This line of argument raises two interesting issues. First, consumers are willing to pay for "bundles" of content as long as their collective quality is vetted by an intermediary. We still buy newspapers, subscribe to magazines, and pay for cable television. Maybe this is because the cognitive costs of assessing the quality of millions of slices of content are too high, and we'd rather let someone trusted do a first screening.
More interestingly, we've been promised a micropayment system for over a decade now, but nobody seems to have succeeded in creating one with widespread adoption. Instead, we have trusted intermediaries like iTunes who use a standard payment system (your credit card) to "microcharge" you for 99c songs and $1.99 iPhone apps. This seems to be working out rather well for Apple, who generated a couple of billion dollars worth of transactions in 2008.
Perhaps this is the future of micropayments for content -- combining trust in payments with trust in taste or filtering. If we have enough faith in the intermediary, we'll let them narrow our content for us, and trust them to charge us right. Its also loosely consistent with why eBay owns PayPal. At first glance, this seems less appealing and efficient than a stand-alone micropayment system combined with technology-based filtering and an open market for content creators. But if you factor in cognitive costs and a growing body of evidence that consumers do pay more for online reputation, placing your "taste" and transaction risk in the hands of the same trusted intermediary might not be all that inefficient.
That still doesn't solve the micropayment mystery. Why hasn't a good micropayment system emerged? The technology exists, there's lots of money to be made from being the standard, and there's certainly plenty of microcommerce languishing in its absence. There's got to be something about what consumers value in a payment system that is missing from all the efforts we've seen so far...
5 comments:
Comment to Micropayments Mystery:
I think the main point that is missing is the simplicity and accessibility for the consumer:
It is still much simpler to carry around boundled paper to read an article everywhere than a notebook with steady internet access.
Simplicity is also the factor for success for Apple's iTunes Store. Since an iPod/iPhone has to be connected to iTunes to get updated with music, it is much simpler to download it directly to this SW than to go to the CD store first and upload it into iTunes afterwards.
It is important to note some differences in paying for electronic content vs. paying for printed content. Firstly, it is not just the content aggregation, but also the pre-printed portability that adds value. It can't be overlooked that people are willing to pay for these, because they are "used to" paying for them. This is not at all the case with electronic content. With the large amount of free, quality content available on the internet often people will choose not to pay money when similar content is available free in the same format. One other thing that should not be overlooked is people's mindset that they are paying for something tangible when they buy a newspaper or magazine.
Micropayment for online published content [newspapers, magazines] differs from online music in the following ways, some of which may explain the reasons why micropayment has not taken off in spite of the success of online music stores like Itunes:
1. Music is usually bought after sampling the entire content for free (on radio, tv etc). Whereas if published content were offered for free sampling, there would be no reason to buy the content, since its effectiveness and utility have already been provided through the sample
2. Music has universal appeal unlike news articles, which appeal to limited segments.
3. Online content like news and articles for the most part yield one time utility, unlike music, which has lasting utility.
4. Music industry has well-established segmentation, where musicians have their own branding which makes it easy to market their work. Online published content is severely lacking in this area and with competition from blogs and social networking sites like twitter, paying for news/opinions is becoming less relevant.
5. Teens and young adults who are usually the early adopters of latest technology are pivotal to the success of Itunes, whereas online published content lacks similar appeal to this segment
I would like to add 3 more comments to the discussion:
1)Sooner or later a common platform will emerge which will feed into all the interfaces like iPhone, Kindle and some new gadget. This will eventually take care of micro payments - actually a chunk of payment per month for an individual (like a credit card payment).
2)I subscribe paper version of WSJ. There are 100s of different articles published every day on diverse topics. I get time to read only few articles of my interest and rest is wasted. I am wasting my money to buy them and hurting environment as well. Micro payments is a mutually benefiting idea.
3)Is it really worth it? A week back CNN was asking a local resident of Amsterdam about the air crash, which she clicked from her cell phone. Intellectuals & experts are writing blogs, updating Wiki, Knol etc. Thus when people are willing to report incidents for free and express there ideas for free is it really worthy for newspapers to charge for the similar content?
I heard Apple is very close to bringing this to reality with a concept of "Online Newstand". With a strong hold in the content consuming devices (IPad, IPhone) and with a platform like ITunes, it is very easy to get this done. From a consumer point of view, he wont mind paying something like 5 cents or 10 cents to read a popular article from the top publishing houses. Also I see that most of the top publishing houses like Time (based on their editorials when IPad was launched) are very excited with devices like IPad.
So I think we are very close to seeing this in reality with more tablets on the way.
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