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Anatomy of a photo failure

PhotoPoint.com's shutdown left 1.25 million people wondering whether they'd ever get their originals back. Dale Gass, president of the site's parent company, analyzes what happened.

Dale Gass faces a daunting challenge: retrieving countless digital photos for thousands of consumers.

Former members of defunct photo site PhotoPoint.com have harshly criticized Gass, whose company, Pantellic Software, ran the site but abruptly ceased operations in December. In the process, some 1.25 million PhotoPoint users were left wondering whether their photos would ever be returned to them.

Gass, who served as president of Pantellic, said his company took all good-faith measures to keep the PhotoPoint site alive. But in the end, it fell victim to high bandwidth costs and the aftereffects of the Sept. 11 terrorist attacks. Since PhotoPoint's closure, Gass has been making efforts to restore photos to members--some of whom, he discovered, had stored their original copies on the site.

In late February, Gass posted a survey on PhotoPoint's Web site, asking former members whether they would be willing to pay $24.95 to get their pictures back, among other options. At the beginning of March, a message on the site notified customers that it is making arrangements to have photos burned onto a CD.

The plan, however, received mixed responses from members; some were upset they had to pay additional charges to get their photos returned to them, while others were more understanding of the situation. Customers who want their photos returned will have to pay $24.95, plus shipping and c.o.d. charges.

CNET News.com recently caught up with Gass, whose company has become a poster child for the boom and bust of the dot-com era. He talked about PhotoPoint's demise, its current situation, and the future of online photo development sites.

Q: How did you come up with this survey?
A: It was based upon what I see as the most viable short-term options for PhotoPoint's future. For those members who neglected to keep copies of their photos, finding some way for them to get their photos back is important. Having CDs burned is the most obvious method.

Will PhotoPoint get reborn?
PhotoPoint may or may not find a new home, and its new home may or may not decide to honor existing membership fees. I'm pursuing all options available, and it is just too early to tell at this point.

One option is to ask former members if they would be willing to pay extra fees. Where would the money go to if you do collect these fees? Would it go toward paying Pantellic's debt?
As Pantellic has no employees, no assets, no revenues, the CD-burning service would be outsourced, and there would be various costs associated with that. Pantellic itself would not be involved in any ongoing online service for a fee. That survey question was for the benefit of parties interested in taking over PhotoPoint. I would hope that anyone taking over the membership would provide some discount to those that had paid memberships. But that decision will ultimately lie with the buyer.

What made you decide to charge when a lot of members had already paid for a subscription to the service?

"It is disappointing the number of people that immediately assume we were rip-off artists."
Pantellic is not trying to "double bill" people. Pantellic is insolvent, and I am just trying to find ways for people to get their photos back and possibly find a new home for their online photo-sharing experience. It is disappointing the number of people that immediately assume we were rip-off artists. Anybody who saw all of the efforts we made to keep things alive through some extremely difficult times--and the efforts being made now to at least give people some options--certainly wouldn't see it that way.

I agree that the demise of Pantellic is unfortunate for the people who paid PhotoPoint Corp. and Pantellic for memberships. It was our intent to be in this for the long run, but some unpleasant surprises--and the revenue effects of Sept. 11--put Pantellic out of business. We did everything we could and went down fighting.

Why weren't members contacted about the survey? Why hasn't there been any communication at all with former members?
Sending 3 million e-mail messages, handling bounces and unsubscribes and such, is very labor-intensive and bandwidth-intensive. At this point, we don't have definitive news for the membership. When we do, we will mail them.

The survey was a way of getting a feel for the percentage of people interested in the various options, not as an exhaustive poll of all members. And it has given us the information we need to justify the outsourcing of CD burning. There is also the issue of bandwidth. PhotoPoint was historically provisioned for bandwidth to support millions of members. At this point, however, the PhotoPoint survey site has minimal bandwidth available to it. Having millions of people show up at once would render the survey unusable. There are some significant challenges in dealing with this volume of membership that most people don't appreciate. When CD ordering is available, all members will be notified via e-mail.

Why wasn't there a comment section on the survey for people to post concerns and suggestions?
There was initially, but the comment field was not used in a constructive fashion, so it was removed. And there just aren't sufficient resources at this end to read all of the comments.

What has happened to the equipment that stored the photos? Do you get it back?
No. All of the equipment to run the site (Web servers and storage array) were returned to the vendors from which they were leased. Pantellic has no funds to get this hardware back. The outsourcing company that will be burning the CDs will be using their own hardware, restoring the photos from backup (a laborious process).

I understand that you may have received a lot of negative criticism from former members. How would you respond to them?
I'd just like to say that we did everything possible to keep PhotoPoint alive under a great deal of adversity. And we came close. On Sept. 11, our revenues dropped to one third of their previous levels and were only just starting to rebound by the time we ran out of money in mid-December. The suddenness of the shutdown was an unavoidable business reality. Announcing that we were going out of business ahead of time would have resulted in a stampede, clogging our bandwidth and servers, as well as running up additional bandwidth charges with our ISP that we knew would never be paid. When you're out of money, protecting suppliers and customers at the same time is a difficult challenge.

"I'd just like to say that we did everything possible to keep PhotoPoint alive under a great deal of adversity."
We tried to shut down the business in as respectable a fashion as we could. We were leasing an extensive amount of networking gear from a partner that was very supportive of us over the years. When we shut down, we notified them and made arrangements to promptly return the gear--the same day, in fact. Again, I think people underestimate the cost of keeping a site like PhotoPoint running. We see a lot of comments along the lines of: "They could have kept it up a week to let us get our photos." Unfortunately, that extra week represents tens of thousands of dollars in lease, bandwidth, salary, and so on that couldn't have been paid. It's not just a matter of leaving the server on.

Have you reached any conclusions about what considerations customers need to keep in mind in connection with online digital photography?
I should note that we did not realize the number of people that had kept their only copy of photos on PhotoPoint. To us, that would be like leaving your negatives at Wal-Mart after getting your film developed. In this new paradigm of digital photography, I think the industry has not addressed the concept of negatives or archives of your digital photographs very well. More technical people realize that you must keep safe copies of all digital data. We have seen that this isn't necessarily obvious to the typical consumer. And now that we realize there are many people who kept their only copies on PhotoPoint, we are working hard to provide a means for them to get them back. No, it's not ideal, as there are additional costs involved. But at least it's an option.

What's been the tenor of the messages?
Since Pantellic closed its doors, there have been plenty of irate, rude and even threatening voice mails. But there have also been some heartfelt pleas and words of encouragement from people who just want copies of their photos. In a world where people are 10 times more likely to yell and complain, it is good to see some people be more civil and constructive. It is for these people that I'm working hard to find a solution.

I noticed that there was a message posted notifying customers that you will be offering people an opportunity to have their photos burned onto a CD. How many people responded to this option versus the other two options?
It was fairly evenly split between the three different options.

What is the name of the outsourcing company that will be burning the CDs?
Due to the fact that there are many upset PhotoPoint customers, the outsourcing company has requested to remain behind the scenes providing the service for Pantellic.

Are there some companies that you know of that are interested in buying or reviving PhotoPoint at this time?
There is some interest, but preliminary. And as time passes, the concern about the membership becoming stale seems to be growing with the partners I'm talking with. This may not be the case in reality, though. The survey results show a strong interest in reviving their accounts for a monthly fee. Due to the possibility of any revival being a slow and uncertain process, I thought it best to proceed with the CD burning, so people can at least have the peace of mind of having a copy of their photos.

By the way, there is one point I think is worth making: PhotoPoint's former competitors charged significantly more for CDs than the offer we will be making. Club Photo, for example, is $7.95 per album (an archive CD), or $49.95 for all your albums. We will be offering the equivalent of that archive CD for half of the price. 

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