Slashdot Mirror
The March Towards Micropayments
MattW writes "It's been well over a year since Ron Rivest's company Peppercoin was introduced on Slashdot. Now, the AP is reporting that Peppercoin 2.0 is here. Peppercoin's website indicates that version 2.0 pays merchants exactly what they charged, instead of with cryptographically signed tokens which may or may not sum out to exactly the expected charges. This looks like the technology that will enable credit card acceptance in vending machines and video games, but may not solve the need for truly "micro" payments, like paying $.005 for a page view."
The biggest obstacle to using credit cards for micropayments is the cost of transaction processing
I wonder if the folks at Microsoft are considering Passport as a micropayment vehicle for subscription-based websites? Micropayments lower the threshold and do not require a big decision before users get their initial benefits: thus users will be encouraged to view more pages and spend more. Of course, there will almost certainly be discount schemes for frequent users of a site such that nobody would end up paying more than they would under a subscription plan.
Also, although a closed initative, the W3C Micropayments Working Group provides some interesting info.
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I'll pay you $0.0002 to think up a more clever reply than this!
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..will be big money rather than chump change.
the first post guys will go bankrupt!
If you lost your job today, don't despair. You may die tomorrow anyway.
The acceptance, or maturity, of a technology can not occur without there being a desire or perceived need for it by the consumer. If there is no need, infinite supply (as is theoretically possible with such a thing as digital services) is meaningless, as people will still not use it.
.01 or so for every slashdot article which someone gets before the rush/premium members.
That said: what's the desire, or demand, for micropayments in general? I can see how they would appeal for use in vending machines or game payments, but for per-view payments online?
The largest, and potentially only, source of income I can see for such a product would be through the porn industry. That way they might be able to more easily be able to meter out their 'service' in a commodity type fashion: "You 'used' X megs, so we charged you for that much" - as opposed to the blank service fee model, where the customer might frequently cancel the $5/month subscription, as "they didn't use it" *cough* and there'd be little/no incentive to pay for it.
Personally, I would stop going to most sites I currently visit if I had to pay for them. I already pay for internet access; why would I want to, or should I have to, pay for something which is currently free? "Premium" service on sites, however, might benefit - it would be easier to do a per-view billing model, again. For instance, on slashdot: charge $
~/ssh slashdot.org ssh: connect to host slashdot.org port 22: too many beers
Micropayment, macropayment, blah, blah, blah. Some things are worth paying for, others are not. Until and unless MC and Visa get into the act, these things are unlikely to bear much fruit. Some, yes. Enough to get all giddy about? Hardly.
What is the problem this is trying to solve? Why not group together (as a somewhat poor example) all of the OSDN content sites. You then pay, say, $5 for a certain number of page views across the entire spectrum. Each view is tallied and attributed to the appropriate site. Similarly, you can have organizations of news publications, technical publications (I'm thinking game and/or computer mags), entertainment of various sorts.
Look, as always, the porn industry is ahead of the game. Get one of those memberships to twenty different sites. They don't bill you by the page view, they let you hit all the sites. Look, if porn ain't looking at it, it's not going to work.
Finally, who the hell wants to type in a 16 digit credit card number, 4+ digit expiration, name, address, etc, etc, to view a web comic?
Oh, you can just buy 'points' and redeem them at various sites? What's flooz.com up to these days?
Jesus was all right but his disciples were thick and ordinary. -John Lennon
I don't think will work on a grand scale. It's technically feasable and probably would work great if everyone's mind-set was different. However, I think most people will instantly find them annoying and feel they are being "nickeled and dimed". I would rather sign up for an unlimited service on a monthly charge than a micro-payment based system. Even if under micro-payments I would spend say $3 - $5 / mo and unlimited would be $10-$15. Then I wouldn't feel the need to be jewish with what I'm doing and could do it at my leasure.
I'm wondering if this psychological aspect has been concidered or not.
Ah, which ignores the two biggest obstacles to using micropayments:
a)People HATE getting nickled and dimed- hence the very origin of the term!
b)For websites and the like, people will simply seek out free content which is available in quantity. Bob starts charging micropayments for his webcomic. Bob witnesses most of his readers disappearing into the woodwork. Jane, Sally, and Joe notice little bumps in their traffic logs.
People just can't seem to wrap their heads around the fact that some stuff just isn't considered by the public worth paying for, at any price.
Oh, not to mention, the micropayment guys seem to like charging as much or more than the credit card companies, the money is not very accessible, and so on.
Please help metamoderate.
...the obligitory "Office Space" quotes amount micropayments.
i could see this working if prepaid low limit debit cards became common. I would love to use prepaid $100 cards to pay for stuff online just for the added safty. You can't have your credit rating messed with if your not risking it. Plus it would make micropayments not a big deal. You could keep a $10 or $20 card handy just for that purpose.
Many gambling websites such as http://www.onlinegambling.com/ and http://www.partypoker.com/ allow users to gamble using credit and debit cards. They also provide other methods of payment such as paypal - which uses a savings/checking/credit card account anyways. The online gambling industry is thriving.
I think micropayments would work very well for people who want to download music, do research, or gain the benefits of some other inexpensive transaction.
http://tomgould.com/
My boss has talked a bit about trying to find a way to make some small amounts of money coming in constantly through micro payments... the only problem is, what could you truely market to make people pay micropayments for?
When I go to a site and they want me to pay to see content, even if a small amount, I always go elsewhere because (a)I font want to go through a hassle of paying to see a damn site and (b) I doubt right away that whatever lies within isn't worth my dollars.
One idea my boss had was perhaps people could come to a site and find a simular question they have, and pay to see the answer. I also fail to see how this would work either, as a little googling usually reveals the answer to any technical question I have. I dunno though, seems alot of people are always asking questions on irc without even trying google.... like they say:
"Give a man a fish, he'll eat for a day, but tell him to RTFM and he'll keep asking questions!"
Clay Shirky makes a strong case why micropayments haven't taken off, and probably won't in the forseeable future. In short, the difference between "free" and "only $0.005" is much larger than only half a cent - it's a change in the mindset of the reader. The article also references more academic papers describing the weaknesses of micropayments.
Ubi dubium ibi libertas: Where there is doubt, there is freedom.
Do we really want to go towards a cashless society. I agree this micropayment system is far from it but this system will lead to the owners of VISA to have an awesome amount of power. Imagine , what would happen in a cahsless society where Visa get a percent of every transaction taking place.
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but wouldn't a micropayment be something like $0.0000001 per page view.
There are three parties to a micropayment transaction:
- The party receiving the money.
- The bank, credit card company, or other intermediate party facilitating the transaction.
- The party paying the money.
The way it works is relatively simple. Party 3 does something which requires a micropayment. This could be $1.00, $0.10, or $0.001. Either way, the procedure is the same:When the transaction takes place, a record goes into a database on Party 1's side, showing that a certain amount is expected to be collected. Party 1 would only have to keep track of the total amount it expects to collect from each Party 2 it uses to facilitate transactions. Therefore, it would not take tremendous resources on Party 1's part to keep track of an enormous number of tiny transactions. If Party 1 uses 4 different Party 2 providers, it would only have to keep track of those 4 numbers. Party 1 could elect to keep track of each individual transaction for real-time management purposes, but this would take tremendous resources and expenses.
Two records go into a database on Party 2's side. The first shows that an amount is being collected from a certain Party 3. The second shows that an amount is being paid to a certain Party 1. Because Party 2 facilitates the transaction, it does business with many Party 1's and many Party 3's, so each of these two records would point to the other for reporting purposes. Party 2 would need an enormous storage system and enterprise class databases to keep track of this information. Also, the database would need to organize the information hierarchically so that Party 1 or Party 3 could log in and see a list of all transactions they are paying or receiving, and to/from whom. Party 1 and Party 3 would need to trust Party 2, but micropayments are small, so the risk of error is in the 10's of dollars.
Party 3 could receive an electronic statement of total amounts paid to each Party 1 with whom Party 3 did business. This would probably cost extra, so Party 3 could elect to receive a cumulative total for all transactions less than a certain amount, say, $0.10, and individual records for all transactions above that value.
Finally, here are the mechanics of the micropayments: Party 3 sets up a maximum amount of micropayments being made in any period of time before a special notification occurs to authorize additional micropayments. Suppose this amount is $30.00 in any 30 day period. Immediately, Party 2 would receive the $30.00 through an electronic transfer from Party 3's bank account or credit card. These $30.00 go into a huge pot of all money Party 2 is holding on deposit from all Party 3's. As time goes by, Party 3 does things that cause transactions to take place. Party 2 knows the total amount it, Party 2, not Party 3, owes to each Party 1, and the total amount still on deposit by each Party 3. These two values are kept track of separately. When the amount owed to a Party 1 exceeds a certain value, say, $100.00, or whatever Party 2 decides based on the level of service Party 1 elects, that amount is electronically transferred from Party 2's big pot to Party 1's bank account. When a micropayment transaction takes place, essentially only two things happen: A numeric value is incremented in each Party 1's account, and decremented in each Party 3's account.
Party 3 does not pay anything for these services. Party 1 may or may not pay depending on the terms of its agreement with Party 2. Party 2 makes a profit by earning interest on the $30.00 that it is holding in advance, and the $100.00 that it does not pay until that amount is reached.
The problem with micropayments is the "micro". Payments are payments.
I consult for an organization with a billing system that sends out bills for as little as $0.01 and as much as $5-6 million for a quarter. If the app supported it, they could probaly bill to the tenth of a penny if need be. The system doesn't care.
The only difference between MasterCard and a micropayment system is scale and profit. Given a scalable global system, an transaction is a transaction. Each transaction has a distinct cost associated with it, which is really not relevant to the value of the transaction. The cost of a $15,000 transaction is nearly the same as a $0.015 transaction.
And therein lies the problem. In order to make micropayments affordable, you need to drop highly profitable fees on small transactions... plus your customers will start to question your high fees on larger transactions.
The banking system makes far too much on "macropayments" to scuttle the whole thing to accomodate small payments.
Conformity is the jailer of freedom and enemy of growth. -JFK
From the article: The cost reduction is possible, he said, because of a patent-pending method of lumping together individual transactions into one transaction to reduce the cost to the merchant.
Are they applying for a patent for adding several numbers together? I have prior art! Specifically, I added several numbers together while in Rivest's class! (Did he steal this from me?)
Paying doesn't necessarily mean "transfer of money", it can also mean giving some content back. YMMV.
Micropayments = Microvisits
I'm sorry but if your business strategy requires collecting $0.005 per page visit you don't have a business strategy. Sure $0.005 is nothing but in order to play that you have to register, log in, etc... I'd rather spend those few seconds finding an alternative free site or if that doesn't exist flat out stealing your content from whatever on easily found source is hosting it. It's the principle of it. Offer something of real value and people will pay for it. Do nothing and try to skim off as much as possible without people noticing.. don't expect me to blink as I shoot that one down.
Whose need? Certainly not mine. Most web pages I visit should be glad they got a hit, much less my nickel. Say goodbye to "surfing" when everyone realizes they can charge-- I'm not going to pay to browse unknown sites.
Something else that hasn't been mentioned, you can also say goodbye to any semblance of anonymity when your credit card company keeps an enormous tally of every page you paid five cents to visit. And of course, they won't use that info. for market research, will they?
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Anyone know how well slashdot does with micropayments?
http://www.windmeadow.com/
If you think your content isn't worth changing a worthwhile amount of money ($1.00 or more) for then you should just put up ads (AdSense). Or if you just don't want to charge visitors for access. Nothing is worth the hassle of doing an electronic transaction for a few pennies. Google AdSense is built for doing very small transactions and it requires no work on the visitors part except to be interested enough in an ad to click thru.
I'm not going to go to a web-site and whip out my credit card just to spend a few pennies. The effort isn't worth the "reward." But if an ad is interesting enough and the site isn't vomiting ads in my face I won't hesitate to click on the ad. They get their "micropayment" with no hassle on anybody's part.
Content owners need to take a hint from Costco et al and sell in bulk. Digital Blasphemy charges for access to some of their new material and access to the archive.
Charging per comic or per page is just silly. Would you pay a penny for a single page out of a book? Have the most recent X days of strips free and charge for access to older strips. That gives visitors the ability to get a good idea if your work is of any quality and the fans the ability to support the author in a reasonable fashion.
Someone needs to take this micopayment horse out to pasture and put it out of its misery. The only people making money on this scheme are the people who come up with these cheesy products that alledgedly handle micropayments.
Ben
Work Safe Porn
I can't believe they patented this.
I think that parts of Amazon's loathesome "1-click" ordering is actually prior art. If you have 1-click turned on, it will not process your order for a couple of minutes. This allows you to order several items - one after the other - and they will be combined into a single order. This way you only pay for credit card overhead and shipping on the entire order (and not for overhead & shipping on each individual item).
I think the 1-click patent is absolutely worthless in the first place - a patent on combining transactions, doubly so.
Other uses for the method are in network transactions - specifically Doom 1.0 -> Doom 1.1 update back in 1992 (or 1993?). Doom 1.0 sent tiny packets (sometimes one packet per *bullet*) and was known for choking networks because of the overhead. The update combined tiny packets into larger ones so that the overhead was less. This is a logically identical technique, just applied to data rather than money.
As much as I like it, I also fear it. I fear the end to the vast amount of free resources the internet has to provide. Yes I'd be great to be able to easily tip and contribute to projects and good resources ... but, what will a day of surfing cost when everyone is asking for $0.25 ?
... If it catches on to any extent they will be there to dominate it..
Lets hope this can cut into the Visa / Mastercard Manopoly???
Yahh right
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The cost reduction is possible, he said, because of a patent-pending method of lumping together individual transactions into one transaction to reduce the cost to the merchant.
Correct me if I'm wrong, but doesn't iTunes Music Store already do this? I've sometimes bought a song and then bought another one a day later and had them show up on the same invoice (and the same resulting credit card charge). Doesn't seem like a big innovation... and doesn't Amazon do the same thing with 1-Click also? (which Apple licensed) So now we could have two companies with silly useless patents for pretty much the same thing - with any luck they'll spend millions in litigation and end up appropriately punished for their patent-mongering.
I don't see how useful this would be in arcades anyway - most of the newer ones (Jillian's, Gameworks, et al) already have their own micropayment systems in the form of stored-value cards. Maybe in free-standing video games, but those are getting less and less common these days, and your neighborhood pizza parlor isn't going to have room for a cockpit-sized racing simulator anyway (or even a DDR game for that matter) - nobody's paying $1 to play a round of retro Pac-Man these days.
"The cost reduction is possible, he said, because of a patent-pending method of lumping together individual transactions into one transaction to reduce the cost to the merchant."
How in the world is that patentable? Apple has been doing that with iTunes since the beginning. Google also doesn't handout checks for AdSense until you have $100.00 or more accumulated.
People have also mentioned Wal-Mart dropping a charge from their credit card because it was such a small amount that lingered for too long.
This company is patenting something companies have done for a very long time and then calling their product 2.0. Pretending this is going to translate from video games (anyone who's worked or played in an arcade knows how fast quarters fly completely obvlivious to how much has been spent) to the web is just ignorant. Nobody is going to be sitting on a web-site dropping "quarters" for hours. There's not enough "excitement" to distract visitors from how much they're spending.
It's a whole different paradigm from playing games at an arcade.
Ben
Work Safe Porn
One of the reasons that "tokens" for micropayments are unpopular is the same reason that everyone hates those coupons you have to buy when you go to the local fair. You know, every vendor takes only coupons, so if you want to eat, drink, ride a ride, take a crap, or do anything, you've gotta buy a coupon.
But think about the business model of these coupons: people buy a large chunk of them (more than they acually need, so they won't have to go back and get more), and then don't spend all of their tickets. However, you paid for $20 in tickets, and only bought $15 in food, so they've already raked in $5 without any spending but for cheap coupons.
However, fairs and the internet are two totally different venues. At a fair, there is a monopoly run by the owners, and you can't exactly warez some popcorn off of bittorrent. The internet allows for alternatives. For example, if the NYTimes decided to require microcash payments instead of microsoul payments, I'm pretty sure that slashdot and other similar sites will be devoid of links to the NYTimes site. This is survivable because we have things called mirrors and caches.
If the idea of selling ringtones had been posted here on Slashdot, I am pretty sure we would hear the same arguments : "won't work, no one will pay money for something like this"
Selling ringtones has turned into a multi-million dollar market.
The Internet as most of us have come to know it, is constantly changing (big news). So do our consuming habbits (really now?). After all, we are creatures subjected to evolution.
While the aeroplan was being invented, the common person had the same argumentation: who will want to fly?
Or befor cable was introduced, many of the common folk suggested, it would be impossible to get consumers to pay for something, they are already getting for free.
I am not willing to subscribe to a site, though I would be willing to pay to view certain articles/content. Now not every article will be worth while to pay for, and this is the point where a business plan comes in. Enough said....
I think we are missing an important way that Micropayments can be used.
The user can Earn money though Micropayments as well as spend.
Example:
Lets say you are a Meteorological organisation and you would like to get finer granularity of your barometric readings. You sell a mini weather station to a user, and the software provided captures the weather data for their location and uploads it to the Meteorlogical Bureau. The user earns Microcredits for this, cheaper than putting in your own weather stations.
I think Microcredits can be used both ways.
You can be paid for Rendering Images for a movie, performing 'Human Only' tasks for other companies, and have web sites that list all the things you can do to earn Microcredits.
Why can't I get paid in Microcredits to fold Protien Molecules for some Research Lab...
Suppose I'm charged $0.005 per pageview.
It's not inconcievable I could be charged a dollar a day, $365 per year. Can I afford that? And how about the stuff which charges whole cents per pageview, such as maybe news sites?
People recognize instinctively that small stuff adds up, and that small stuff for which you can't easily do the math in your head will wind up biting you.
This is why micropayments are DOA.
FOr micropayment to gain wide acceptance, there needs to be an integration within the browsers. I researched that for a while because my website has some value but not enough to warrant pulling a CC out. Imagine if you get to a site and you have a little icon on your task bar that start flashing a bit for attention. You pass your mouse above and it asks: "do you agree to pay 0.005$ per page while you visit this site ?" With an optional cgi being called back on the site in case you aswer yes. And somewhere within the browser options lie the CC reference (or paypal or whatever). It would make it convenient to use, which is the main things missing from all current micropayment choices. The time it takes to enter registation, value, references, etc... is not worth 0.005$.
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A system similar to this is already operation in six countries. It is called Fundamo, and was originally developed for mobile payments across the GSM network. The architecture, and an implementation, developed by Fundamo are licensed to network operators who partner with banks to offer this service on their networks. The company was founded in 1999 in South Africa, is backed by two of the biggest financial institutes on the continent, and has numerous patents to its name. Its system will be rolled out in another six countries this year, under various brand names. See www.fundamo.com.
It seems like micropayments are a solution looking for a problem. Others have gone over the difficulties (mostly PR) that Rivest has; let's step back and take a look at why micropayments are meant to be exciting.
The idea, essentially, is that it allows people to make money off of their content in a new fashion. Instead of advertising or subscription, people pay, per use, to get content ad-free.
The web comics world is all very excited about this. Imagine! Cover your bandwidth and make money just for your art! No need to build a subscriber base for print copies, no need to get big enough to be ad-supported, no need to whore out on the side. Instead, get everyone to pay a tenth of a cent every time they want to read your page. Or maybe five cents for your monthly magnus opus.
Does this ever happen in the real world? When was the last time you paid five cents for anything other than a stick of gum from the General Store? Newspapers are the closest you get, but they are mostly ad-supported anyway, and your 75 cents is not coming close to defraying the cost of production. Perhaps giving money to buskers, but it's hard to imagine people would feel the same way about tossing a quarter to some anonymous fancy webmaster that they do about giving the same to some ragged hipster they see every day.
Meanwhile, except for a few self-promoters who also handily want you to deposit $10 in their micropayment system, web comic people are going with the old -- and apparently very function -- methods. They get advertising banners, they promote their hard copies, they do promotional work. Comics not big enough to hit this put up a paypal donation button, sell t-shirts, &c to the hard core fans who want to feel like they're supporting a cool indie artist. Meanwhile, musicians go out and give concerts; their mp3s and even their hard copy albums are mostly around to draw people in to hear a live performance.
So what is the big deal? It's an interesting intellectual problem, and this is a clever solution, but the idea of making scads of cash off of it -- and revolutionising internet content distribution -- seems to me to be a lot of hype, and something only those totally out of touch with how the various "worlds" of content have already solved this problem.
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Also wouldn't the businesses spend more money on processing these micropayments than the payments are? This system can only work on a truly large scale. This may force businesses to find a way of redcuing the costs associated with the internet, so it might actually work to our slight advantage.
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