Micropayments are a perfectly valid and succesful business tool – as long as the end user stays out of the picture
In the wake of the failure of Bitpass and Scott McCloud’s decision to stop charging a micropayment for The Right Number, discussion of micropayments as an option for making money with web content, specifically, webcomics, has flared up again. Note, for example, Clay Shirky declaring victory for his side of an argument that took place several years ago. Joey Manley thought the tone of the article was a bit vindictive, but like several commenters to Joey’s post, I think it was necessary for Shirky to make the post so that debate had some closure.
Of course, these things never truly end. On Comixpedia, Joel Fagin has another go at it, making some good points about the difference between a service and a project and arguing that that distinction, not micropayments themselves, are what caused micropayment-supported webcomics to fail. As long as webcomics are sold as a service (you pay to login and see the comics on the server), rather than a product (you pay for comics to download and keep), they won’t be worth charging for. As an example of a micropayment-enabled product, Fagin cites iTunes (and comment hijinx ensue).
I have trouble with the idea of iTunes as a micropayments business, though a quick look at the Wikipedia article on micropayments suggests that it qualifies, because the payments involved are too small to process economically through the credit card system, and aggregated inside iTunes’ billing system on a weekly basis. But I don’t think the 1-dollar per song price tag was what micropayments’ original boosters had in mind. The Case For Micropayments by Jakob Nielsen, from 1998 (that’s how long we’ve had this conversation, folks), talks in terms of cents rather than dollars. That’s a big difference.
By the definition that allows iTunes to be a micropayments-based business, Modern Tales is one – though no longer primarily so. In its original business model, prices for monthly subscriptions were in the too-small-for-credit-cards category, but annual subscriptions were not. Today, of course, most of the content is free, supported by ads from Google and Project Wonderful.
What happens internally at Modern Tales is a lot closer to the original idea of micropayments than what happens at the customer level at Modern Tales, or at iTunes. When a subscriber clicks on a link to an archived Modern Tales comic, that creator gets points equivalent to the number of comics pages served as a result of that link. These points get aggregated and divided by the total number of points in a given period to give a percentage of the earnings that the cartoonist should get. I’ll spare you the details, but "points" act as stand-ins for really small sums of money – i.e. micropayments.
Likewise, Project Wonderful’s cost-per-day, measured in tiny sums of money that are aggregated in advance by the advertiser, is a micropayment-based system. Come to think of it, for most smaller hosts, Google Ads’ internal accounting and aggregation would count as well.
In the backends of web-based businesses, micropayments are used all the time. Maybe that distinction, between charging micropayments to end users and charging them to advertisers or publishers/portals, is more meaningful than the distinction between products and services.
It’s probably ironic that the biggest boosters of micropayments wanted them to kill ads, when what micropayments actually do is enable them on more sites that wouldn’t otherwise have had them.