Valleywag asks a fantastic question in reference to an article on The Guardian: how come the Web does not yet have a micropayment system:
How come there’s still no popular micropayment service on the web? Imagine if a website could smoothly charge a cent, for instance, each time a user clicked through to read the full text of an article, or view a clip. If the cost was low enough, and the transaction sufficiently invisible, internet media could finally escape its dangerous dependence on advertising. And readers could pay for news, on subjects such as politics, for which there’s no advertising support. And why is that such a preposterous dream? Well, for one, because entrepreneurial talent and venture capital money is so drawn to increasingly marginal mashups.
This lack of micropayment system, frankly, is why subscriptions online never went anywhere, and why video download sales / subscriptions won’t either, something we covered here.
But the reason why such a thing does not exist, besides from VCs [rightfully] suffering from herd mentality, is that VCs are smart enough to know that the odds of a micropayment system working are slim to none.
Paypal was the exception, we know, and that’s why it was both one of the 13 Most Explosive Web Startups Ever and its acquisition by eBay one of the Top 10 Best Web Acquisitions Ever… but Paypal was - make no mistake about it - the last of the mohicans in an era before Google showed how profitable a company can become online.
Sure, AOL became the first company to crack the Fortune 500 list, but after its doomed merger with Time Warner, no one thought a Web company could become a stand alone powerhouse. Google proved the naysayers wrong. Biggatime.
As a result, the stakes are that much higher. You now get arguments for and against net neutrality, which while somewhat unrelated point to the potential landmines that come with any argument for a micropayment system.
After all, the stakeholders of such a eutopian system would include, presumably (though arguably not obligatory):
- financial institutions (to underwrite it all, and carry the financial risk of micropayments)
- phone carriers (we need a wireless solution, after all, no?)
- software companies (to write up the program)
- ISPs (who believe they deserve a cut since people access this financial supermall via their gateways first)
- the publishers who are the ones selling the content
- the retailers who are selling the goods and services
- ad agencies who will be designing the sites that carry such goods, services, and content.
The list, my friends, goes on and on.
The potential upside for a ubiquitous is so ginormous that its potential is its Achilles Heel.
And, don’t kid yourself, eBay, Google, Yahoo! and MSFT (via Passport as a first step) have all attempted to do something that could go on to serve as such a function.
Had Paypal remained independent, maybe it would have had a chance, as a unique, independent and reliable solution. But its own growth and potential scared eBay into buying it, making it anything but independent and impartial.
And… now that online advertising has become the ultimate money-maker online, the arguments for financing such a solution simply won’t entice too many VCs to fund something from scratch.
It will be companies - amongst those listed above - who will fight for supremacy in this space, and because they each will have their own allegiances to no one but themselves, said product will never take off.
Of course, one company has an inside lead on pulling something like this off, and that one company is Facebook, but we’ll leave that for another day. And no, not necessarily the Facebook you see today… but if you study its past, analyse its trajectory and connect the dots in its future, it has a few things that no other company has. The answer is not obvious or so obvious you might miss it…
But, does the Web really need micropayments? Maybe. But in light of us just making the case that print media should be free, how can we suddenly argue for digital media to charge micropayments? Read our case for Should Print be Free here.
Subscribe:
May 24th, 2007 at 3:34 pm
PayPal (aka eBay) took a step back in the right direction with their mobile based payment offering.
GG
May 25th, 2007 at 12:04 pm
SMS.ac has established relationships with hundreds of worldwide carriers and charge on a per-use micro-payment basis for many types of transactions on its site. You can’t export the infrastructure to another site, but it is indeed successfully doing micropayments on its own site. Carriers I’m sure are taking a huge chunk.