Micropayments: Ready for Prime Time?

New NYTimes article

[rogerd]

Interesting article at NYTimes: Developing Systems of Online Payment [nytimes.com] - once again, some credible businesses are making a run at micropayments. Small, standardized payments always made a huge amount of sense, IMO, but critical mass has been lacking. I know I'd be willing to pay small sums for bits of content if it was easy to do. I think content providers that currently have archives that are fairly costly (say, several dollars per item) might see a big revenue jump if people could browse an article for a fraction of that and with no annoying credit card transaction - perhaps just a click to "Confirm $.25 payment". I thought perhaps Microsoft could pull this together with Passport, but it hasn't happened yet.

[pbreit]

Micropayments are a difficult proposition for a variety of reasons.

First, it isn't really the best way to charge for micro-content. Subscription and advertising are generally more efficient ways to monetize micro-content for both readers and authors.

Second, there's a massive chicken and egg problem. With no micropayment-enabled buyers, no authors are going to offer up payment-enabled content. Ditto the opposite.

Third, budding micropayment providers invariably make bad decisions. The worst is going after too low a price point. Someone needs to figure out how to make a $1.00 purchase price cost effective before going to $0.25 or, heaven forbid, fractional cents.

Metering billers, phone companies for example, have developed similar payment systems but even they seem to have moved more recently to more of a susbcription-type billing method.

[rogerd]

I agree about the chicken/egg thing. Either one major site (Amazon, Yahoo, etc.) needs to ramp up a strong system for internal offerings and then extend it to other sites, or some kind of consortium needs to be put together.

One quasi-micropayment model I used to like was the old Prodigy network. They had some destinations that were premium content - when you went into those areas, you were assessed a time-based fee. I think it was on the order of five or ten bucks an hour extra, but you could often get in & out in a few minutes... in essence, a micropayment for accessing special content. It showed up on your Prodigy bill, even if the content provider was D&B or some other third party. Very neat & easy.

The content providers have to guess what the demand curve looks like. A music vendor might sell a thousand copies of a song at ten dollars, a million at a dollar, and 10 million at 25 cents... There's usually a point of maximum revenue, and my guess is that for many products that maximum will occur at a very low price. That price point will be profitable, though, only if efficient, nearly friction-free billing systems are in place.