I don't really buy his argument. At first he says that most online purchases are too big to really be considered "micropayments." Well, duh -- there's no micropayment infrastructure, so no true micropayments. The business models that exist today are the ones that somehow get the customer to cough up a couple of bucks.
Then the main thrust of his argument is that consumers won't accept micropayments because there's a big difference between "free" and "very cheap." I think this has some merit, but the success of not-very-micro payment services like iTunes shows that consumers are willing to pay for content while the value proposition is right. They just don't want to be hit with a continuous stream of charges that can add up to a massive bill at the end of the month. That's why metered data plans were such a PITA: it's hard to see how much you're using when you're surfing, and there were a lot of horror stories about people getting bills for thousands of dollars at the end of the month. Nobody wants that.
What a micropayment system needs to succeed is to drop the transaction cost, so that very small payments (maybe even fractions of a cent) are feasible, and then they need to be transparent to the user. The charges can't just happen silently and then end up on a bill at the end of the month; that makes (smart) people understandably nervous. You need to show how much money people are spending so they can see that it's a comfortable amount to spend.
I think if you had a system that let you toss virtual pennies around, people wouldn't hesitate to spend them any more than they hesitate to spend real-world pennies (which is to say, not much). As them for a few bucks and they will stop and think, but a couple of cents? I don't think they will. People just need to get used to spending money again, rather than the false sense of "free" from ad-supported services.
At first he says that most online purchases are too big to really be considered "micropayments." Well, duh -- there's no micropayment infrastructure, so no true micropayments.
Exactly. There is no data in his argument - you can argue that people wouldn't want to pay a little versus nothing but how can you know? There is no real opportunity to test this on the Internet. In real life, there are people who make a living from busking, which implies that there is no universal psychological barrier to tossing a quarter in a tin can for a snatch of a tune that put a smile on your face. (You can argue that there are people who never give to buskers, but that is not really the issue).
As for the transaction cost - well indeed, this is why the micropayment problem has not been solved. This isn't really my field, but I imagine the way forward is to somehow "warehouse" and broker payments until they are no longer "micro". For example if I make 10 micropayements of $0.25 to 10 different recipients, i am debited $2.50 once, and all that debit goes to one recipient, with everybody else's money shuffled around until all recipients ultimately get their money in as few transactions as possible. Nobody said it is an easy problem to solve.
> For example if I make 10 micropayements of $0.25 to 10 different recipients, i am debited $2.50 once, and all that debit goes to one recipient, with everybody else's money shuffled around until all recipients ultimately get their money in as few transactions as possible.
You know what banks are doing? That's exactly how they operate transfers. Only it seems, not cheap enough. (However, almost every bank in Germany allows you to make transfers to people with accounts at other domestic banks for free. Since ages. It's just not convenient.)
Definitely shouldn't be easy. Whichever company goes big time with micropayments in the next decade is sure to become a multi-billion dollar company (I'm positive Paypal is worth that much).
What a micropayment system needs to succeed is to drop the transaction cost, so that very small payments are feasible, and then they need to be transparent to the user. The charges can't just happen silently and then end up on a bill at the end of the month.
You don't need to actually move money every time for that. Just have an easily accessible widget/meter. (OS X Widgets, but connected to a page in the browser would be perfect for that.)
You can also give the user tools, like a 'Max burn rate' setting that prevented you from spending money at a rate faster than you're comfortable doing. (This would appear as the site restricting access based on pay.)
The people to make this happen are actually Google and Mozilla with cooperation from Opera. If you make it a part of the web infrastructure like the little lock icon for SSL is a part of it, or like the (default) Google search field in the upper right corner, then it will work, so long as it's voluntary. (Tipping) Make it an open protocol, and provide the centralized back-end processing for free, and the webapp hosting companies will throw it in, and everyone will have it.
People just need to get used to spending money again, rather than the false sense of "free" from ad-supported services.
You say that like it's simple. Changing people's thinking is about the most challenging goal a startup can take on. It can take an awfully long time. I'd love to hear (tipjoy) Ivan's thoughts/plans on this topic.
Then the main thrust of his argument is that consumers won't accept micropayments because there's a big difference between "free" and "very cheap." I think this has some merit, but the success of not-very-micro payment services like iTunes shows that consumers are willing to pay for content while the value proposition is right. They just don't want to be hit with a continuous stream of charges that can add up to a massive bill at the end of the month. That's why metered data plans were such a PITA: it's hard to see how much you're using when you're surfing, and there were a lot of horror stories about people getting bills for thousands of dollars at the end of the month. Nobody wants that.
What a micropayment system needs to succeed is to drop the transaction cost, so that very small payments (maybe even fractions of a cent) are feasible, and then they need to be transparent to the user. The charges can't just happen silently and then end up on a bill at the end of the month; that makes (smart) people understandably nervous. You need to show how much money people are spending so they can see that it's a comfortable amount to spend.
I think if you had a system that let you toss virtual pennies around, people wouldn't hesitate to spend them any more than they hesitate to spend real-world pennies (which is to say, not much). As them for a few bucks and they will stop and think, but a couple of cents? I don't think they will. People just need to get used to spending money again, rather than the false sense of "free" from ad-supported services.