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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."
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Honestly, I can live without most things. Sure, I listen to music, and I watch DVDs, and I play video games, but only while they're free. (I mooch from my friends) Were these friends to suddenly become unavailable, I would do without.
Same goes for web content. I enjoy slashdot, but I'd give it up in a second before I'd spend one red cent.
GeekNights!
Late Night Radio for Geeks!
...500 pages long with 3 zillion transactions. *Thats* why it'd fail ;)
What is the point of the internet?
I honestly can't think of a single web site where people would be willing to spend $0.005 to view a page.
It's hard for thee to kick against the pricks.
Everyone with half a brain realized this years ago, no matter how many hype articles there was in the media. Micropayments is great for companies, and a pain in the ass for consumers..
e-cash? Shut up. We got credit cards, paypal and we dont want more accounts and stuff to keep track of.
Will code a sig generator for food
The RIAA said nothing is really free! There are poor people starving in China because I didn't buy the Macarena song.
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. 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.
He barely mentions music and movies, but Hollywood is eager to charge us per vieweing, rather than a pay-once watch/listen forever deal. Pay-per view and Video on demand are a current example. Of course, as long as DVDs and CDs remain mainstream, we won't have to worry about paying 10 cents every time we listen to the "Macarena".
He's sunk his teeth into a clever sounding argument here, and he won't let go, but it doesn't make sense. It is potentially true that the web has brought the price of info down to nothing, but that doesn't mean it's because micropayments fail.
Expierence has shown that whenever people start trying to charge for content that people will find other sources which are free. We have become use to information being free and feel (wether rightly or wrongly) that it should be
My $0.000002
Rus
Cheap UK and US VPS
...and have been so since 1993. And probably will be so in 2013. :)
Honey, I shrunk the Cygwin
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.
Tomorrow will be cancelled due to lack of interest
This guy is bang on in many points. Even a free registration is annoying, I stopped reading New York Times when they fixed the archive.nytimes.com hole. Fileplanet? I have to register to wait in line for 3 hours to download a patch? Micropayments are even more of a hassle. I liked the way the author described the way people evaluate purchase decisions, and he's right: I wouldn't pay for a newspaper that charged by the article, or word. Penny Arcade, RPGWW, Poisoned Minds, GU Comics and others tend to have a gift for any donation. They're the ones that clean up. I wonder how successful that method works for sites that aren't webcomics. LiveJournal and /. seem to be doing well.
I'd have to disagree that micropayments won't work; I think micropayments do have potential, though establishing the system may take some work.
Given the choice between, say, downloading a song off Grokster for free, or paying a dime to download it directly from the artist's web site, it's true that many people will choose to grab it for free. But if the version off the web page is known good while the one on Kazaa may have glitches, that ten cents may not seem to be such a big deal. The good feeling one gets in "donating" to an artist one likes helps as well.
The bugaboo in micropayments isn't whether people will do it; it's in getting such a system emplaced. What good is being able to pay someone a nickel over the net if you've got to buy $9 worth of nickels first, with an extra buck for a transaction fee?
I suspect what we need is a "killer app". For instance, someone selling a nice, useful tangible service and ONLY accepting this micropayment as currency. An entity doing so would also need to bear the cost of sustaining this electronic currency.
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.
It all goes downhill from first post
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. Not a coincidence that it caters to people who have deep pockets -- or like to pretend that they do. Clearly the bucks are there if you have something people want at a price they can afford.
These "micropayments don't work" rants all fall down because they ignore a fairly conspicuous fact: micropayments not only work, but have been in use for a very long time. Do you have to buy a subscription to read a newspaper? No, you drop a quarter in the machine and you take one. (Or a buck for the WSJ.)
But wait! That's different! You don't get to pick out individual articles and just pay for those. But that's a technical issue. It isn't practical to build a machine that would do that. The smallest unit that is practical is an entire newspaper.
Somehow, nobody's managed to carry this idea over to the web. Perhaps this is technical and economic too: payment systems are too hard to implement, computers you can read in bed are still a marginal item, etc. But I suspect there's also a conflict with established interests. (Doesn't it bother anybody that not a single online newspaper has experimented with micropayments, even though they're all desperate for revenue?) Owners of "intellectual property" are very nervous about distributing it in electronic form. (Hence ebooks that cost more to buy than hard copy books.) And existing financial institutions can't be infatuated with payment systems that would compete with their lucrative credit card businesses.
And please, you would never willingly "do without". If your "friends" became "suddenly unavailable" - an experience that I'm sure you're quite familiar with - you would immediately go looking for other "friends" to take their place in providing you as much as you can take.
Honestly, whatever became of the idea of contributing? Of carrying your share of the load? Are there really so many people all the way down the producer-consumer axis - so far that you can't even see the relationship between the two?
For a view from the other-side (that of the independent content provider) check out Scott Mccloud's response to Shirky's latest essay.
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.
foldplay your photos won't know what hit them.
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.
.25 will be more telling than this article.
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
If with respect to DVDs, CDs and video games everyone adopted your attitude, you would have to do without them because they would not be available.
This is the classic free rider problem (see also Wikipedia).
Only Women Bleed (Sex, Sharia remix)
If I can buy pre-paid BitPass cards without a credit card, with a similar level of convenience, then we have a winner.
Either that, or anything targeted at teenagers will never be able to charge.
What we call folk wisdom is often no more than a kind of expedient stupidity.-Edward Abbey
[100% ISO 646 Compliant]
SVM, ERGO MONSTRO.
- 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. 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.
The rule is simple, but so many people try to argue around paying ( or charging ) for anything.
If you try to charge for something creatively generated...be it software, art, music or whatever, someone somewhere will pull out the Elsworth Toohey method of attack and claim your brainchild should be public domain.
Conversely, too many people think they can charge astronomical prices for minimal or poor content. I like Scott McCloud's work, but 25 cents seems like a lot per comic strip. So, if 25 cents is too much, would people pay 5 cents? 10 cents?
Mr. Shirky's arguments have the taint of someone who desperately wants to prove that you can't charge for anything that doesn't come with a big business label on it. Otherwise, give it away, it belongs to everyone.
His arguments have some merit regarding micropayments and their effect of making consumers choose, but his general tact is that micropayments won't work because people are used to getting it for free ( and that distibution costs nothing to artists ) is making use of informal logic. If Jerry Seinfeld produced new 30 second episodes of Seinfeld and charged people $2 to view it, I'm not so sure people wouldn't flock to ante up. I'd probably pay to read Scott Kurtz'z PVP ( www.pvponline.com ). I've enjoyed reading it, usually every day. It's far superior to most of the comics in the daily newspaper, and I pay for those.
The simple truth is, we all have limited funds, so yes, if someone charges for something, we will have to be discriminating with our dollars. But, if the person is producing
something worth buying, then pay them. The artist is always getting 'free distribution' as Mr. Shirky seems to believe. Creating a comic is no different on concept than writing great software or producing great music. It takes more than time, it often takes actual education, materials, research, etc. If someone wants to give away their art for free, wonderful. But if someone wants to charge, it's understandable.
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 batPeople 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.
--
By way of setting up a straw man, Shirky asks: "Would you pay 25 cents to view a VR panorama of the Matterhorn?" As if one's personal preference for Matterhorn photography had anything to do with the success or failure of micropayments.
Make no mistake; like ALL business ventures, some people will fail with micropayments. Some will fail because they didn't know how to market their product, or because they set their prices too high or too low. But so what? That's endemic to capitalism, not just micropayments. Just because Crystal Pepsi failed doesn't mean capitalism itself is a failure. Engaging in these kind of arguments is a beginner's mistake, and most of Shirky's thoughts on micropayments surprisingly and unfortunately exhibit this same kind of sloppy thinking.
His "mental transaction costs" argument, for example, is predicated on users being forced to engage in one or two cent transactions every time they want to view a page. But most micro advocates have abandoned this line of thought. The idea of charging a penny-per-page is history. What they want in the 21st century is the ability to sell their products -- songs and webcomics, mostly -- at a fair price. And micropayments enable them to do that. Shirky endlessly flogs the dead horse penny-a-page model, but conveniently ignores the 99-cents-a-song model that's made iTunes Music Store such a success.
Scott McCloud himself writes that 1,354 readers bought Part One of "The Right Number" at 25 cents a pop. Considering that he was the very first BitPass seller ever, and that everyone who wanted to see his comic had to go through the effort of signing up for BitPass, that's remarkable, and worth talking about. It certainly flies in the face of Shirky's assertion that consumers on the internet are so lazy and indiscriminate in their tastes that they'll bolt to free content at the first opportunity. Scott's readers had to not only pay, but go through the effort of risking $3 signing up for a new, untested service. Scott's experience demonstrates that failure to get people to pay for your product has everything to do with your relationship to your audience and nothing to do with micropayments. But Shirky ignores it all the same.
Finally, Shirky's views on micropayments completely fail to address the idea that micropayments can work with other forms of payment, such as subscriptions or bundling, instead of replacing them. Buying content ala carte may be the step that convinces you to subscribe to a site, for example. Micropayments aren't an either/or, they're an and. One more choice, not one less. And of course, micropayments can work exceptionally well alongside free content. Any public television pledge drive shows this principle in action; even small tchotchkes can induce many people to donate. Any thoughtful analysis of the future of micropayments ought to examine this phenomenon, but Shirky doesn't.
In some ways, it's nice to see that Shirky hasn't changed his tune. At least he's willing to go down with the ship. But his analysis is -- by any standard -- unbelievably shallow. As the market for micropayment content increases, it will be interesting to see how he tries to spin reality.
He who refuses to do arithmetic is doomed to talk nonsense.
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