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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.
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...
That what was all this school was for... to teach us how to solve our own problems. -- janeowit
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...
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.
....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.
xao
http://TheHillforum.hopto.org
Maybe noboby wants to sell anything for a penny.
The government which is strong enough to protect you from everything is strong enough to take everything from you.
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.
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.
In related news:
Slashdot to introduce microposts, the offers seems geared toward the anonymous cowards posting under the 2 lines area...
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?
An Eye for an Eye will make the whole world blind - Gandhi
If micropayments are for just a few cents, shouldn't transactions in the $10-$90 range be called millipayments?
-Mark
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...
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.
Software Wars
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.
Two wrongs don't make a right, but three lefts do.
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
Not a bad deal for PayPal, but not a good deal for anyone else.
We call it art because we have names for the things we understand.
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.
Oolite: Elite-like game. For Mac, Linux and Windows
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.
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).
.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.
Now consider spam. If spammers had to pay
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.
seems overly expensive for "micropayments"..
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.