The problem with micropayments

By February 10, 2009Business models, Content

Clay Shirky has a great post this morning: Why Small Payments Won’t Save Publishers in which he argues eloquently that micropayments don’t work except in very specific circumstance.  The full version is very much worth a read.  The key arguments are as below.

  • We don’t like being nickle and dimed – Clay describes the dislike as “both general and strong”, saying that people prefer both subscription and subsidised services.  I’ve always thought that control and value for money are the reasons behind the dislike.  With micropayments systems you never quite know how much you will spend and whether the next article you will click on is worth the 10p you will be charged for it.
  • It has been tried many times in the past by publishers and hasn’t worked – see these critiques, Szabo 1996; Shirky 2000, 2003; Odlyzko 2003 and this earlier post from Clay for some examples of failure
  • Micropayments systems that have worked have all shared a common feature – the user has no choice.  iPod owners have to get their music from iTunes, Cyworld customes can’t go anywhere else for their virtual goods etc.  This is different to news (and hints that the future for iTunes might not be rosy).
  • These days sharing content is as important as reading it, as Clay says “content moving from friend to friend through the social network …. matters so much, in fact, that we will routinely prefer a shareable
    amateur source to a professional source that requires us to keep the
    content a secret on pain of lawsuit. (Wikipedia’s historical advantage
    over Britannica in one sentence.)”