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Responses to Clay Shirky on Micropayments
FrnkMit writes "Others besides Slashdotters have responded to Clay Shirky's latest article on Micropayments, including long-time micropayment booster Scott McCloud and the MIT Technology Review."
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Any article mentioning Scott McCloud must of course include the views of two of my favourite philosophers.
(P.S. If you read the news article that goes with it, you'll see that the comic is actually about micropayments.)
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... is that there's so many to choose from. The problem is all these micropayment systems don't interconnect with eachother. If I were to sign up with BitPass, I would have to pay $3 even though I need it only for a purchase of $0.25 The same goes for any other micropayment system. I think micropayments should be handled in a decentralized way, all the way from your ISP bill to the target vendor, using so-called "micropayment banks" in the process.
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If micropayments ever become ubiquitous, I think we'll start seeing the old "salami slicing" hack again. When a lot of stuff you do online costs a nickel here, a penny there, a dime elsewhere... you can rack of some pretty serious numbers of transactions just browsing around. After all, if loading that New York Times article linked to from Slashdot is only 2 cents, who cares, right?
But perhaps some clever fraudster will see an opportunity here. Wouldn't it be easy to steal 1 cent a month from 1,000,000 people who use micropayments? After all, who's going to notice a line item titled "News article ----- $0.01"? So there's $10,000/month that nobody's really going to miss.
And for a single penny, would most people take the time to make a phone call or write an email to request clarification on where that charge originated? Even if all you make is a pitiful $3.60/hour, that one penny takes a mere 6 seconds to earn, far shorter than the time it would take to investigate. And is the micropayment company going to investigate your 1 cent dispute? Likely they would ignore you or even just automatically refund your penny without much thought.
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The article is spot-on, for specific kinds of content, but I think its conclusions are wrong.
Clearly no-one will pay even a dime for content that they can get elsewhere for free. It's true that the size of the payment is less important than its simple presence.
But there are other things we happily pay for, and micropayments are a basic necessity if we want to get those things digitised and available on-line.
In Belgium, where I am, people are using premium SMS messages for micropayments. It's incredibly inefficient: a Euro1.00 message returns at most 60% to the website owner. Yet this is becoming a more and more popular way of charging for access to dating sites and other web sites people are happy, eager even, to pay for.
Micropayments to reserve parking spaces, to place small ads, to search for appartments, to post a CV to a job site, to chat with remote friends, to get news on what's happening downtown, to vote for pop starts, to play games, to access porn,... the horizons are vast and limited today only by the complexity of linking the consumer's wallet and the vendor's account.
What's missing in the micropayment world are two things, AFAICS. One is government support to mandate norms and standards backed up with legislation and consumer/supplier protection. Two is support from the banking industry in the form of accessible implementations available to small vendors.
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I don't think I have ever subscribed to online content where I had to pay money. Another thing I don't do, which Clay mentioned in his article, is sign up to the people who force you to fill out their questioneers to read their content. I have definitely found that I can find the information through Google via Usenet which, despite people claiming is dead or whatever, is a very good resource for many types of info, including world events in which the posters themselves might be taking part in. So being an average consumer myself, his words ring very true to me.
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A point in the MIT piece shows that they do not really understand what they are talking about. They say:
"A micropayment system like BitPass would allow consumers to experiment with new content but also to place their support behind specific artists whose work they find consistently rewarding and interesting. Ultimately, they are paying for only the content they consume--and not shelling out a fixed sum every month."
In other words, they see pay-as-you-go as a benefit to the consumer. Problem is, the consumer does not view it as a benefit; rather the opposite.
A number of studies have shown that people greatly prefer a fixed-cost structure over use-based payment - even when they demonstrably would save significant amounts of money by switching over. People find the need to constantly decide whether a given use is worth the money; and to feel they constantly have to monitor and aveluate their usage spending to be a burden that is disproportionate to the amount of money they would save, even when the amount is quite significant.
I know that the most liberating aspect for me of going for a fixed line, rather than using a modem, was not the speed, but rather the liberation of being online at all times, using it whenever I wanted without worrying about telephone charges (local calls are metered in most of Europe).
So, no, I do not really believe in "micropayments" in the sense they are talking about it here.
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But cutting to the chase, if a good micropayment system does get invented, then it will seriously lower the bar on the "tip jar" concept. The overhead of deciding whether you want to spend a cent here and a cent there (especially on a site that you can't sample for free) is enough of a headache (even at low risk levels) to drive people away, but if your favourite webcomic has a tip jar, you might throw in a dime a day, or even a penny a day (he said, shamelessly resorting to Americanisms). Those things can add up if you have a big readership, and can overcome the expenses that Mr McCloud points out with regards to bandwidth and success being its own worst enemy.
As for the sites that want to try the "you must pay me 25 cents in order to see this page" approach -- feh -- let them take their chances with the free market; I won't resent them in the unlikely case that it works. But in my not-particularly-humble opinion, voluntary payments will be the way to go (see second and second-last paragraph of linked Cringely article).
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From the article: [I]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. In fact, dividing up front costs by the number of readers means that content gets cheaper as it gets more popular, the opposite of analog regimes. [/I] Does this person think that web hosting and bandwidth are free? The reality is completely the opposite if you look at things like webcomics, where popularity will literally bankrupt the artist, as they gain too much traffic to live in free webspace.
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Being an "artist" myself, and even having vague plans at earning my money with this after my (unrelated) study, I'm afraid I must disagree with McCloud saying that art isn't a commodity.
;-)
Funny though that Dictionary.com has a rather interesting definition of the word "commodity" with relation to McCloud's comments, but I'm sure that McCloud tries to say that a commodity is "something that you can just take for granted".
We may not realize this, but our "modern" culture, like any other culture before it, relies on the availability of the art that underwrites it. Belonging to a culture is still something that is expressed through music, art, fashion and religion. People don't like restricted access to culture. Music, cartoons, whatever art it is that you like, it becomes part of your life, and part of your culture. (Striking example: how many `80's songs do you like to hear, while you agree at the same time that they suck -- just because you grew up in the `80's and you can share something with your friends through this music?)
Life, even in our Western world, would not be so nice if we all threw out our stereos, radios, comic strips, TV's, bioscopes, monuments and ALL other ways in which we access art, and thus culture.
Art is a gift to culture, and should thus be a gift to the people. Like anyone else, artists should make a living. They should definately find some way to calculate their hours of work into their products. But the art should be free for all of us willing to enjoy and extend it (bar stuff like trademarks that put some structure in the "development process" of our art).
Now get out there and start making business models again!
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One only has to look at the Internet adult entertainment industry to see that micropayments are already a working solution.
People will pay for content if it's something they actually want. Micropayments using a prepaid scheme are much more attractive than conventional credit-card systems because they are (a) anonymous, (b) transferrable, and (c) cheap.
I think the discussion in the article is entirely skewed because the author looks only at conventional content, and even a cursory look at the Internet demonstrates that supply far outweighs demand: there is an almost inexhaustible supply of prose, music, humour, and news. Why would you register for such content, let alone pay for it?
Basic economics: make something people want, and can't get elsewhere, and they will come and pay for it.
Blaming the payments scheme for weak products that no-one wants is surely a mistake.
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Virtually every major consumer service provider is moving towards flat rate pricing. It is far simpler for the service provider and far simpler for the consumer. Not only is it simpler, it is also cheaper. The service provider saves a lot of money on billing which is priced as a function of complexity. Flat rate packages provide a great value for the consumer and also simplify the consumer's finances. There is good reason that millions of consumers are moving to flat rate service providers.
As a micropayment system is complex and costs a tremendous amount of money to implement, staff, and maintain, the consumer can expect costs to be higher when using this sort of system. I might add for emphasis that only a fool would think the higher costs are not going to be passed on to the consumer. Not to mention that the consumer now has to track their own actions on a minute scale that will take lots of time. Imagine instead of having one "pay per view" system to keep track of, you now have 17 "click per view" systems to worry about. It is like every channel on your satellite TV having its own pay-per-view system and account. It's not something many people would willingly sign up for, that's for sure.
So why do some companies want to buck the big flat rate trend in consumer pricing and create high complexity micropayment systems?
The answer is simple -- they want your money. With micropayments, a service provider gets your money up front, gets to keep your money in an account which generates float revenue, and is in the superb position of forcing the consumer to spend the money on potentially uninteresting things in order for the consumer to feel the money is not being wasted. Many micropayment systems have no way of getting your money out.
However, the biggest reason companies are pushing micropayments is that if they can shift the consumer's expectations to think "every time I do any little thing, I am going to pay", it will be a giant door opening to much higher prices for everything you do in life.
Check your ATM balance? Costs money. Press play three times on that song vs. once, costs extra money. The list will be endless. Micropayments are also a way to do an end run around "try before you buy". Instead of free song samples or free content samples, you'll be told "don't worry, it's micropayments."
The major banks have done large computer simulations and they have found they can make far more money using hard to understand variable cost transaction fees than they can using any sort of flat rate fee model. Now the banks are even more clever in that they combine the best of both worlds -- they package up seldom used services and charge a flat fee and then take more commonly used services and charge the variable rate transaction fee. Of course merchants will copy the banking system models and implement fee-based pricing that also allows you to go into negative dollars, so you will owe money. And don't forget the "micropayment account overdraft fee". Which will not be a micropayment, I guarantee you.
The heart of the matter is that micropayment systems are driven by greed. They are not driven by any desire to deliver value to the consumer. They are created to force a complex intermediary between the consumer and the service provider. The costs of this intermediary are significant and they are passed on to the consumer. The economic models that drive micropayments favor maximizing profits for the service provider.
All in all, micropayments are abuse waiting to happen. Consumers have avoided them like the plague for good reason. Though it's hard to believe, consumers want to hold on to their money. Pricing model studies have shown that they are tired of getting nickel and dimed to death. Consumers want clear value and the peace of mind that they can use a resource without the worry of variable fees sneaking up and biting them. No one has the discretionary money or discretionary time anymore to worry about the complexity of adding many new payment systems -- neither consumers nor service providers. Maybe one day in the future, micropayments will make sense. But I don't think that day is today.
Micropayments, small digital payments of between a quarter and a fraction of a penny, made (yet another) appearance this summer with Scott McCloud's online comic, The Right Number, accompanied by predictions of a rosy future for micropayments.
To read The Right Number, you have to sign up for the BitPass micropayment system; once you have an account, the comic itself costs 25 cents.
Right there. Did you see that? That's the problem with micropayments.
I don't know this guy and I don't know his comics. Why am I going to hand him a quarter to read his stuff?
Sure, if he is already established in his niche on the 'net, he can make a good living. But, if you are just starting our, micropayments will guarantee the death of your site. No one will pay for a site, um, sight unseen.
I'd love for people to pay a penny to read my weekly London Journal, but I know if I asked for it first, I would never get any new visitors.
If you are walking down the stret and someone asks you for a penny, would you always give it to them? Every time? It's just a penny - if you saw a penny lying in the street odds are you wouldn't even bother to pick it up, unless perhaps to feed your superstitious side. Maybe we ordinarily would but have already given out all the pennies we had in our pocket. Maybe we have an ethical objection to handing out pennies to whomever asks for one. Or maybe we're just having a bad day and don't want to be bothered. Still, one can reasonable argue the simple act of giving someone a penny should be well within the capabilities of even the poorest of us.
But once you move online that penny represents an entirely new barrier. It represents the wall between those who play the system (however badly) and those played by the system. Not everyone has a credit card. Not everyone has a debit card. Furthermore, many people, despite the fact they could have one of these wallet size icons of mass consumerism, don't want one. And it's not because they don't like buying stuff, or because they're too cheap to give you a penny if you were to ask them face to face.
Charging for content online places a barrier between the creator and the audience that goes much deeper than the same model in meatspace. And it's not necessarily an economic one, although it very much can be. Mostly, tho, it's a barrier of philosophy, and it sets the wrong tone for the future so many of us allege to believe in.
The entire promise of this new distribution mechanism is it puts creators more directly in touch with consumers. That some creators are going to work within existing economic structures is to be expected and, frankly, I say more power to'em. But this is a choice for the creator that does not directly involve me: if someone puts banner ads on their site to help them pay the bills, that involves me only passively. Moving to an escrow agent, however, forces the consumer (me) to play an active role in that exchange - even when "it's just a penny" and even when the mechanism is "transparent" at the point of sale.
On the face of it, government involvement seems like a good idea. However, what about all we non-US citizens? Could we all count on our respective governments to cooperate and allow micropayments to really flourish? Or will 'international' users find themselves unable to access bits of the web?
I'd much rather see the internet community develop a useful standard that can be easily adopted by vendors...perhaps such a thing already exists? A technological solution is always better than a government mandate.
Lets face it; over the last few centuries, who is it that has managed to develop several convinient systems for transfering money internationaly - often embracing the latest technology to do so? It's not the various goverments... it's the banks. The banks needed a way to transfer money from one place to another without physicaly moving it, so various system was developed. They even manage to make a profit out of it.
Now, if the banks got their act together and launced a simple to implement system for micropayments - possible just nationwide as a start - I believe that it might take off. As more and more people saw that the system worked, more and more would pick it up; allowing, for instance, slashdot-readers to pay 0.01 cent to the owner of the website we're pounding into rubble, allowing him to pay his ISP for more bandwidth for a limited time. Off course, this could work for pr0n as well, letting you pay for just the pictures / movies you download rather than to pay for all the crap you'll never bother seeing once you realise that all the stuff you just handed over ten bucks for sucks chunks.
Everything in the world is controlled by a small, evil group to which, unfortunately, no one you know belongs.
In fact, the good stuff is becoming easier to find as the size of the system grows, not harder, because collaborative filters like Google and Technorati rely on rich link structure to sort through links.
I disagree. If I type in 'good weblogs' to google, I still get a bunch of crap I'm not interested in. Why? Because my idea of a good weblog doesn't necessarily match up with everyone else's.
The key to micropayments is to use existing customer relationships. Mobile phones are a good example - you can buy access to information or services by sending an SMS to a specific phone number. The payment comes onto your phone bill and everybody is happy.
I am currently involves in implementing micropayments for gaming services, and it works great.
If I'd known responses to Clay Shirky's article would get their own thread, I would've waited. Here's a crosspost of my original response.
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.
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There is a big difference between micro value payments, and micro cost payments.
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The inefficiency of all electronic payment system is huge.
Bitpass charges between 5 - 15%, and it's one of the best in terms of money taken out of the system.
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