Justin du Coeur (jducoeur) wrote,
Justin du Coeur

Micropayments: time to try again?

[Warning: technical musings ahead.]

Towards the end of yesterday's discussion about Ars Technica, advertisements, subscriptions and so on, I wound up in my usual position of wishing there was a decent micropayment system available for sites like this. Mind, I don't mean "micropayment" in the BS PayPal sense of, "less than ten dollars" -- I mean two cents a pageview, or somewhere around there. Basically, a good way for me to directly pay per-page about what they are making from the scummy spyware advertisers. And I found myself wondering, why aren't these things already out there? I mean, I remember all the rush of enthusiasm for such things in the heady, early days of the Web, which all seems to have gone *poof*.

This proves to be an interesting rathole of a discussion, and the conclusions from a quick surf are, on the surface, depressing: a lot of people have tried and failed. A few of the particularly interesting articles I came across:The heart of Shirky's point, which I think is a good one, is that you can't ask people to *think* about micro-payments. The heart of the micropayment idea is that the payment for an individual pageview is so cheap that it is effectively free. But if you force people to *decide* to pay two cents to view a page, you've already lost: making that decision costs enough attention that people aren't going to go for it. It looks like this argument is probably correct.

That said, I honestly don't think that it's the main reason micropayments haven't succeeded yet. IMO, it's pretty clear what a micropayment vendor would need to do in order to get the main pieces right -- the first article above gets most of these, although not quite all:
  • It would need to be trusted by both users and vendors. Clear business plan, clear privacy policy, no spyware or snooping. Ideally, no tracking of user movement, even internally; certainly no exposure of such movement. Ideally, open source so that people have faith in the security of the system.

  • That being the case, it would need to take a consistent small cut of every transaction, in order to make its money.

  • It would need to provide aggregation on both sides, to achieve reasonable cost scale. That is, the user isn't actually making a hundred two-cent purchases on his credit card; rather, he gets billed monthly for his usage across all sites. (This is somewhat in tension with making it available for minors -- might need a pre-paid variant to work for them, but most adults would probably prefer post-paid.) Similarly, businesses would receive rolled-up payments on a regular basis. (Probably with minimum amounts before payments cut in, and rolling over to the next period otherwise.)

  • It has to be designed to scale, with very small cost of running an individual transaction. If it costs more than a hundredth of a cent per transaction, the business plan won't work. (Fortunately, this is an increasingly minor issue, but you have to pay careful attention to billing costs.)

  • It has to be almost ridiculously easy to use. Signup needs to be as quick as is practical (no harder than PayPal at the absolute worst), and there should be no decision required to view a typical page in this system. That, in turn, implies to me that the system needs built-in whitelisting, so that the user can say, "Don't bother me about one-cent pageviews" or "I will pay up to a dollar a page for foo.com". This is a tricky UI problem to get right, but seems doable.
So given all that, why has micropayment not caught on? I see two fairly basic reasons:

First, the Cult of Free has undercut it. Plain and simply, it's hard to compete with Free. One cent might not sound like too much for a pageview, but it's a lot more than Free. Of course, the reality is that most of those pages are *not* free -- in fact, most of them are costing you hassle (in the form of ads) and/or privacy (in the form of web beacons attached to those ads).

I'm not sure whether this problem is going to eat away at itself or not. It *is* pretty clear that genuinely free doesn't usually cut it: in practice, many large sites are having trouble making their nut that way, and are increasingly resorting to paywalls, spyware and other approaches to cope. If paywalls do come into common use, then I'd say that micropayment-based viewing will prove an idea whose time has come.

Second, though, the competition is just plain killing itself. The problem isn't the lack of micropayment plans, the problem is that there are too damned *many* of them, and they don't work together properly. I don't mind setting up one account for micropayments, but I'm sure as heck not setting up forty of them. Basically, for micropayments to work, they absolutely depend on network effects: the more sites that accept a particular micropayment scheme, the more users who will sign up for that scheme; the more users who are in a network, the more sites will be attracted to it. But kicking off a network-effects play is notoriously fraught, and generally requires both skill and luck. Far as I can tell, none of the existing systems have managed it.

That said, though, it seems to me like a more-sophisticated standard might have a shot at success. In particular, the problem is the common notion that there has to be a single intermediary between the site and the customer. Agreeing on that intermediary is the heart of the network-effects problem: unless the sites and users agree, there isn't enough critical mass for a micropayment vendor to take off.

So what do you do? We probably need a standard that recognizes a more complex ecosystem -- that allows each user and site to sign up for the micropayment vendor of their choice, and negotiates between them. This isn't trivial by any means, and I'm not certain that a single co-ordinating site can be avoided. (In particular, there needs to be some mechanism whereby a user's browser identifies his micropayment vendor to the site, so the transaction can happen.)

But all of it feels very analogous to the distributed-identity problems that have, finally, been seriously tackled in recent years through standards like OpenID and OAuth. In fact, the micropayments problem may be nothing more than a specialized use case for OAuth -- after all, the heart of the issue is authorizing a transfer of money. The UIs for OpenID and OAuth are still tending to be too clunky, but that's been improving rapidly.

I'll go out on a limb and say that I think it's getting to be steam engine time for micropayments. The business realities are showing that Free has been overdone, and major sites are drifting slowly towards paywalls. A properly-managed micropayment system would be much, much *easier* for users than having to manage lots of little subscriptions to individual sites, which is the way most paywalls work today. Clay Shirky's point about not requiring users to think too much is valid, but IMO whitelisting and spending caps will address it well enough. The maturity of Web technology should bring the transaction costs down low enough to make it viable, and the Open Stack looks like it is a good ways towards solving the key interchange problems.

So -- anybody see any good candidates out there? I'm curious whether the movement already exists and I haven't noticed it yet...
Tags: technology

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