Revisiting Micropayments

Back in 2001, I posted an amateurish essay onmicropayments, written from my perspective as a willing-to-payconsumer that hoped to continue to enjoy quality content while theonline advertising market collapsed.





Embarrassingly it got picked up by Slashdot and was put up as the awkwardcounterpoint to anearlier article by Clay Shirkey, in which the authorcompetently, with research and everything, argued against theconcept.

Arguments were had and forgotten, and we all moved on. Lots ofgreatcontent disappeared from the web, advertisers got more and moredesperate, often malicious, and a long and horrible content droughtensued.

Eventually Google came onto the scene, bringing advertising tothe little guy, and the content market was reborn on the back ofAdsense.

Clay was held up as the victor, or more correctly was consideredthe only contender, and has been used for citations countless timessince, unquestionably proving the non-viability of anysmall-transaction system. I came across just such an article moments ago, as I do several times amonth.

Was Clay right Are people really psychologically unable tohandle small payments Is the idea of small-cost subscriptionpackages for websites an unworkable model, or do people just saythat because they like imagining that they’re having a freelunch?

Lots of people seem to think so.

Then again, lots of people thought the Earth was flat, terriblethings would happen when we passed the speed of sound, it would beimpossible to full-text index the internet or to search iteconomically, and so on.

Take a moment to consider that there have been 2 billioniPhone apps sold, with a current average price hovering arounda dollar. There are predictions that the average price will rise inthe coming years, to a magnificent $2.37 by 2013.

This is for generally small, disposable apps that often dolittle, but because the cost is small and the transactionsurprisingly well lubricated by the iTunes process, a lot of peoplejust click “buy” and enjoy the experience. Look at Atwood himself —using him as an example given that he comes into play in thearticle I referenced earlier — who said:

My total bill for 3 screens worth of great iPhonesoftware applications About fifty bucks. I’ve paid morethan that for Xbox 360 games I ended up playing for a total ofmaybe three hours! About half of the apps were free, and the restwere a few bucks. I think the most I paid was $9.99, and that wasfor an entire library. What’s revolutionary here isn’t just thedevelopment ecosystem, but the economics that support it, too.At these crazy low prices, why not fill your phone withcool and useful apps? You might wonder if developers can reallymake a living selling apps that only cost 99 cents. Sure you can,if you sell hundreds of thousands of copies:

That’s impossible! Clay Shirkey says so! Or at least that’s whatpeople often interpret him as saying.

iTunes doesn’t just service the iPhone app market. Aside fromits start selling music (usually sold by the track), countlesspeople are avoiding advertisers and buying network televisioncontent via the services. Marginally small amounts, but lowtransaction costs, technology, and the ease of purchase makes it aviable market.

iTunes doesn’t own this nickle-and-dime market, though.

I enjoy the occasional bout of gaming on the xbox 360, and ittakes every opportunity it can to try to get me to partake of tinylittle purchases, some as low as $0.40. Want a game-specific theme?Want some bling for your avatar Want that car before you’ve”earned” it Want this amateur community game Come on, it’s just acouple of points from some nebulous points pool that you can spendsimply by pressing A a couple of times, and when it empties youjust add a bunch more.

Of course, all of this naturally leads to the semantics of whata “micropayment” is, and inevitably people will argue that amicropayment must be paying sub-pennies by the page, or the KB, orthe image, or whatever. That isn’t the spirit of it at all,however, and instead the origins of micropayments were easy toaccommodate payments of amounts that were traditionallyuneconomical to gather. In my mind iTunes absolutely supportsmicropayments the theory, because prior to that service it simplywasn’t possible to sell applications for $1 or less. There was afairly lofty minimum threshold below which it wasn’t worth yourtime.

That is no longer the case within certain spaces.

Which again brings us to the possibility of micropayments forwebsites that hold actual value: People need to quit pretendingthat micropayments are some disproven, unworkable theory. There area lot of us who simply abhor advertisement or economic coersion inall its forms (as you saw in the prior entry, the moment someoneadds commission links to what is purportedly a subjective review,my opinion of their credibility drops precipitously, and I’msuddenly wondering if they actually liked the product, or if theyjust fumbled around for something and pushed the first thing theyfound, using it to effectively tax the readership indirectly andterribly inefficiently), and who aren’t cheap bastards. If you havea site of value, and if there were a trustworthy, credible andlubricated system like iTunes for Websites, the idea could havelegs.