Fame, Fortune and Micropayments

adharma writes "Clay Shirky is at it again. Addressed previously, his new article discussess the failures of Micropayments and the joys of free content."

You know...

[Bame Flait]

The mere fact that the article reports on two different systems highlights an enormous problem in the world of micropayments: competition creates more problems that it solves! The beauty of a micropayment system is that one doesn't have to keep an account with a single provider, and oftentimes these providers are small enough so that an account would be senseless anyway; the issue created, however, is that consumers moving from one provider to the next are going to need a common ground for payment between them. Although this is what a micropayment service is supposed to be, a flourishing of different micropayment systems will mean consumers will have to stick to one and be limited in where they can spend, or go through the hassle (and probably expense) of creating accounts with many, partially defeating the original purpose. What do I see happening?
1. A single system gains the monopoly, and micropayments start to actually look worthwhile. OR
2. Consumers just continue to resort to big name information providers which they create accounts with, maintaining the status quo.
If the e-coins system I was a member of earlier in theis decade is any indication, I see the latter as the much more likely of the two evils to occur...

Paypal

[Anonymous Coward]

Why do you think Paypal has gone to such lengths to build up a huge userbase? They're positioning themselves to be the micropayment processor. You deposit money in your Paypal account and avoid nasty CC processing charges.

instead of subscriptions, maybe

[midgley]

There are things I would pay a penny for (0.01p) (I thought we have pennies, and the US has cents, but we seem to be swapping the words) that I won't take out a subscription for, and things that I am happy to subscribe to such as The Independent newspaper. [independent.co.uk] I found Jakob Nielsen's Alertbox articles moderately persuasive, including the suggested interface for feding back to the user the rate at which virtual coppers were leaving the virtual purse. I remember a broker explaining to me that people won't pay for information, and therefore the busines model for the company being set up was of a walled garden...I thought he was wrong then. You won't have heard of the company, it sank.

Micropayments are the Next Big Thing(TM)...

[JessLeah]

...and have been so since 1993. And probably will be so in 2013. :)

What's this guy smoking?

[Stary]

Analog publishing generates per-unit costs -- each book or magazine requires a certain amount of paper and ink, and creates storage and transportation costs. Digital publishing doesn't. Once you have a computer and internet access, you can post one weblog entry or one hundred, for ten readers or ten thousand, without paying anything per post or per reader.

Sure. I'll be contacting him shortly about hosting some sites... since he's figured out how to do it for free, regardless of the bandwidth usage. In the end, someone pays. You may or may not do it directly, which /. is a good example of, but you do pay.

It's the impetus of opening your wallet

[Leeji]

Shirky makes good points -- I think the real problem with micropayments is that you have to counteract the momentum of a closed wallet.

People are frugal -- especially online. I pay for the occaisonal shareware, and I subscribe to the occaisonal service. Like Shirky mentions, I can easily determine the value of spending $20 to support a software author I like. When I see enough value, I open my wallet.

When it comes to $0.25 for a comic strip, though, we have no point of reference when it comes to value. We're buying something of "fractional" value; 1/365th of a yearly subscription, or 1/2 a laugh, for example. Is a comic really worth 5 cents a frame? If I'm doing it for moral reasons -- to support the author -- will he even notice the $0.25? What exactly is a good deal for $0.25, anyhow?

When it comes to something buying something with such fractional value, it's simply not worth consumers' time to make that buying the decision. It's definitely not enough to counteract the momentum of a closed wallet.

clearly argued

[urbazewski]

I usually end up gnashing my teeth when reading articles about the economics of the internet, but this one was well thought out. It's interesting to contrast his argument that the web and other forms of technology that allow people to produce and distribute their own work will undermine micropayments with the overall trend towards a "winner take all society" or "blockbuster/bestseller society" where fame and fortune are increasingly concentrated on a small minority of winners. (Economist Robert Frank and co-author Phillip Cook outline the argument in their book The Winner Take All Society [amazon.com].)

The web shows the same pareto distribution that Frank & Cook discuss, with a few sites getting a huge number of hits and the vast majority getting just a few.

However, Shirky may still be right that the proliferation of free content will prevent even wildly popular sites from turning their fame into fortune. It's also possible that the continued emphasis on blockbusters is a flawed business model that causes publishers/producers to overlook vast markets for a greater variety of content. It's the unwillingness to see beyond the huge profits of a Britney Spears or Madonna album that leads the music industry to pursue shortsighted strategies of squelching online access to music.

People pay for quality.

[xanderwilson]

The author uses two pretty low-quality examples. Just as people are loathe to pay $20 shareware for software worth about $5, the two examples (.10 for PowerPoint slides) don't sound worth it either. When valuable content comes priced at or below their value--that's when Micropayments have a chance to succeed. Not when people continue to follow the paradigm of overcharging customers, just on a smaller scale now.

I thought McCloud's comic was well worth the 25 cents and BitPass was pretty easy to use. I might experiment with it on a future project of my own--alongside free content.

I don't remember exactly what separates a "micropayment" from a "small payment," but consider the apparent success of iTunes. I've talked to a lot of people who are amazed at how easy it is to click and buy--at $.99 even--and they're more willing to spend than they thought they were. Can people find these same songs for free? Probably. But they're paying for how much more convenient the paid service is to them than the free version.

I'd love to see how well or how poorly McCloud has done with his comic. Here's someone who has demonstrated his value to the consumer in the past with both free and priced content. I think finding out if people were willing to follow HIM from free to .25 will be more telling than this article.

a practical way of implementing micropayments

[clovercase]

i think the most critical components to getting a micropayment system off the ground are:

• seamless integration with web-browsing experience
• trusted intermediary handling the payments

i think that google is perefectly situated at the moment to use its widespread goodwill for this purpose. the micropayment system could be integrated into the google toolbar [google.com]. users would prepay a certain amount to google that would reside in their account (google would keep a commission, say 10%). the balance on your account would be listed right on the toolbar, and whenever you visited a site requesting a micropayment, a message would appear on the toolbar (not an annoying dialog box) providing you with the following options: 1) never pay micropayments on this site 2) pay this site this time but ask me again next time 3) always pay micropayments for this site (unless the publisher changes the price required).

the amounts being charged would always be displayed, as would the running balance of your account.

Re:Getting what you pay for

[Pharmboy]

An observant person (don't seem to be a lot around here) will have noticed that one of the few pay-for-access web sites that actually have customers is the one owned by the Wall Street Journal.

Rush Limbaugh's 24/7 program is similar in that you pay around $45 a year ($75 for two years) for both the monthly newsletter and premium web access combined. $10 less for no newsletter.

Been a member for 2 years now, and I find it's worth it, even tho I only hit it 2 or 3 times a month. Also give access to higher bandwidth audio stream of the live show, which is nice in a steel building with no reception. Plus tons of good links, video feeds, access to tons of audio and video links, and archived shows. When you listen to the archives, there are NO commercials, and when you listen live online, you get bumper music instead of commercials when you are a paying member.

My opinion is that the Rush program works because it is not "all things for all people" but rather a very focused delivery system for specific content, conservative politics.

Not everyone is into it, but they have a ton of members and provide exceptional content for those who like it. If you like the Rush show (I do) it provides very nice access with no commercials. It is a pretty good model for others.

But, of course, you've got it upside-down...

[skia]

This article is well thought-out as far as its arguments go, but fails to look at the big picture.

The author seems to think micro-payments are doomed to fail because it is not macro-payments that are deflecting customers -- it's the mental action of deciding whether or not to buy something.

I can see his point in the short-term. If a site I read regularly suddenly switches to micro-payments, I have to decide if I think the site is "worth it" anymore. I might very well stop visiting it all together. If you force any significant number of people to make a decision -- any decision -- you'll end up with people on both sides of the fence.

Likewise I agree with the author that, if I was bored and randomly surfing a list of micro-payment-enabled content, I would have to subject each offering to an uncomfortable level of scrutiny that may turn me off from clicking the "Buy" button.

But these two scenarios are not what micro-payments are trying to address. Micro-payments really shine when the decision to buy has already been made.

The large percentage of all things bought are premeditated. It's not often that someone drives by an auto dealer and decides on the spur of the moment that he's going to buy a car. People do not go to a book store and just wander aimlessly and sometimes accidentally buy a book.

If a person goes shopping, it is with the intention to buy.

So now lets look at the more likely scenario of a micro-payments shopper. Say a young boy longs to find some entertaining reading material. He's already decided that he's willing to pay for it. So he goes on line to sort out his options. He finds a comic book store, but it's in the next town, a half-hour drive away. He discovers he can subscribe to his favorite comic, but that's expensive, and it will take the comic book company forever to ship it to him. There are some free comics on the web, but he's read all of those, and some of them are of questionable quality. Then he comes upon a comic that can be purchased with micro-payments. Let's look at the questions this boy is going to ask himself:

• Which is the best value?
• Which gives me the quickest gratification?
• Which is the least amount of hassle?
• Which looks the most interesting?

Notice how whether to buy or not was never a question asked? Notice how micro-payments encourage a positive response to three of the above four questions? If you manage to bat .750 with a customer, chances are you will make a sale.

People will only balk at being asked to buy something if they are not shopping to begin with. And it's a fact of business that it's hard to get people who are not shopping to make impulse purchases. But micro-payments should not be misconstrued as being designed to attract the impulse buyer. While their low cost does give them a foot in this door, micro-payments will really only come into their own when used to sell goods that the public is looking to buy.

You're Missing the Point

[dr2tom]

The success of micropayments will not be determined by whether of not people like to get things for free. Its success will depend on finding an entrypoint where successful entrepreneurs start getting rich using micropayments. The partcular verticle niche that launches the micropayment industry will not be any that you've discusses. Someone will invent the niche. www.futureofmoneysummit.com