Last week I participated with a small group for an informal half day mini-conference at MIT to revisit the arena of online micropayments. This was a very hot topic in both academia and among some newspaper people 10 years ago. As described by Bill Densmore, one of the pioneers of the movement, micropayments are
The backstory: Among the prognosticators at the start of the online age, the original business model for online information was that the user would pay for content. Why the need for a micropayments in the first place, when there are credit cards and the like? The assumption was that the transaction cost would be prohibitive for payments that might be five or ten cents to read an article. The earliest models, therefore, were monthly subscriptions, such as the first iterations of online versions of the Atlanta Journal & Constitution and the LA Times on the pioneering Prodigy service. Version 1 of USA Today on the Web was for a monthly subscription. Slate started free, then switched to mostly subscription, but went back to free when it became obvious that the revenue from subscribers in the thousands would be less than advertising revenue from readers in the hundreds of thousands or higher. But requiring subscriptions to anything could discourage spontaneous access to a stand alone article from nonaffiliated writers or minor publishers.
As we all know now, the mass audience never bought in to the option that it must pay for most of its news and general information. With a few readily identified exceptions (let’s think—oh, The Wall Street Journal Online comes to mind…), newspapers, magazines and everyone else soon discovered that they could make more money by offering free access and use the many additional eyeballs to sell advertising, initially in the format of banners and similar versions of “display” ads.
This model worked to a point. Still, it was particularly unsuited for the small players, who did not have the wherewithal to sell advertising and , in any event, with monthly hits in the hundred or thousands, could not get the interest of these advertisers.
But the marketplace works in neither strange nor mysterious ways. Aggregators such as Doubleclick soon arose to make it easier to include ads on a site. Later, the major breakthrough was the introduction of the AdSense program by Google.
This created the column of text ads that are ubiquitous throughout the Web. The ads that are displayed are, more or less, related to the content of the Web site. AdSense has made it possible for small advertisers to get cost-effective targeted placement and has made it nearly effortless for even the most humble Web site to see some revenue.
This growth of Internet advertising was seen by some participants of the conference as having sidelined the development of any payment or user-identity systems. “Why did micropayments fail?” asked one of the conveners.
However micropayments have not failed-- they just did not evolve in the way that had been foreseen by the early developers. AdSense – and similar programs—have created a form of micropayments funded by a third party-- advertisers. Numerous Blogs and other information sources-- including some from mainstream media-- are earnings modest to substantial sums by way of aggregating many "clicks," frequently at five cents or 25 cents each. This is precisely the micropayments idea-- just from an unanticipated angle.
The objective of the mini-conference was to identify needs and requirements for an Internet information payments infrastructure and consider next steps on how to create the needed.
My own take on this—as I was asked-- was that if there is truly a need, then there are any number of smart entrepreneurs out in the universe who would grab the opportunity and an equally substantial group of venture capitalists looking for ways to invest in something that has not been done, is needed—and can be sold for a profit. This soluton, to be sure, runs into the ideological component among some in the community who hold that such a system cannot well serve content providers who may not be mainstream. I disagree. If the AdSense approach – i.e., free-- cannot generate enough income for this group of content providers, I have my doubts about how many takers they will have at ten cents a crack.
There is also growing evidence that strongly suggests that individuals and groups with something they want to say or show are not necessarily motivated by the money but rather by the opportunity of a forum. I call them missionaries, as opposed to "merchants" who are motivated by the profit motive more than the attraction of having a media platform. Hence the proliferation of Blogs, Podcasts and Web sites--many with sophisticated graphics and substantive content—yet without an obvious business model. This is the world of citizen media makers, about whom I will have more to say one of these days at my Who Owns the Media? Blog.
The Internet has provided a forum for a mind boggling cacophony of opinion, art, information and entertainment. The question for the next conference should be: Has the lack of a user-micropayment system held that back? How would the offerings via the Internet look differently if such a user-micropayment infrastructure was in place?
“…A system [for the Internet] for tracking, exchanging and settling value (including payments) for information commerce (text, music, game plays, entertainment, advertising views etc.).” Beyond that basic component, the premise of the conference organizers for such a system adds an ideological component: That the system “should be ubiquitous yet never be owned or controlled by either the government or a dominant private, for-profit entity. It needs to be massively distributed and - in some fashion - collaboratively owned.”
The backstory: Among the prognosticators at the start of the online age, the original business model for online information was that the user would pay for content. Why the need for a micropayments in the first place, when there are credit cards and the like? The assumption was that the transaction cost would be prohibitive for payments that might be five or ten cents to read an article. The earliest models, therefore, were monthly subscriptions, such as the first iterations of online versions of the Atlanta Journal & Constitution and the LA Times on the pioneering Prodigy service. Version 1 of USA Today on the Web was for a monthly subscription. Slate started free, then switched to mostly subscription, but went back to free when it became obvious that the revenue from subscribers in the thousands would be less than advertising revenue from readers in the hundreds of thousands or higher. But requiring subscriptions to anything could discourage spontaneous access to a stand alone article from nonaffiliated writers or minor publishers.As we all know now, the mass audience never bought in to the option that it must pay for most of its news and general information. With a few readily identified exceptions (let’s think—oh, The Wall Street Journal Online comes to mind…), newspapers, magazines and everyone else soon discovered that they could make more money by offering free access and use the many additional eyeballs to sell advertising, initially in the format of banners and similar versions of “display” ads.
This model worked to a point. Still, it was particularly unsuited for the small players, who did not have the wherewithal to sell advertising and , in any event, with monthly hits in the hundred or thousands, could not get the interest of these advertisers.
But the marketplace works in neither strange nor mysterious ways. Aggregators such as Doubleclick soon arose to make it easier to include ads on a site. Later, the major breakthrough was the introduction of the AdSense program by Google.
This created the column of text ads that are ubiquitous throughout the Web. The ads that are displayed are, more or less, related to the content of the Web site. AdSense has made it possible for small advertisers to get cost-effective targeted placement and has made it nearly effortless for even the most humble Web site to see some revenue.This growth of Internet advertising was seen by some participants of the conference as having sidelined the development of any payment or user-identity systems. “Why did micropayments fail?” asked one of the conveners.
However micropayments have not failed-- they just did not evolve in the way that had been foreseen by the early developers. AdSense – and similar programs—have created a form of micropayments funded by a third party-- advertisers. Numerous Blogs and other information sources-- including some from mainstream media-- are earnings modest to substantial sums by way of aggregating many "clicks," frequently at five cents or 25 cents each. This is precisely the micropayments idea-- just from an unanticipated angle.
The objective of the mini-conference was to identify needs and requirements for an Internet information payments infrastructure and consider next steps on how to create the needed.
My own take on this—as I was asked-- was that if there is truly a need, then there are any number of smart entrepreneurs out in the universe who would grab the opportunity and an equally substantial group of venture capitalists looking for ways to invest in something that has not been done, is needed—and can be sold for a profit. This soluton, to be sure, runs into the ideological component among some in the community who hold that such a system cannot well serve content providers who may not be mainstream. I disagree. If the AdSense approach – i.e., free-- cannot generate enough income for this group of content providers, I have my doubts about how many takers they will have at ten cents a crack.
There is also growing evidence that strongly suggests that individuals and groups with something they want to say or show are not necessarily motivated by the money but rather by the opportunity of a forum. I call them missionaries, as opposed to "merchants" who are motivated by the profit motive more than the attraction of having a media platform. Hence the proliferation of Blogs, Podcasts and Web sites--many with sophisticated graphics and substantive content—yet without an obvious business model. This is the world of citizen media makers, about whom I will have more to say one of these days at my Who Owns the Media? Blog.
The Internet has provided a forum for a mind boggling cacophony of opinion, art, information and entertainment. The question for the next conference should be: Has the lack of a user-micropayment system held that back? How would the offerings via the Internet look differently if such a user-micropayment infrastructure was in place?
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