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The real reason we need micro payments

Someone here recently posted a link to an article that micro payments are dead because people mostly prefer free content over paying even a small amount for it, and I agree with that, but what about micropayments for other uses?

I was trying to find a program that converts gifs to icos but was not willing to pay 20 bucks for the privilage (cheapest I could find). I bet there are a lot of single use type users who need to do this stuff, and thats where micro payments should head.

The Artist Formerly Known as Prince
Monday, January 12, 2004

OT answer  http://www.irfanview.com/

apw
Monday, January 12, 2004

I think the problem with micropayments is folks will avoid them when they realize they're being nickle and dimed to death.  Penny here, penny there and pretty soon you're talking about real money.

Sure, long distance is only 5c a minute, but you still keep your calls short because of that, don't you?

And long distance is a pretty well-defined service.  But what about websites that cost you, say, 5c per web click, except for "premium content" which is 25c, and then it's 12c per megabyte if you want to download a song or 6c if it's a video clip, etc. etc.

And in the link that was mentioned several days ago said something on the order of "you won't see an itemized bill" - which I think will lead to real abuses of the system and a lot of haggling over the issue.  First of all, most websites won't have customer service associates, and even if you could reach one, how are you going to argue "no way did I view $30 worth of content" when you don't have an itemized bill to back you up?

Alyosha`
Monday, January 12, 2004

Since you don't know how it will actually work, it's too early to knock it.

Maybe the customer will be able to set a $2.00 limit on this website, $1.00 on that one, etc.

Among many other things.

Such as, businesses will quickly realize "no itemized bill" is a showstopper and will start *advertising* that "we provide itemized bills".

Alex.ro
Monday, January 12, 2004

I thought the whole deal with micropayments is that the price per transaction is currently high for credit/debit card processing.  i.e.  for a $0.99 downloaded song, $0.50 of it may be a VISA transaction fee.  Where as buying a 61" plasma tv online with a VISA card still is only a $0.50 transaction fee.

Therefore instead of doing all these transactions one at a time they are managed by a micopayment vendor, basically a bunch of IOU's get transferred and eventually batched into one VISA transaction.

apw
Monday, January 12, 2004

Go talk to a pyschologist.

Micropayments make the user physically uncomfortable.  It's like having a low-level electric charge attatched to your private parts while you surf.  Unless you have some way to hold your users hostage, no matter how micro you make the micropayments, they'll go somewhere else.

Any running meter discourages use in a powerful way.

Richard P
Monday, January 12, 2004

"..avoid them when they realize they're being nickle and dimed to death..."

It really is a perception of value thing: People have gotten so acclimated to everything being free on "the web" that they associate virtually no value to it. This is the major barrier that most subscription or micropayment sites will encounter, and I really think that the web as a whole may have to go through a few more years of "dearth of content" before people start to appreciate the value of content (I know others, such as Shirkey, claim that the web has a vast and burgeoning collection of great content, but my impression has been exactly the opposite -- the web was a far more dynamic, informative, valuable entity 5 years ago).

Electricity, as a good opposite perspective, is somethings that few of us really think of (most of us are horribly wasteful of it, and keep adding more and more electronic gizmos running aroun the clock), yet it's "nickle and diming" most of us to the tune of $100+ per month. I drive some 30+ km to work each way, nickle and diming me hundreds per month when you add up all of the transportation costs. Hell to get on the toll road to save a bit of time on that ride costs over $5.00 each way. You'd think that a couple of dollars a month on web content, given that it's a huge part of my life now, would be a small psychological leap, but it really is.

Dennis Forbes
Monday, January 12, 2004

Nobody offers flat-rate electricity.

Nobody offers flat-rate gasoline.

In both cases, you have users with no other choice.

Look at phone service.  The trend is obviously AWAY from metered service.  Cellphone companies offer "unlimited nights and weekends" in order to present an image of unmetered service.  Some even offer "100% unlimited".  Phone companies are going the same way.  Customers have spoken.  They prefer flat-rate to metered.

If I like something, I want to be able to enjoy it without feeling like I need to stop racking up the charges.  People with lots of money may not care.  But anybody who has to budget for food is going to be unconsciously thinking "I could browse the web more, but then I'd have to buy one less pound of pasta."

Richard P
Monday, January 12, 2004

Users are not able to go through a few more years of "dearth of content" because that word "more" implies we've reached that point already.

In the dim distant past (a few years ago) any topic you can think of would have a few good free sites, maybe a few sites selling decent content, and hundreds of "me too" sites where people spend a few days enthusiastically duplicating content available elsewhere (but without the quality) and then lose interest.

Today any topic you can think of has a few good free sites, a few sites selling decent content, and thousands of "me too" sites where people spend a few days enthusiastically duplicating content available elsewhere (but without the quality) and then lose interest.

Isn't that odd? It's not that there's less high quality free sites, but actually there's just more crap. An even odder thing is that the crap sites tend to link a lot - so it still doesn't take long to find the sites that are actually worth using.

Either "dearth of content" means "things are still pretty good" or there's no dearth of content yet, and thus limited desperate need for micropayments. True, there's also limited ability for professional writers to make a living off their website when amateurs can share equally accurate and useful information but that's not my problem, that's just called capitalism.


Monday, January 12, 2004

Two reasons I wouldn't use micropayments:

1. I'm lazy. I'm the George Jetson* of the web-surfing world.

2. Who is it I'm giving my Visa number to? The less name recognition a company has, the less likely I am to buy from them on-line.


* From "The Jetson's":
Jane: How was work today, honey?
George: Exhausting. I had to push 5 buttons today! [grabs martini]

Nick
Monday, January 12, 2004

Richard P pretty much summed it up.  It's like a low-level shock being delivered every time they click a page.  Might as well give em one big shock at the beginning and end of the month.

Also ... users have the expectation of content being free on the internet because ... well, that's pretty much the free market value of it.  I like reading the paper online, but if I had to pay anything for it, I wouldn't.  Supply and demand at work.  I don't care how much it costs the newspaper company to put it up there.  If it's not a viable business, then it's not a viable business.  Some sites - Slate, for example - charge according to the traditional flat-rate subscription model.  I don't read Slate, though.

I might agree to buying a song for 30c apiece online, but no sane company charges every time.    It's more like you'll open an account with a minimum of $10 and buy 'em that way.

The idea of setting limits on a website is just as frustrating.  It's like having to deposit 85 cents to talk for the next three minutes on a payphone.  "Ding, you just spent some money".  "Ding, you spent it again".  Here's a better idea ... just put a little meter on the website.  Customers can just enjoy watch that number go up and up and up ...

So, micropayments are dead.  Or perhaps stillborn - they never were alive in the first place.

Alyosha`
Monday, January 12, 2004

Clay Shirky has a nice article on the topic, where he points out that the cost of a micropayment isn't so much the 5 cents, it's the decision to spend or not to spend.  When there's no decision to make (flat rate plans, or bulk-paid things like gasoline or electricity), there's no problem paying small amounts for small-valued things.  But micropayments for web content mostly mean making a decision - 'is converting this jpg to a gif worth 50 cents to me?'
Instead, people prefer to decide to buy entire clusters of functionality all at once, which they can use whenever they please.  We call those things applications.

andrewm
Monday, January 12, 2004

People don't like micropayments, even if they end up being cheaper for that person's usage pattern.  People just don't like being "on the clock" all the time, where everything they do costs a little bit more.

A better solution, in my opinion, is for websites to join together and sell subscriptions for groups of sites.

A number of sites have demonstrated that people are willing to pay for content and community on the web, if that content and community is high quality.  They just need to work on the details of how to actually get the money

Similarly, despite "conventional wisdom," advertising on the web is in no way a dead business.  Smart companies are figuring out that if you make ads that A) aren't insulting and annoying, and B) are related to the actual subject matter of the websites they are seen on (ie, targetted advertising, imagine that!), they can actually be pretty successful.

Mike McNertney
Monday, January 12, 2004

This conversation has strayed quite a bit from the original post. The OP agreed that micropayments for web pages were dead, but asked about the possibility of micropayments for other things, like small utilities that you might only need to use occasionally. Maybe one tiny payment would give you a license for a month or something.

I think this idea has merit. Most people would be willing to pay <$1 to solve a small but momentarily significant problem (e.g. I need to convert 1,000 images from tiff to jpg) if it was easy enough to find the software and pay for it. Currently, the transaction costs are killing sales of such a small scale. The developer of the utility might have spent maybe 10 hours coding it, so he'd only need a few hundred users to send him $1 to make it worth his while.

Adsense (and other similar ad schemes) are going to keep normal web content free. A hobby site or independant publisher with fairly modest traffic can bring in enough income to pay for hosting and at least offset some of the ISP bills, rewarding authors for sharing useful content without putting a direct burden on the visitors. It also encourages them to add more content, making the site even more useful. Everyone is happy, and nobody has to worry about all the micro transactions they're clocking up.

Darren Collins
Monday, January 12, 2004

"Isn't that odd? It's not that there's less high quality free sites, but actually there's just more crap."

I didn't say that there was less good content because I didn't know how to use Google -- I said it because I honestly (and overwhelmingly) believe it to be true. There is indeed a lot of easily accessible crap content (just as there was years ago), but there is far less good content: Most of the real media producers pulled out because there's little money in it.

Dennis Forbes
Monday, January 12, 2004

"Nobody offers flat-rate electricity.

Nobody offers flat-rate gasoline.

In both cases, you have users with no other choice."

They _do_ have an obvious choice, which was painfully clear by the analogy--they can choose to minimize usage. So I take it by this constantly repeated wisdom that people are so fearful of being nickle and dimed to death that they don't drive and they huddle in darkness, angered at the damn monopolies? Hardly.

In reality few people even think about their usage -- I drive hundreds of kilometres without batting an eye. I rent a couple of movies, at $6 a pop, from Blockbuster a week. I have loads of electronic appliances buzzing away all day long (in reality I minimize electric usage through energy star appliances and CF lights, but for environmental reasons). I enjoy a nice hot bath despite the fact that it'll hit me in the wallet for both water, and for natural gas. All of these cost me more than even the most ridiculously exaggerated prospects of a "for a fee" web would (and most people's examples are absurdly inflated).

Personally I think the common reasoning, that people have an aversion to anything that costs, is absurd bullshit, and it has legs simply through repetition (repetition makes all things true, though, right?).

Dennis Forbes
Monday, January 12, 2004

Alyosha => micropayments are dead?

Bwahahaha.

No really. The next time you (the generic "you") want to sell a  piece of shareware for $1.25 to a million users, you'll think different.

Alex.ro
Monday, January 12, 2004

"Most of the real media producers pulled out because there's little money in it."

Hi Dennis....Id be relly interested in hearing your examples :)

FullNameRequired
Monday, January 12, 2004

What a horrible world it would be, if we allowed the "if I only got a penny from everyone on the planet, I'd be a billionaire" schemers to have their way.  The world would be flooded with cheapass products ... hucksters trying to get rich quick.  Likely most of us would be a charged a penny from a million people than earning a million pennies.  It's rather nice that there's a floor to the "cheapest thing that can be bought".  It's much harder to get a dollar from everyone on the planet, or five.

Granted, that's how people get rich today.  But it's not like it's behavior we should be encouraging ...

Alyosha`
Monday, January 12, 2004

"It's rather nice that there's a floor to the "cheapest thing that can be bought".  It's much harder to get a dollar from everyone on the planet, or five."

Indeed. It is terribly important to me that the rich get richer, and poor stay poor, and anything that upsets this balance frightens me. The idea that anyone with small products of limited benefit can make small amounts of funds off of their products offends me -- I only want the large vendors such as Microsoft, with the ability to collect many of these small products together -- to make money. It is also important to me that the largest moneymakers of internet commerce are the Visa, Mastercard and Paypals of the world - the content creators can suck it.

Dennis Forbes
Monday, January 12, 2004

"Personally I think the common reasoning, that people have an aversion to anything that costs, is absurd bullshit, and it has legs simply through repetition (repetition makes all things true, though, right?)."

The problem is when the mental cost of making the decision is large in proportion to the value of the item or service being purchased.  People will spend that time to decide whether to rent a DVD for $5 or buy a burger for $3, but when the items are 5 and 10 cents the mental cost is large in comparison to the item.

It is true that deciding to switch on your TV for an hour might add 25 cents to your electric bill, and talking on the phone for another minute adds 7 cents to your phone bill.  But every cent does not become an in-your-face dollars-and-cents decision. If you were constantly being reminded of the cost of having something run for another minute, people would be less inclined to use them.

For micropayments to work, there needs to be a way to get the costs out of people's face all the time, and provide billing at a more cumulative level.  Cumulative billing (or prepayment) would also help to reduce the per-transaction costs by not turning every single unit of activity into a financial transaction. They don't send you a phone bill for every single call you make; they may list the individual calls but only make one transaction with your bank or credit card company.

T. Norman
Monday, January 12, 2004

Ahhhhhhhhhhhhhhhhhh.............

Were talking about micropayments for sw not content

The Artist Formerly Known as Prince
Tuesday, January 13, 2004

For those of you captivated by Clay Shirky's article, read Scott McCloud's response here:
http://www.scottmccloud.com/home/essays/2003-09-micros/micros.html

The article also describes a service called BitPass, which is essentially a pre-paid micropayment scheme.

Personally, I agree with Dennis Forbes' analogy with electricity bills.  If the unit price is low enough, people will disregard it. I don't go through a painful decision process when turning on the light in my apartment, even though it means I'll have to pay $.0001 per hour or something like that. Why? Because I know from experience that my monthly bill will come to a reasonable amount.

Tomasz P. Szynalski
Tuesday, January 13, 2004

The problem with comparisons to utilities is that they're just that - utilities. There is no choice whether or not to bring electricity or telephone service in to your house, it's a must have. Whether or not to set up the account to allow micropayments in the first place is where they fail.

I remember a year or two ago signing up for a $3 a month service and using it for about two months. How many people do you think signed up, used it for about two months, and never bothered to cancel, getting that $3 charge on their credit card without actually using the service? I remember thinking about this as I was cancelling my account.

So it's not the $3 a month, it's as Clay Shirkey said, the decision to spend the money in the first place.

Like Dennis Forbes, I used to go to my local video store and rent a couple of movies, but I always returned them late, so what would have been $4 a movie turned in to $10 or $15. In fact, rumor has it that Blockbuster makes most of their money from late fees.

Figuring that I spent as much per month on movies anyway, I switched over to Netflix, and now I'm charged $20 a month no matter how few movies I watch.

In a way, Blockbuster has become the metered service, though I hear they have a competing plan now with unlimited rentals for a flat fee.

I don't know how many of you have read The One to One Future. In it, they postulate that the future of marketing and sales will be aimed at getting enough trust with the consumer that you have a direct line into their bank account. On the Internet, every transaction is a direct line into my bank account. No cash here, the closest thing to Cash we have is Paypal or Amazon because I know it's Paypal or Amazon tapping in to my bank account, not some unscrupulous merchant.

I may be willing to pay $1 for a one time use program to convert a .gif into .ico (maybe a 24 hour time limit or something) if Amazon handled the transaction. Then this service could be bundled with a number of others (thus saving on the $0.50 Visa fees) so at the end of the month I'd get a bill for $20 for all my one time use programs.

Even better, on a corporate level, I may be willing to pay a fee-per-use of certain programs or services (like newsfeeds) if my usage level hasn't come up to a point where a flat fee makes sense. Spread across several thousand users it may make sense to pay per use rather than buy the product outright for everyone who needs it.

www.MarkTAW.com
Tuesday, January 13, 2004

Why doesn't someone give it a try?  Post a web page that converts GIFs to JPGs for $.25 per picture.  If it works, you'll be rich, and if it doesn't work, you'll have learned something valuable about micropayments.

Foolish Jordan
Tuesday, January 13, 2004

I think for me at least Tomasz got it right when he said that the main thing is, I know that whatever I do with regard to leaving lights on, using the kettle, whatever, I know that my monthly bill will be a reasonable amount.

In effect, electricity for me IS a flat rate, I know it will always be about a certain amount, give or take a few pounds here or there. The problem I have with micropayments on the web, is that I use it A LOT. The difference between what someone with small usage might be paying, say a few dollars a month, and what i'd be paying, (hundreds I imagine) is horrifying. It would stop me using the internet in the way I currently do.

The ticking meter which has no limit, and which drastically increases what a user is currently spending, will find very ferw takers...

Andrew Cherry
Tuesday, January 13, 2004

Dennis Forbes Wrote:
They _do_ have an obvious choice, which was painfully clear by the analogy--they can choose to minimize usage. So I take it by this constantly repeated wisdom that people are so fearful of being nickle and dimed to death that they don't drive and they huddle in darkness, angered at the damn monopolies? Hardly.


You misunderestimated ;) my argument.  I said they had no choice other than metered service, and therefore they *do* minimize their usage.  If you're the service provider making money off of your service, you don't want your users to minimize their usage.

You may not worry about the light in the bathroom affecting your electricity bill, but I bet you'd turn off your electric heater if you planned on being gone for a week.

Richard P
Tuesday, January 13, 2004

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