PayPal to Offer Micropayments

lazarus corporation writes "According to a press release on shareholder.com, PayPal are introducing micropayments processing fees for digital goods. Will this allow musicians to do away with record companies completely and successfully sell their own music online?" It looks geared to be the under $2 area and not the couple of pennies area, so I think calling it "Micropayments" is a bit much, but it's something. Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.

Comments

Transaction Costs

[Oculus Habent]

Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.

The cost is in the partnering. Even if you can get the user to put in money in large blocks that don't kill you in financial transaction fees ($20+ is my guess) instead of being charged a few cents a day/week, you have the transaction overhead of whatever unique system each site uses (per page, per article, per section, per day, any of these with caps...), subtracting the fees from each user, aggregating the total payment to each site and providing statements to all.

The key to the micropayment game is aggregation of volume . If your company is processing 2000 payments per day of $0.01 each from 2000 different people, it's probably costing you more than it's worth. However, if you're processing five million payments a week with an average individual's cost being around $0.25, you might be breaking even. If you could get two dozen major sites and hundreds of smaller ones on board, you might make money.

Either the financial costs (actually taking and distributing money) need to be reduced, or the number of transactions per person/site need to go way up. I don't see banks and credit card companies giving out money for cheaper, so, here's the hard question: How do you get widespread buy-in on a system that only works once it has widespread buy-in? Who's the philanthropist who will fund a losing game for as long as it takes to become profitable?

Hey, maybe the government is interested! They own the money, anyway...

Re:Transaction Costs

[the_unknown_soldier]

But this is the beauty of pay pal. When paypal transfer money from one account to another the money is still just sitting in Pay Pal's account. So users Put in $20 for micropayments, it gets moved to 20 different accounts, and each of those accounts gets 20 micropayments. Apart from raw database management costs which are minimal, this is going to cost Pay Pal the same.

Re:Transaction Costs

[Oculus Habent]

How long do you think the sites will leave their money sitting on PayPal, though?

I understand that PayPal's solution is quite different from Slashdot's solution; PayPal is banking on $0.50-$2.00 - type transactions and Slashdot is a penny a page. The latter style (CmdrTaco's comment) is what I was talking about.

PayPal may be uniquely positioned to provide such a service, as they already provide some aspects of the needed technology.

As Taco mentioned, though, the real test of "micropayments" is not under $2.00, but rather under $0.10. The markets are likely quite different though. This 5% plus 5 cents could work for a variety of small transactions.

Re:Transaction Costs

[AviLazar]

Let's not forget things as fee's. When you use your Credit card to pay PayPal there is a merchant charge. This charge varies but it can (easily) be around 1.25 + 1% of sales. This is paid by the merchant, not the client. So if you are buying something for 1 cent, even 25 cent's, the merchant is not only not making money, he is losing money!

Now a company like PayPal probably has a pretty good system in place, where their credit card charge is less then mom-n-pop merchant - but they still have costs

It's not that we can't do micropayments, it's just that it is not cost effective.

Re:Transaction Costs

[atomic noodle]

'Who's the philanthropist who will fund a losing game for as long as it takes to become profitable?'

Those people are called 'investors', not 'philanthropists'. And there are lots of them around.

Otherwise, I agree with you completely. I just wanted to correct that one point.

Re:Transaction Costs

[gfreeman]

I think the point that was being made was that it should be insignificant to PayPal to move data around internally. The charges you mention will only be brought into play when cash is withdrawn from the merchants' accounts. Moving pennies from one account to another should be free, given that commissions are paid upon withdrawal.

With credit cards, there's no "float" - all payments go in and are paid back to the merchant minus commissions. (I am assuming that's true, please correct me if you know different).

I agree with the OP - it's surprising that in 2005 there's no real micropayment infrastructure in place.

Re:Transaction Costs

[AviLazar]

Floats almost always happen (with the exception of Wire Transfers, which usually cost 10-50$/transfer). Also, if the merchant doesn't settle their credit machine at the end of the night this delays the transaction (in this case floating to the advantage of the customer). I doubt a place like PayPal, or even any online retailer who only accepts credit cards, would do this. It still takes time, however, and companies float. Some banks have deals with each other and they minimize floating periods, but it is still there (even if just for a day, or even half a day). Remember, in terms of millions and billions, half a day of floating is still a lot of money.

But yes, I think micropayments should be in palce, but how cheap do we go. Someone mentioned that you have a prepayment account. So you stick $20 on your PayPal account. When you make a purchase you use money from that account, so you do not get hit with inter-banking fee's (i.e. ATM fee's). While this would be a good method, it would mean the client gets a HEAVY float penalty. Your $20 sits there for days, weeks, months, years! It's a good option, but many would scream bloody murder for their $20 worth of interest.

Can this be done electronically - yes, the technology is already here. But banks are old school and are greedy. Put it this way, my friend works for a company that knows how much it costs banks for ATM charges (from one bank to another)...it's about 4 cents (as of a couple of years ago). But bank's charge about $2 from the foreign bank, and probably around $1 on your banks end (assuming you do not have a special account). So you suffer a $3 charge for a 4 cent transaction. Talk about price gouging.

Re:Transaction Costs

[CProgrammer98]

You have been especially selected for our FREE Apostrophe 101 course.

We recommend that you pay particular attention to module 3...

It's "fees", not "fee's" and "cents" not "cent's". Although you managed to work out how to pluralise "thing", "sale" and "cost" and even "micropayment" correctly.

4 out of 6 plurals correct... Well done, but do try harder next time... :)

Re:Transaction Costs

[Anonymous Coward]

Someone please take that man's apostrophe key away!

Re:Transaction Costs

[llamashoes]

I have a hard time with post's like this.

Re:Transaction Costs

[EERac]

Ron Rivest and Silvio Micali have looked closely at micropayments, and are even involved with a startup named Peppercoin.

It's been a while since I heard Professor Rivest (of RSA fame) speak, but part of his solution was to aggregate payments across customers. In his talk he explained how buyers could be given electronic money, only a fraction of which was actually valuable to a particular vendor. Suppose 9 out of 10 "e-dimes" would not be redeemed, but the 10th entitled the vendor to a dollar from the credit card company. The vendor would break even on average, but if they could test the money themselves, would use far fewer transactions.

Making the whole system secure relies on a bunch of cryptography. Specifically, it's important to not be able to forge money, not be able to test a bunch of money to see if it's valuable to a vendor, and not be able to give the same money to multiple vendors.

I imagine the Peppercorn is currently proposing a simpler solution that integrates better with existing technology. Either way, when a payments are sufficiently large, the system could just defer to current technology, so the vendor is no worse off.

Re:Transaction Costs

[MikeFM]

I just let users buy credits (that can be used on any site supporting my system) and let users transfer credits from that pool. When they run out then they can't access any of the using sites without buying more credits. *shrugs* Seems easy enough. Usually sites charge about $.01/Kb. Dunno if I could make the system profitable for me as the service provider though. I thought about making it so credits could be used for other stuff though and providing free store/auction sites that only work with credits. Use the micropayments to hook in a client base.

My 2 cents...

[nmg196]

Why would you need to pay someone only 1 or 2 pence/cents? I can't think of anything this cheap that you would need to buy on the internet. Except perhaps a license to play a music track once or something...

Re:My 2 cents...

[gravos]

There are TONS of things that paying a penny or two for would be really useful, and could make your online browsing experience much better.

For instance, imagine paying a penny to read a webcomic on a site (like, say http://penny-arcade.com/). It's a pittance to you, assuming all you have to do is click one button to make the payment. If 10,000 people pay one penny to read that comic, the author has made $100. This is a great way to support online content-based sites, and also to rid them of ads. Something that can get the darn ads off the Internet would be great!

Re:My 2 cents...

[cloudmaster]

Yeah, you have subscriptions to "information" sites. Sure. :)

10% Charge

[Anonymous Coward]

The new fees will enable merchants to process payments at a rate of 5 percent plus 5 cents per transaction.

So for $0.99 it will still take a 10% fee.

Bastards.

Re:10% Charge

[qwp]

yes, but you have to look at the system as of now.
Right now you pay 30 cents plus a % of the sale.

I run a dollar/month hosting company, and 35% of every monthly sale goes to paypal. Which the way I setup the system, is just the hit I take. I've accepted that because the hosting company isn't setup to make gobs of money, it's just ment to support designers and provide a better service. With this new micropayment structure I could earn 25% more each month, without doing a single change.

Yes it is still evil, but hey I just had to sign up for a free paypal account to start running accounts through. I'd rather pay 500 dollars over 3 years than 300 dollars up front for a system.

God forbid....

[xao gypsie]

....that the artists themselves would have the ability to sell and market their own music without big companies trying to get their piece of the pie. I am all for anything that returns music to an art-form rather than a business model.

Re:God forbid....

[ScentCone]

God forbid ... that the artists themselves would have the ability to sell and market their own music without big companies trying to get their piece of the pie.

It's not entirely clear what you mean, but I'm assuming you're refering to a company like PayPal "getting a piece of the pie" by facilitating those transactions of a buck or two. What's your notion, instead? That the musicians re-invent micropayments themselves, establish the infrastructure, the banking connections, etc., thus cutting out "the man," and then having no time to ever write or record another lick of music?

We're a civilization of specialists. Most musicians don't grow all of their own food, either, and instead allow other people to get a "piece" of their food money. Someone else gets a piece of the pie when the band replaces the brake pads on their van, too. Making it easier for artists to handle small transactions is making it better for the artists, but it isn't better for anyone if the people building systems like that have no expectation of making a living off of their own efforts and investments themselves.

Certainly artists that don't find this sort of tool useful can just... not use it! If tip jars at bars and coffee houses are more their speed, then that's always an option, too.

Re:God forbid....

[Lumpy]

Musicians already do have this ability.

it's called a live concert. musicians have been doing this for 90,000,000 years. they can sell admission without giving "the man" a cut of the pie.

Hell I see musicians doing this on street corners in large cities.... Ok calling some of them "musicians" is a bit of a stretch.

There are thousands of ways for you to get paid without paying fees, taxes, extortion payments. unfurtulately all of them require you to be able to physically touch the person buying from you.

anything else either requires billions to build or buy your own infrastructure or you pay "fees".

Wrong problem

[vettemph]

Maybe noboby wants to sell anything for a penny.

Stuff that matters?

[EvilCabbage]

Screw Paypal. Seriously. I've quit dealing with anybody only accepting Paypal as payment methods, I've voiced my dissent (in a calm fashion) over their continued poor service and especially after the recent charity "issues", I'd urge other people to do the same.

Re:Stuff that matters?

[Tom]

Name an alternative.

My online game accepts donations. I've looked very hard two years ago when I added that feature, and I found a total of two services I could use (PayPal and Moneybookers). Everyone else asks either for a ridiculous set-up fee or is otherwise unsuited for small businesses, donations, etc.

I started offering both. In 18 months, a grand total of $10 was sent through Moneybookers, compared to a few thousand through Paypal. Guess which one I dropped.

Re:Stuff that matters?

[QuantumG]

And yet you don't recommend any alternatives or even give any good reasons why PayPal is no good. I hope your "urging" of other people is typically done more effectively.

In the mean time, there's plenty of people who are happy with PayPal's service.

Re:Stuff that matters?

[Tony Hoyle]

They shut down the account without any warning, were not contactable and their automated system for reinstatement did not work.

When they were finally contacted they refused to release the money for 9 days, and stated that as they have an exclusive contract with United Way they can't authorize charity payments to the red cross.

So instead they refunded all the money - *minus* all their transaction fees... so paypal made a nice tidy sum and the people in new orleans got zip.

Nice company.

Re:Stuff that matters?

[Vintermann]

Why on earth did you drop moneybookers? It didn't exactly cost you very much to publish an email adress did it? Ten dollars may not be very much, but what's the point of refusing them?

The ONLY kind of online payment system I have used (short of credit cards over SSL) is moneybookers, and I won't use anything else for that scale of payments unless they go out of business.

Re:Stuff that matters?

[jez9999]

Apparently you never heard from the thousands of people who Paypal has screwed over, an example of which was illustrated by this recent story. I never use Paypal anymore, and haven't for many years. I'm still alive.

Re:Stuff that matters?

[Blakey Rat]

What about Amazon.com? They offer the same service as PayPal, have a MUCH better reputation and at least as much name-recognition.

Bitpass has had micropayments for a long time

[RhettR]

BitPass has had micropayments for some time... the catch is you have to buy at least $3 credits, but then you can pay those anonymously to websites in increments as small as one cent.

Microposts

[Anonymous Coward]

In related news:
Slashdot to introduce microposts, the offers seems geared toward the anonymous cowards posting under the 2 lines area...

Easy joke missed...

[MosesJones]

charge a penny on-line

The phrase is SPEND a penny

I can't believe that Slashdot editors missed such a simple and infantile joke opportunity.

Are standards improving or slipping?

Re:Charge a few pennies?

[Anonymous Coward]

I'll go apply for a patent on "Aggregation of currency in a leather based sheath" quickly!

Millipayments

[kriegsman]

If micropayments are for just a few cents, shouldn't transactions in the $10-$90 range be called millipayments?

-Mark

Paypal seizes $27K of Hurricance Katrina Red Cross

[Anonymous Coward]

Paypal just siezed $27,000 of aid going to the Red Cross from SomethingAwful.com users - I'd say thats reason enough to cancel if you haven't already been royally screwed by them...

Ask gas stations.

[mshiltonj]

They've figured out how to charge me 3.29 + 9/10 for a gallon of gas. 9/10 of one cent is pretty micro.

Re:Ask gas stations.

[Will_Malverson]

Not only that, but they typically measure the amount of gasoline that you bought down to the thousandth of a gallon -- The "true" price of whatever you pumped should then be specified down to the millionth of a dollar, or ten-thousandth of a penny.

To avoid rounding issues, if they're going to specify the price down to 1/1000 of a dollar, they'd have to have pumps with a granularity of ten gallons.

Penny-sized micropayments v. $-sized dispute costs

[G4from128k]

The core challenge for small micropayments is the high cost of dealing with disputes. The cost to the company of a single dispute can be $5 to $50 depending on how much communication and labor is required to resolve a disputed transaction. If the transaction service is only charging a penny, then it only takes disputed charges in 1 in 5000 to 1 in 500 transactions to totally consume all the revenues - leaving no money for the actual service (software, hardware, marketing, etc.) in the other 99.9% of the transactions. Even if the cost of the technology were zero, these "real people" costs would make micropayments prohibitive.

Paypal tries to avoid these high cost by making it very hard to contact a "real" person. Real people just cost too much. Of course, Paypal's alleged reputation for poor customer service (see paypalsucks.com) is the side effect of trying to keep costs down to enable low-dollar transactions.

Perhaps when someone creates a competent AI for customer service, micropayments could work. Given that most companies still have trouble getting competent people for customer service, I'm not hopeful.

Structural problems

[confusion]

There are some structural problems with micropayments that need to be overcome:

- paypal sucks. Everytime I think I should give them a second chance, they bombard me with 10 more reasons I need to stay away. They are like Best Buy in that regard.

- Charge/merchant processing is still horribly expensive, to the point of making this unattainable. Long ago I had thought that paypal was going to smash the deathgrip that charge processors had on the world, but that has not come to pass, as they likely are also a victim of the charge processors.

If I spend $.50 per month on digital media, and even if charges are batched monthly AND they get a super deal on charge processing costs, they will likely end up with

Good deal for PayPal, but not for you

[miniver]

"The new fees will enable merchants to process payments at a rate of 5 percent plus 5 cents per transaction."

• $0.20 transaction -> $0.06 = 30.0% for PayPal
• $0.40 transaction -> $0.07 = 17.5% for PayPal
• $0.60 transaction -> $0.08 = 13.3% for PayPal
• $0.80 transaction -> $0.09 = 11.25% for PayPal
• $1.00 transaction -> $0.10 = 10.0% for PayPal
• $1.20 transaction -> $0.11 = 9.16% for PayPal
• $1.40 transaction -> $0.12 = 8.57% for PayPal
• $1.60 transaction -> $0.13 = 8.13% for PayPal
• $1.80 transaction -> $0.14 = 7.78% for PayPal
• $2.00 transaction -> $0.15 = 7.5% for PayPal

Not a bad deal for PayPal, but not a good deal for anyone else.

Micropayments aren't new

[Alioth]

Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.

Micropayments were available in the mid to late 1980s on Prestel and Micronet (a British pre-world wide web online service). "Information providers" on Prestel/Micronet could have free pages, or pages that cost money to view from 1 penny and up. In 1986, I was buying and downloading games for my Sinclair Spectrum for a reasonable discount over going to the shop and buying the same game on tape. Multi-user games such as Shades were paid for using micropayments (1 penny increments). You could rent Gallery pages (a bit like making your own home page on the web today) by using this system.

Of course with Prestel/Micronet it was easy since Prestel just added the charges to your bill quarterly. However, there's no reason why PayPal couldn't have done the same for PayPal user to PayPal user transactions since they wouldn't have to interact with any banking institutions to do it, so really it's boo on PayPal for taking so long to actually make this happen.

Royally Screwed By Paypal

[HackNack]

Paypal scares me now. Too many people depent on it as their sole way to receive payments. I mean, as long as they're the ones getting jacked with the high fees, that's fine with me.

The thing about Paypal is that its buyer protection is rediculous. I've recently sold something to a guy in Europe and sent it with USPS. A few weeks later he disputes saying that he never received the item. Then I look at his eBay feedback and realize that I just got screwed. There is nothing I can do. So now I have to refuse selling to people outside of North America or I have to charge them $50+ for UPS or FedEx.

It seems like after eBay takes their cut and Paypal takes their cut, the seller is left with a sore behind.

That's nice

[Dan East]

I'm a developer that has used PayPal to receive monies for the sale of thousands of copies of my software over the past several years. So I am one of those that doesn't perceive PayPal as evil, as they have never screwed me over personally.

However, as nice as it is that PayPal is going to make this happen, it really needs to be implemented within the actual banking system. I guess things are still too antiquated in some banking circles to reduce the transaction overhead enough to allow micropayments. However since their communication is already 100% digital, one would think they could make this happen if only they really wanted too. I guess too much human interaction is still involved, and it would be very difficult to track down theft when instead of a few hundred dollar transactions, someone has to look at several thousand 5 cent transactions.

Also, when micropayments become commonplace, I expect phishing to grow immensely. If something only costs, say, a quarter, then a person would be more likely to pay because the risk is so low (I can see the spam subjects now: "Download top-40 songs for only 25 cents each!"). And thus it follows that when the consumer is fleeced, they will not be as likely to pursue the issue to get their money back. My daughter lost a quarter in the vending machine last week, and it simply wasn't worth the effort on my part to hunt someone down to try and get a refund.

Also, can you imaging trying to contact the FBI to report an interstate theft of this kind?

"How much of your money did they take, sir?"
"25 cents"
"Did you know I get paid $20 an hour, and you have already used up $2 of my employers time just talking to me?"
"No, I didn't"
"[click] [sound of dialtone]"

Dan East

Already been done by...

[OpenYourEyes]

About... oh... six or eight years ago, there was a company that was founded which had a great online payment scheme that would handle micropayments without problems. Instead of charging a per-transaction fee, it would make money on the float of withdrawing a larger sum from your bank account, not giving you interest on that ammount, and letting you tap into it whenever. Putting money back in your account that was transferred to you could take a couple of days, since they wanted to earn the float money. The company even had a way to do micropayments by beaming data from PDA to PDA, and were planning on a cell-phone version of the same thing. Eventually, they abandoned this system, abandoned the PDA and cell phone systems, and just about abandoned their customers. They switched to a transaction fee system, got bought by a bank, focused on auction transactions, and eventually were bought by eBay. This company was called PayPal.

Spam

[Ieshan]

Suppose you required along with your email that people first deposited a .001 cent micropayment to your email provider, or else their email would be bounced. This cash would be deposited in your "email account", and you could use it to send .001 cents to other people. So, if you emailed back and forth between two friends, your net loss would be zero (B sends .001 to person A, person A sends .001 back to B).

Now consider spam. If spammers had to pay .001 cents for every email, and they send out hundreds of thousands of day, that's 100s of dollars wasted on micropayments. Up the micropayment to .01 cent, and the mass emails to a million a day (not unheard of), and you're dealing with tens of thousands of dollars in spam overhead. That's a lot, and not easy to recoup by selling product. It makes spamming unfeasible.

The idea is a little like putting re-usable postage stamps on your email. Instead of paying a tax, you're paying an assurity that you've enclosed a totally insignificant monetary sum along with your email.

People would probably be able to whitelist certain accounts, so that they could recieve mass mails from the University, and from Sport Teams, and from their family. But ideally, it wouldn't matter, becuase the payments would be so small, it would only affect those doing craaaaazy amounts of mass mailing.

Re:Spam

[Tony Hoyle]

Been tried.. wouldn't work.

1. Who would collect these payments? You really think a spammer in korea would pay them? The ISP? I don't use my ISPs mail system (neither do spammers, btw.)
2. Mailing lists... LKML would go bankcrupt in about a day.

Re:Spam

[Sancho]

1. PayPal, or whatever micro-money-management service everyone agrees to use. And I don't think a spammer in Korea would pay them either, but they'd be blacklisted if they didn't.

2. This would almost have to start out on the client with un-paid e-mails being either dumped in the bit-bucket or used as another factor in a Spamassassin-like filter. As more people began using it, it could theorhetically be an authentication on the server so that the bad mail is never delivered to the end user in the first place, which would, of course, cause a problem for mailing lists unless the whitelists were server-side as well.

Re:Spam

[drsquare]

So Paypal gets to make money from every single e-mail sent in the world?

Not only that, but Paypal will effectively CONTROL ALL E-MAIL. I don't trust them with my money, let alone communication.

Re:Spam

[jim_v2000]

What about people who run their own mail servers?

scam.. expensive.. what else comes to mind?

[Exter-C]

seems overly expensive for "micropayments"..

Paypal == Evil

[1s44c]

Sooner or later paypal shaft everyone they deal with. They are the SCO of the banking world.

They freeze funds and keep the money whenever they feel like it, they take random amounts out of peoples credit cards whenever they feel like it, and they send a pack of lies to their debt collection agencies about their own customers whenever they feel like it.

Warning from real life experience, DON'T DEAL WITH PAYPAL!!

Re:Tell me more?

[jhalme]

Well, the SA servers are now back online again so you can read Lowtax tell the story himself;

http://www.somethingawful.com/

Should I welcome or fear micropayments?

[rolfwind]

Hm... when it comes to when micropayments online - say a penny per transaction - should I welcome or fear this development?

How many free services/sites will start charging cash to use their services (a penny per page view) that will seem cheap at first view (it's only a penny!) but will start nibbling away at your wallet over time.

Just a stray thought.

Is this NEW?

[dpbsmith]

I haven't followed all the various changes in PayPal's offering, but when it was originally introduced, one of the scenarios they explicitly mentioned in their FAQ was one in which you sent a nickel to each of a hundred friends.

When you sent the nickel, they would hit your credit card for $5, your friend would get a nickel "in" their PayPal account, and you'd end up with $4.95 "in" your PayPal account. The next 99 nickels would all come out of your PayPal account.

Haven't you been able to do this all along?

This has been done by peppercoin

[FuzzyDaddy]

Peppercoin has already worked out a way to cheaply (i.e. transaction costs are much less than 1 cent)and securely do micropayments.

It's difficult that's why

[homeslice3]

Back in 2001 I signed up for a long distance provider online and got 3 cents a minute for all calls on my LAN phone. I rarely use it for LD (use my cell), so 4 1/2 years later, I've accumulated $3.11 of long distance phone calls - the provider won't run my credit card until I reach 5 bucks of charges.

Each month I get online (no paper) bill from them telling me I'm going to get billed some day.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Tell me more?

[toad3k]

Fark linked to sa's post, and in the comments there are a surprising amount of people with bad experiences.

http://forums.fark.com/cgi/fark/comments.pl?IDLink =1653706

And of course there's always the venerated paypalsucks.com

Overblown

[Jeff Molby]

Micropayments have significant challenges, but I don't think this is one of them. It's every bit as expensive for me to dispute few pennies as it is for them to resolve the dispute. I've been known to throw away pennies when cleaning because I didn't care enough to find a jar.

Certainly, I would file a dispute if a pattern of overcharges arose, but I doubt I would even take the time to go over my statement unless it amounted to more than $5/month.

Are there really people here that value their time at a couple pennies per minute?

More than that

[JavaRob]

I think nobody wants to BUY anything for a penny, either. Or -- they don't want to make hundreds of tiny purchases. No matter how easy it is. All micropayments do is *discourage* you from using a service more -- because every little thing you do will cost you money.

Think about it -- what do we have in the real world that works in micropayments? The closest thing I can think of is phone service (where each minute of long distance costs you 7 cents, or whatever).

And most phone companies are trying to AVOID the metered usage model, because people don't like that realization that as they're talking, that money is draining slowly out of their pocket. So - unlimited local calls, free nights and weekends, etc. etc.. The more you talk the more value for your money you get... so this kind of plan gets people in the habit of using the phone for long stretches of time. Then they're willing to pay more (since they feel like they're getting more!), and the usage habits transfer to the standard metered hours.

But now think about a nascent online service. What's bad for a basic, necessary service like phone is HORRIBLE for brand-new, NON-commodity service. An online service needs to do everything it can to encourage you to use it more, to use it all the time, to incorporate it into your life. That's where the money will eventually come from -- people who feel they're getting a lot of value out of it. Nickel-and-diming you to death (and anything that gives you that feeling -- no matter how cheap it is in the end) is the exact opposite of what they need to do.

I haven't thought this through far enough to figure out the ideal alternative -- maybe cheap year-long (unlimited) subscriptions to networks of sites? -- but I feel like micropayments will always give me a bad feeling.

Penny-level Micropayments as an income source?

[Andrew Lenahan]

It's already fairly obvious why "penny" micropayments haven't been embraced by consumers (inconvenience, privacy, annoyance factor) as well as why they're unattractive to transaction service providers (costs of disputes, etc.).

Much rarer are discussions of the topic from the content-creator's (artist/writer/cartoonist/musician/poet/whatever) point of view. Minimum wage is roughly $5/hour in the US and $10 in the UK. You'd need 500-1000 visitors paying a penny EACH HOUR just to equal the princely sum you'd make behind the grill at McDonalds. And that isn't even figuring in the transaction fees, advertising, taxes, hosting fees, bandwidth, DRM, software, customer service, etc. Obviously, not an attractive concept to most artists.

One response might be "Okay, you won't make much, but it's better than giving it away!" Not necessarily. Free content has a great deal of fluidity: it can be linked, quoted, forwarded, blogged, passed around the office, etc. Achieve a certain level of success in offering free content, and one can make up a tidy living selling merch and other residuals... Homestarrunner is a good example of this business model.

Given the staggering amount of transactions needed just to compete with minumum wage, I can't see penny or nickel-level micropayments ever taking off.

OT - Re:What good is micropayments...

[Cheerio Boy]

(Score:0, Redundant)

It wasn't fscking redundant when I posted it moderators.

And the question still stands - what good is adding another service to PayPal when they can't even get their existing services, dispute system, and watchdog stuff to work right?

Re:Tell me more?

[JourneymanMereel]

In PayPal's defense, there are a lot of people out there running scams claiming to be raising money to help the hurricane victims. After raising substantial amounts of money, they keep it rather than donate it. Unfortunately, things like that happen anytime there is a need. Something Awful may very well be one of the excpetions, but how is PayPal supposed to know that. I'm guessing based on his comments that he most likely was fully intending to give the money to the Red Cross while rewarding those who donated with free stuff he already had sitting around. It's unfortunate, but I can certainly understand why the account would be flagged as suspicious and shut down.

On the other hand, not allowing money to be given to the Red Cross because "the United Way is PayPal's relief organization of choice" is just plain rediculous!

Re:Actualy, it's more like:

[QMO]

"Who's going to sue them for $50?"

Someone will sue for $3.27 plus $32,700,000 for "mental anguish."