First Fame, Then Fortune
Micropayments: My Powerful Mantra For Economic Change
by Robin Good
This is an essay about micropayments, how they have been misunderstood and misapplied in most of their early commercial implementations, and how they could indeed be used for the benefit not only of content authors, but for supporting, at the foundation, a radical change to online economics.
Micropayments have indeed, in my personal vision, a very important space in our rapidly changing paradigm of how we work, co-operate, collaborate and reward each other online.
The world and online information economy need not to be viewed only through the eyes and assumptions of the classical western capitalist system. Simple, fundamental laws such as the one of supply and demand are not even applicable to the information economy as the supply of digital information is nearly infinite.
Micropayments, may not only provide a unique ethical approach to reward content through goodwill and respect for quality contributions to the human culture, but one of the best solutions to sustain independent authors, writers, artists, musicians and other "non-commercial" entities, which care more about providing a "social service" to others, than having a business with increasing profits.
There are indeed many individuals very willing to support an information economy system that while keeping the great majority of content available for free would also permit, allow and facilitate the spontaneous donation of small amounts of money to support and sustain the continued availability and creation of shareable content.
If we are really serious about not creating more generations of digital have-nots, the micropayment ethical approach may provide the best way to rapidly spread information of all types while keeping a sustainable, happy and growing system in place.
So, to erudite myself, I have been reading with much interest and open mind the different stances taken online by several commentators and independent thinkers in relationship to the essay recently published by Clay Shirky on the gloomy future of micropayments.
Micropayments are techno-logistical bank-credit card related mechanisms which would allow visitors to your Web site to pay with micro amounts their view into your best content articles, essays, PDF files, audio interviews or movie clips.
My strong sensation is that the whole success or failure potential of micropayments has nothing to do with the actual ability to find the seamless way to charge, get paid and serve the content desired or without interrupting too much the smooth online information gathering journey of your future micropaying customer.
If that was not the case I would not hesitate a moment in suggesting BitPass as your next step into micropayment initiation and promised nirvana. The service is ready to be used, it is not difficult to set-up, and if you read and listened to their marketing mantra both you and your micropaying customer could probably get an advantage from this new way of micro-charging for content access.
But, as Shirky says, and I agree, this is not going to be the case indeed.
So are micropayments a misconceived idea never set to hit the mainstage or are they yet to be properly understood, developed and implemented in contexts where they can add rather than taking away?
First of all, do we really know what micropayments are, or at least what it is officially believed they are?
Here a couple of options to give you an idea of the range being covered by the definitions given out there:
Systems "capable of handling arbitrarily small amounts of money"
"For consumers, I define a micropayment as an electronic transaction or payment in the range of about $10 to about one-tenth of a cent, which travels over the Internet or public network infrastructure. "
There are indeed very different opinions and definitions of micropayments. (Unfortunately each author or commentator tossing ideas around in this field seems to believe that whatever his definition of micropayment is, it is the same one shared by everyone else, and therefore he or she never bothers to clarify unambiguously what it is really intended by this term.) As something that does not yet exist it is more difficult to pin down its nature, and that is why it is all so more important to clarify and clearly define what we are referring to specifically.
Some background on micropayments
Jakob Nielsen has been one of the most vocal proponents of micropayments since 1998. With him other notable eminent technology analysts and future forecasters like Nicholas Negroponte of MIT have spent many words and essays to announce the imminent implementation of micropayments.
Happily or not, their vision has not yet materialized; at least as they had envisioned it and micropayments still may appear to be as far from us as it was back in 1998.
But things have indeed changed and while micropayments as originally envisioned by many are certainly not here yet, new ideas, technologies and ways of looking at micropayments have surfaced and are opening up new ways to support the sustainability of "ethical" and "social" content/services online.
Micropayments have long been advocated for a number of reasons but their driving force and unspoken intention has really been the one of finding ways to easily charge for content that would otherwise be hardly possible to sell.
Some of their most vocal proponents have been long advocating them by suggesting their ability to effectively support:
a) Market efficiency. It would seem, according to those who have written about this, that the online information market is well set to microcharge for any spare resource it can identify. Spare mass storage, bandwidth, spare advertising space
(Google AdSense is a very good example of an invisible-to-the-user micropayment system effectively in place.)
c) The replication of a payment system already in use and well accepted by consumers. Proponents suggest a reference to telephone, electricity, gas, etc. All of these "utilities" use a micropayment system, at least in the view of some of the micropayment philosophy proponents, and what they suggest is that people do not have a problem in being charged in this way.
d) The ability to charge for information that would otherwise be given away for free.
On the other hand, micropayments harshest critics have brought a much larger of number of problems to support their argument that micropayments are a failed idea.
There are indeed several good reasons why micropayments have been described perceived, reported and criticized as a doomed idea with no potential for success in the global marketplace. The most fundamental reasons of this criticism are:
Reasons for micropayments being doomed
a) Lack of ease of use. Too great a burden for people to participate. Micropayments do not have to get in my way. If I need to stop, input information, register myself, get my credit card out and do more it is likely that I will opt for another search on Google...unless.. you are the only one to have "that" info. But then, why would you be selling for a micro amount?
b) Standardization. Micropayments infrastructure should be a secure open standard on the Web that anyone service or company can tap into without needing to hook into a proprietary system of sort. Standardization efforts and work by the W3C has been recently stopped lacking greater consensus and support from the parties involved. If the user prepays into a micropayment system like BitPass or FirstGate, she is not entitled to access all of the content requiring micropayments available online but only those registered with one of these two providers. These make using micropayments cumbersome for the user who would be encumbered by the need to subscribe to different services.
c) Competitive adversities create by the politics of online free content. If there is a lot of quality free content on the Web, users will always be incentivated to search for the free resource rather than having to pay, whatever small amount, and activate a payment account system. Any artificial limit to easily access information is counter to getting and growing a larger audience. For the growing number of ethical and independent content creators going online, is far more attractive to cultivate a large audience that does not pay that to have a small that pays something.
d) Failure record. A very large number of companies have tried to enter this potential market space over the last few years (1995 and later) without being able to achieve any relevant success. The success rate of all micropayments projects set up so far has been nealy miserable. FirstVirtual, Cybercoin, MicroMint, Internet Dollar, Digicash, Millicent and many others have failed without achieving any amount of significant market penetration.
e) Users want simple and predictable pricing. Micropayments crate a state of confusion and anxiety in the user as in a fully transparent micropayment implementation they would not know what they are paying for and when they are being charged for it.
f) Content wants to be free. If there is indeed a growing quantity of free content available and it is increasingly easier to find it and access it, users will refrain from accepting to pay even a very small amount of money for content that can likely be found for free through other resources. In an information economy where a lot of quality content keeps growing on a daily basis, free is a stable strategy and it is a strategy that works well both when no-one is using it as well as when everyone else is adopting it.
g) Free content is becoming more competitive than paid for content. As the amount of free content grows along with our ability to easily filter, aggregate and identify rapidly what it is of our interest, the fee-based content will have an increasingly hard time sustaining itself.
h) Complexity of comparison. When you are being charged for something you inevitably evaluate in your mind whether the price you are ebing charged is appropriate and competitive for what you are getting. This is always so in a commercial context where other similar products are offered at a price. So, how do you compare the price for an article from a major newspaper costing 15 cents with another one from another one, from a different source costing 30 cents? How can you compare when the values are so small? Beneath a certain price level goods or services become harder to value and the differences and cost-effectiveness advantages are much harder to assess.
i) Anxiety of purchase. Though this issue strongly connects to the above reasoning on the complexity of comparison, it basically identifies the barrier created anytime an information resource comes with a price tag. Access is reduced and a mental act of evaluation is made. No matter how easy or effective the micropayment implementation it would be appear as the mental obstacle generated would be in most cases quite hard to surpass.
j) Overall, today micropayment systems (again BitPass, FirstGate, etc.) work all on the assumption that first you must pay and then you can look. While this functionality could be still ethically leveraged in a number of situations it again creates barriers to the diffusion and reach of your content which is the exact opposite of what any publisher would want to achieve.
A possible new vision
From my personal point of view, a lot of the above negative and critical voices have not taken into account other variables and POTENTIAL APPLICATIONS which would radically transform our general perception of micropayments, their role and their effective potential in our present and future virtual economies.
Micropayments already exist today though we like to name and label them differently as they are applied to situations and contexts that are different from the ones that we had originally envisioned. You can see a form of micropayments today in what PayPal offers through its donation system, where you essentially click a donate button, choose an amount and complete the effort (yes, this is in case you are a PayPal registered user. But in all cases this is only a one-time process).
Google AdSense and in principle even some online affiliate programs are also present-day seamless voluntary micropayment systems which have no need for a special infrastructure to work. They are not micropayments as commercial proponents would have liked us to intend until now but they are indeed indirect microearnings that can be generated around quality independent content.
It is as if micropayments have only been considered as an extra possible pathway to squeeze even more profit out of online content.
But it shouldn't be so as economies need not to be mandated to work forever on a capitalist free market system which rewards profit and does not take into account social interaction, exchange and social wealth generated by the same.
Indeed, if you were not a native of these electronic lands, but a visiting tourist from another place, it would certainly appear to you as perfectly reasonable to consider existing and successful electronic payment systems like PayPal, Amazon Honor System, Google AdSense and other similar ones, as great examples of how micropayments have indeed already made great "ethical" and beneficial inroads into our online information economy.
Don't the above Internet payment services provide the ability to effect micropayments, ranging from a few cents (AdSense) to a few dollars (PayPal / Amazon Honor System), direct or indirectly to anyone author, publisher or artist that integrates them on her site? They do indeed.
And they do so without restricting user access to content and without countering the natural attraction of content to be free.
Content can be free indeed. And micropayments can indeed be a wonderful approach to the sustainability of the new paradigms supporting the new information economy.
Micropayments are great idea bound to fail?
Clay Shirky is right when he says that present micropayments companies are sure to fail. But not because micropayments are a wrong idea, but because we have again tried to apply a new concept to an old system. And that just doesn't work.
Micropayments are an idea that is mature and ready to support a framework of collaboration and business activities that lays all of its foundations on new models of living, working and rewarding each other. Open source and P2P are great examples of this.
Micropayments are a great idea yet to be understood, refined and implemented according to its own nature and not to the ones of an outdated economic and exchange system which cannot sustain the impact of the communication revolution we are now going through.
Clay Shirky himself states it so very clearly that there is no possibility of misunderstanding:
"The internet ....makes all user-supported schemes harder, and all subsidized schemes easier. It likewise makes collecting fees harder, and soliciting donations easier. And these effects are multiplicative. The internet makes collecting mandatory user fees much harder, and makes voluntarily subsidy much easier."
So micropayments can indeed succeed as long as they do not create barriers to access content, they are easy to use, and they support voluntary payments and not forced approaches.
The gift business model well supports micropayments.
One of the ideal approaches would envision the creation of a profit model based not on strict economic profit model and on the classical laws of supply and demand, but rather on the belief that in a new information economy ethical users are indeed willing to reward and support work of intellect that they consider of value or in need of protection.
The business model proposed by Jay Dru is a perfect description of how a true alternative information economy could be built around altogether different values. He says:
"What I propose is, ...., the creation of a profit model not based on supply and demand (which doesn't really apply to information, since the potential supply of any given piece is infinite), but on human goodwill and respect for the value of good content."
The author goes on to wisely suggest that a profit model based on abundance rather than on scarcity is much more in tune with the information economy developing under our eyes and with the tremendous, above mentioned drive of free content over for-fee one.
"People who pay to read a book online pay that fee because they can't see the content otherwise. This means that everyone who sees it, pays, but no one else sees it. Conversely, when something that is freely available asks readers to pay, only a fraction will. However, this leaves the possibility that if something is good, it is that much more likely to be discovered (and potentially paid for) by a larger number of people."
So which one could be a pragmatical, positive view of micropayments and which would be the potential effective applications of this new model?
Start to look at the opportunity to use micropayments for "voluntary" payment mechanisms and you can immediately see an altogether different picture.
If it is the user who wants to reward or support a certain piece of content, research, or piece of music, she will likely perceive the micropayment opportunity as a welcome option to support the information she has already benefited and enjoyed from.
Here in summary is what I see:
1) Micropayments do not have to be a pre-payment to access information.
2) Micropayments are best set to provide economic support to individual content creators and small organizations whose readers wish to encourage, support and patronize in a voluntary approach.
Micropayments appear to offer the ability to voluntarily reward "ethical" content creators such as independent reporters, free-lance writers, musicians, illustrators, poets and other types of artists without the need for a middleman or "publisher" to sit in between the content creator and the final users and without the need to charge for high prices.
(see also Shirky, 2000)
In all cases micropayments should not be a logical obstacle or a barrier to access content.
3) Micropayments should allow simple and seamless voluntary donations that users want to provide to work created by individuals and/or organizations they personally trust, believe in or openly support.
4) Micropayments should be a post-facto act. Micropayments offer an ideal solution for an act of voluntary support taken by the user after having benefited and appreciated of it.
5) Micropayments should be supported by an open source software standard that allows users to easily set aside amounts of money to be used for micropayments online and sites to sign-up for collection of the funds donated.
So who offers this?
The practical solution is yet to be invented, but times, ideas and circumstances seem to be ripe, not only for creating a payment system that does not restrict or limit access to content but actually augments it, but also for creating an online payment system that could leverage the epochal change from fee to ethical free that we are witnessing.
The open source community may hold the best potential to see through and to take on this opportunity to lay one more of the foundations for a truly revolutionary social transformation many believe can be brought about by communication technologies.
How can this be achieved?
The solution is first of all in our approach and attitude toward free content and toward understanding the importance of supporting an economic system where this immense sharing of knowledge can be perpetuated and extended to every human being.
As you understand, the issue is not really about micropayments as it is of enabling systems that facilitate giving money to others, at the minimum cost and with the minimum effort.
If any of this system can be designed and developed by the people of the world who believe in a free sharing society (open source community), here they would have a truly unique opportunity to step in along banks and great media moguls and have a decentralized, non corporate solution that can stand on its own, as a payment processing system, because it will be the individuals of the world that will support it and choose it over standard corporate, proprietary systems.
It may also be likely that such a system may have initially to comply or partner with some of the present system banking infrastructures and credit card policies and regulations, but it will be the power of its sheer number of users that will give it the ability to surpass and replace, when mature, our obsolete approach to an effective sustainable information economy.
In my complete open-mindness I would not hesitate to seriously consider micropayments as one great, key opportunity to create an alternative payment system, capable of gradually sidestepping:
a) the major credit card systems
b) the traditional bank system.
Though apparently utopian I don't see any force capable of resisting the sheer number of adopters that such a system could rapidly rack up.
People do not hate micropayments.
They hate to pay for content and they strongly resist to being interrupted when they are in their information seeking journeys.
(Some) people like to reward good quality content when they find it. If they are provided with an easy, seamless way to donate a small amount of money to support good work by an independent author, they will do so.
Much like when you leave a dime in the cashier jar at the corner bar that served a good coffee and greeted you with some great jokes this morning, so in the online world people will be willing to reward, support and donate to those with whom they have built a feeling of trust, credibility and respect.
We do donate to artists on the street and to musicians and poets playing in the park. We like to reward their work and social effort which requires to go through much hardship and sacrifices to offer something that in the end is part of the common good. In the same way we are now learning to understand that we need and must do the same online, if we like to learn and grow through ability to freely share.
Many people understand that our economic system, as we have it now, has many deep flaws which are affecting human kind on a global scale. When these people also understand that micropayments, implemented as a post-facto, voluntary donation system, can be a wide-spreading sustainable approach to ethical and mutually beneficial online collaboration, exchange, learning and commerce, they will be more than happy to contribute to it.
In respect to the issue of Fame vs Fortune, and the fact that today authors would have to choose one in favour of the other, I like to say:
Fame and fortune can be both achieved today and with much greater ease than it was indeed possible until now. The issue is rather than unless you honestly and transparently conquer your fame by sharing the valuable know-how and information you hold, the harder it will be for you to receive the increasingly growing spontaneous support that ethical users are providing to non-commercial independent authors, artists and non-profits online.
The mantra is therefore: First fame, then fortune. (As it should really be.)
(You may label me crazy, techno-hippie, utopian-thinker, but you can't say I haven't tried to question the issue and to provide an alternative vision.)
So where are your thoughts?
Kick them out right here.