Mac Musings

Paying For Web Content

The Case for Micropayments, Part 3

Daniel Knight - 2001.06.20 -

You're already paying for Web content, and I'm not talking about the monthly bill from your ISP. No, you're paying with your time - the 10-20 seconds or so it takes to load the ads on almost every page you visit.

What's your time worth - ten dollars an hour? If so, you're spending 3-5¢ of your time waiting for ads on almost every page you visit.

What if we could make all the ads go away for a penny? Would you rather invest one cent of cash or 3-5¢ worth of time?

That's just one way of looking at micropayments.

Valued Content

The recent cash crunch at Low End Mac showed us very clearly that a lot of people value our site. Users sent in donations ranging from $1.50 to $150 to keep us afloat when our bank account was almost completely empty. Several suggested we should consider subscription fees for the site, but we firmly believe our content should be freely available to all.

If that's the case, why in the world are we running a series on micropayments?

Because we believe they are the online currency of the future. During our cash crunch, we learned a lot about the value of online content and the cost of online transactions.

We've been using PayPal since last year, mostly in conjunction with eBay auctions and to pay a couple of our writers. It's a great system when you're dealing with modest amounts of money, but it's not too hot when it comes to small transactions. In addition to collecting up to 2.2% of each transaction, PayPal tacks on a 30¢ transaction fee. A $1.00 transaction would net us only 68¢.

The Amazon Honor System is a little better for sub-$1.00 transactions, since their base fee is only 15¢ - but they also charge 15% of the total, leaving us with just 70¢ from a $1.00 donation.

If we were a business that sold a product online and needed to recieve $1.00, we would have to charge $1.32 via PayPal or $1.33 via Amazon. The overhead of small transactions adds one-third to the end price for a $1.00 item. And as the cost of the item decreases, the cost of the transaction becomes greater. We would only break even on a 31¢ PayPal transaction or an 18¢ Amazon sale.

There's obviously no way for Napster to make money selling MP3s for 15¢ without some type of micropayment system or asking users to prepay into a personal account.

The problem is credit cards - they're designed for higher value transactions and become inefficient below about $10. That's why a lot of small businesses won't process sales under $10 with your credit card.

Micropayments, Subscriptions, and Donations

Some sites, such as the Wall Street Journal, charge a subscription fee for access to parts of the site. You pay your $5, $20, or $60 a year in hopes of receiving that much value from the site. Very few sites have had much success with that.

Some sites solicit donations, as we did a few weeks ago. That flips the subscription model on its head - you make a donation based on the perceived value of the site. Of course, the site content is free, so a lot of people don't make donations. It's a lot like PBS, which would like to see every viewer become a member, but at the same time they know that only a portion will do so.

Micropayments could be viewed as midway between the subscription model and the donation model. Instead of paying a specific site a fixed fee to access content for a limited amount of time, you would buy microbits and spend them each time you visit a micropayment-based site.

You risk nothing, since the microbits (each worth maybe 1/10 to 1/15 of a penny) in your ewallet can be spent anywhere on the Web. You get a faster loading page, since there will be less ads - and possibly none at all. And you don't have the publisher begging you for donations or asking you to fork over a monthly or annual fee to access "more valuable" content.

How It Might Work

Once sites begin accepting micropayments, here's what might happen.

You surf over to Low End Mac's home page, which still has ads and remains free to all. However, there's a popup note that is now a micropayment site. Your options:

You'll be able to buy microbits with a credit card, with your bank account, or by transfering money from PayPal. You'll probably have to buy at least 10,000 microbits at a time, and there may be a discount for purchasing several thousand microbits at once.

As you visit your first micropayment site of the day, you'll need to log onto the system with your ID and password. This will prevent coworkers or other members of your family from accessing your ewallet.

Once you've surfed to a micropayment site, you wallet will appear in a window, maybe something like the AOL Instant Messenger window. This window will display your ID and your current balance. It may warn you when you drop below a preset level, such a 100 microbits. This will also be your interface for buying more microbits.

This window may give you the option to toggle between two or more identities, which can be very helpful if you need to separate work from personal expenses. You'll also be able to log into the same account from multiple locations.

Any time you visit a new micropayment site, a popup will welcome you to the site and explain site charges. You can accept or decline - and the software will track your habits so you don't have to see that popup each time you visit that site.

You'll have a fair bit of control over your wallet. You can tell it not to bother you about transactions under 15 microbits, for instance, to ask you each week if you wish to continue paying for content on a particular site, and to always ask when visiting a site you haven't visited in over 28 days.

Of course these settings, like access to your ewallet, would be totally under your control. And you'd also have more control over the Web experience. If you don't think a site is worth your money, you can view their ads. If you'd rather have a faster loading page and think the content is worthwhile, you can pay to have an ad-free browsing experience. And you'd be able to control it all on a site-by-site basis.

The Micropayment Series

  1. A Penny for Your Thoughts, an introduction to micropayments
  2. Little Payments, Big Business, the scope of micropayments
  3. Paying For Web Content, why you'll like micropayments
  4. The Ad-Based Web Is Dying, how micropayments can change the face of the Web
  5. Conclusion: Making Micropay Work
  6. Reader Feedback

Further Reading