changes to how we go about our business. We want to involve your input in the process as much as we can. We want to hear ideas on what we should do. We want to be honest about our struggles and challenges as we build this site and company. We will be making posts with ideas and we will be looking for feedback. Stay tuned.

Anticipated Questions:

I bought a pro account and now it's useless because I can't sell anything! What the heck?!

We're very sorry to drag you into this. If you'd like your money back we'll gladly pro-rate your account over the twelve month subscription and refund you the remaining balance you're owed. If you choose to stick with us as we figure this out we will extend your pro account with us an additional 6 months plus the amount of time it takes us to figure this out. Email us or use our contact form to get in touch.

I sold some photos but hadn't yet cashed out! You owe me my money you jerks! How am I going to get it?

We do owe you the money. It's not our money it's yours. We're very aware of that fact. If you would like to cash out please contact us with the email you use for your ClusterShot account. We will send you a payment using an alternative method to our restricted company Paypal account.

How come other stock companies can operate a similar business model and not have this problem?

We're not sure to be honest. To properly answer the question a suite of lawyers would need to be called. Our best guess, and it is only a guess, is that they comply with the regulations (i.e. They request you to verify yourself with documentation, etc). We're also suspicious that by selling “credits” this somewhat absolves them of a being an escrow service. They are actually selling a customer something rather than just being an intermediary between two parties. We think credits is a lousy way to do business and we will not entertain business changes that include them.