My favorite podcast is CNet’s Buzz Out Loud, which provides commentary on technology news. In a recent show one of the hosts, Molly Wood, talked about micropayments and their future in e-commerce. Little to Molly’s knowledge, she was able to combine two of my favorite topics into a blog post for me: technology and money.
But first, what are micropayments? Micropayments are transactions with very small amounts of money changing hands. They could range from a few bucks to fractions of a penny. What is the use for micropayments though? If you’ve ever downloaded a song from iTunes you’ll understand. But it goes further, think about WSJ.com (Wall Street Journal). They offer premium content for a fee, and their content is good. I don’t want to pay $99 a year because I don’t read their content that often. But I’d be willing to pay $0.10 for access to a single article as I do research for this blog. They could debit my checking account each time I click to view an article.
WSJ.com might be reluctant to switch to this business model until its proven. What do they have to lose? Well they make a lot of money on their current subscription program, and the micropayment business model has not yet proven itself to be more profitable. As the headline states, it is the Holy Grail of online business but we still haven’t found to real Holy Grail! No one has yet made the business model work just yet.
Why could it work?
Think about it from the buyer’s end. Right now I do not want to pay to use WSJ’s premium service. But at $0.10 per article I would buy access to at least a few articles, that gives them a new customer, and I wouldn’t be the only one. The emotional hit of $0.10 is nothing even to the cheap fool writing this post. I’m likely to click through many articles in a single sitting, giving them a consistent revenue stream. Since I’d have to buy the article, they would know exactly what interests me, and possibly be able to recommend other premium content to me.
Why could it fail?
At $99 a year vs $0.10 per article, the typical user must read almost 3 articles every day. It’s easy to drop $99 and forget about it, but when you view your credit card bill 3 months down the road with micropayments and see those dozens of micropayments, you might cut back on your usage. Since there aren’t many success stories out there, WSJ.com is probably reluctant to embrace this new business model.
Finally, why is it the Holy Grail?
Pay-per-use text messages, single song downloads, buying a new item in your favorite video game, all these small payments add up to big revenue for companies. They know this too, and would much rather charge everyone a few pennies than a minority a few bucks. CEO’s lean back in their chairs and sip brandy when they know revenue streams now stem from more customers, and each time those customers come back they’re charged again. We’ll one day wake up to this reality, and at the moment, I look forward to it. Where’s my brandy?