You know, this assertion cannot be decided by one individual person, such as yourself.
The fact that he attracted customers to his platform (paying or not), that aggressively used his service means he solved a problem.
The issue was his ability to generate revenue from his product.
My point is that Letters From Santa is a vitamin, not a painkiller or a cure.
I think this type of business actually lends itself well to a freemium model, if the paid version is worthwhile. That being said, you stepped into a massively over-saturated gift card market.