Despite energetic community efforts and the blooming of a thousand identity initiatives, the path to profits for online consumer identity services has proved remarkably elusive.

Sxip Identity, one of the best-known identity startups and helmed by identerati extraordinaire Dick_Hardt of the Identity 2.0 Slideshow, has not succeeded in raising any venture capital to date. And neither have the other startups in the space, which include Vidoop, JanRain and ootao. While it’s possible that none of these startups have actually tried to raise capital, it’s not exactly a vote of confidence in this era of bulging VC coffers.

Now Sxip Identity has sold the enterprise piece of their business, the only part that had a fighting chance of generating near term economic value. I will hazard to guess that the customer acquisition costs for Sxip Access were larger than the potential lifetime value of each customer, and the resulting cash burn was diminishing Sxip Identity’s modest cash pile at an unsustainable rate.

The acquirer, Ping Identity, is a top federation shop and one of Microsoft’s strategic partners in identity management. Sxip Access is complementary to their product portfolio and can be pushed thru their existing enterprise sales channels. Looks like a nice tuck-in and I wish Andre all the very best.

So what now for the remnants of Sxip Identity and its counterparts? I believe there are at least three challenges ahead. First, there needs to be some agreement on common standards, which I accept is extremely hard, but where much progress has actually been made over the past years.

Next, a focus on fundamentals like customer needs and usability. Their regular shingding has the feel of a science fair that’s long on intellectual stimulation but short on value creation.

Finally, it’s unclear what the economic incentives are to be an online identity provider – the entity that verifies that you are who you claim you are. Taking on that role feels like assuming an awful lot of risk with uncertain financial rewards. Without any reliable identity providers, the level of trust that can be established will be insufficient for transactions of any significant value to take place. And if no valuable transactions take place, it’s hard to pinpoint who’s going to pay for the underlying identity service.

History has demonstrated that an erstwhile panned online consumer service can unexpectedly prove to be rather valuable. So is there a pony in here somewhere? I think it’s possible, but not very probable.