Its no secret that most major content producers are slowly dying as our society transitions to using digital forms of content more exclusively. Newspapers are universally in trouble right now; as revenues continue to decline, and newspaper companies go further and further into debt, most newspaper executives have turned to slash and burn techniques in a last ditch effort to save their businesses. Magazines aren't far behind; magazine readership has also been declining for a few years now. So far, these businesses have had very little success in monetizing their content online. In most cases, the revenue generated through advertisement pales in comparison to what was possible with print editions.
Many ideas for monetizing content more effectively online have been proposed, and a few of the more agile newspapers and content producers have begun to experiment with some of these ideas. Today I'm going to look at what is in my opinion one of the more compelling but as of yet unproven of these ideas: micropayments.
Micropayments are very small payments made in exchange for something in return. Although most payment companies (PayPal, Visa, Mastercard, etc.) define micropayments as any transaction under 10-20 dollars, most people consider micropayments to be an order of magnitude smaller, around 20 or 25 cents in exchange for, say, an article on the internet. By charging users very small amounts for each action they take on a website, proponents of micropayment technology believe that the friction to paying for content will be reduced. Rather than having to pay ahead of time for a subscription, users will be able to amortize this cost over time as they use a product or consume content more and more.
Micropayments are not a new idea. This idea was attempted many times in the late 1990s and early 2000s during the dot-com boom. Some have said simply that the idea won't work, mostly saying that users won't like being charged small amounts.
Here's what's different this time: consumers are much more willing to pay for content online than they used to be, because they are more comfortable with exclusively reading online. It's been shown that users are more willing to pay for things on the internet than they ever have been before, and in surveys users have said that they would be willing to pay for high quality content that is exclusively on the internet. If someone could create a truly low-friction, easy to use micropayment system they may actually be successful this time around.
I think that iTunes is a good example that proves that micropayments can be successful. Essentially the idea behind iTunes is very similar to the idea behind paying a small amount for an article from a newspaper or a magazine. People paid just 99 cents for a song (once upon a time) and were able to download a small item directly off the internet. While the costs of buying thousands of songs certainly stacked up over time, iTunes was and is so successful because it feels as though you really are not spending much money every time you press the "$1.29 buy" button. Therefore, I think that expanding the micropayment system to magazine and newspaper articles is a very smart idea.
ReplyDeleteYou're absolutely right in saying that users are more ready to pay for content now than ever before. This willingness has to do with timing, because creating low-friction payment systems is contingent on a whole bunch of associated infrastructure, like sustainable browsing speeds and secure connections. The potential earnings to be realized is no big secret: http://goo.gl/6jNkG.
ReplyDeleteIt's no surprise then that micropayment startups seem to be the buzz of the Valley of late, with even Google joining the party:http://goo.gl/XLV9b
But being more willing may not meet the market's requirement of consumer propensity. So while I agree that micropayments will eventually become ubiquitous, the million dollar question of course, is when?