Return of the Son of the End of Free, Part I

So the big media news last week was that Rupert Murdoch wants to start charging for the Wall Street Journal online, and the coverage brought back a word that I hadn’t heard in a couple of years and that I didn’t really expect to hear again: micropayments.

I’ll talk about the new End of Free (there was a website by that name, once, but I can’t find it anymore) and how I think it will play out in part II of this series, but I want to indulge in some nostalgia/give the younger readers a little history lesson first.

Ah, Micropayments. Scott McCloud loved them, Jakob Nielsen loved them, back in the days of the Dot.bomb. They were touted as an alternative to subscriptions beginning about a decade ago, when it first started becoming clear that banner ads weren’t going to keep bringing in the $40 CPMs that they did back in 1997. When the 2001 recession hit and avertising revenue really tanked, demand for payment based content distribution models grew and a large number of firms popped up that offered content on either a subscription or a micropayment basis. Modern Tales was originally one of the subscription-based content providers; there was a micropayment-based site called Bitpass that was popular with cartooonists for a while, which I experimented with a bit half-heartedly at the time. Modern Tales, of course, is still here but it offers most (or in practice, all) of its services for free, financed mostly by advertising. Bitpass is gone. This seems to be the pattern everywhere, with only the formery subscription-based sites even lasting long enough to make the switch back to free content financed (just) by the much lower advertising CPMs common today.

What went wrong? Why didn’t micropayments work out? I think there were three closely related reasons.

Firstly, micropayments didn’t become immediate. There was no single infrastructure for them – instead there were a number of micropayments providers, plus some of the content providers themselves. Users had to sign up to a new site for each individual content provider or third-party scheme they came across, they had to get their account credentials, maybe make a deposit through a fourth party, thenthey could make the micropayment, then they could be redirected to the content they wanted. It was clunky and it meant that on top of the monetary micropayment, the user’s time investment, at least for the first transaction, went through the roof. People online like immediacy and they hate uncertainty and waiting, so users weren’t too keen on the whole process. So as Clay Shirky argued as early as 2000, people hated micropayments.

Secondly, users didn’t just hate micropayments, they didn’t understand them either. They did not understand the distinction between a micropayment and a payment, or between micropayments and subscriptions. Originally, a micropayment was defined as a small payment between a quarter and a fraction of a penny. By the time of the arrival of Bitpass in 2003, typical transactions offered were in the 25¢ to 75¢ range, and the fact that this was so was a big part of Scott McCloud’s rebuttal to another Shirky piece accurately predicting Bitpass’s failure, in which McCloud argued that this one would be different. By 2005, users in internet forums like the Comicgenesis forum were using the word “Micropayment” to refer to Modern Tales’ subscription fees or regular Paypal donations. The term had been swept under the rug and never heard from again.

Third, the recession ended just at the time when the price of bandwidth and hosting plummeted. In other words, businesses started advertising online again as the cost of publishing came down dramatically. Free content became worthwhile again.

I haven’t kept track of how the recession is affecting online ad revenue. My own ad income is up since I joined Webcomicsworld and ditched my Google ads, but that’s not enough data to go on. However, I don’t think it’s a coincidence that this idea starts raising its head again in a new recession and comes from an industry that is having a really hard time.

In part II, I’ll discuss some scenarios in which I think the idea may turn out to work after all. They are not going to be pleasant for people who like easy access to content (free or not) or

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