At TechCrunch, Devin Coldewey has an interesting (and long) article speculating on the possible future of how Internet readers will pay for web content. Coldewey believes that a micropayment system will eventually arise, once someone has figured out how to run it with low enough overhead that payments of a few cents at a time are profitable. Then there will be several tiers of payment—per article, per day, per month, and per year—depending on the type of content and tastes of its readers.

He also thinks that, after the dust settles, payments will be on a per-network rather than per-site basis: a single fee would cover content from a set of related sites rather than one alone, Under this system, payment arbitration businesses will spring up (much like the networks that manage banner ads today) to handle payments for sets of unrelated sites.

When people are paying reasonable amounts for access to sites, Coldewey thinks, it will serve as a natural deterrent to casual piracy in much the same way cheap iTunes and Amazon music has. Why sideload an article or video when you can pay a quarter to have access to it legitimately? And he thinks it will also serve to promote better community behavior, as people will feel they have more of a stake in their participation.

Of course, in a sense we’ve heard this all before—there has been talk of microtransaction systems, and failed attempts at setting up microtransaction systems, since the 1990s. Comic book artist and writer Scott McCloud was a proponent of the BitPass system back in the early 2000s, claiming that if the choice was between paying a small amount or not getting something at all, people would pay a small amount—but after it tanked, even he released content for free.

But past performance is not necessarily an indicator of future results. It could just mean people haven’t figured out the right way of setting up micropayment systems yet. Thomas Edison famously went through thousands of failed attempts before finding a method of making an incandescent light bulb that worked. Edison once said,

"After we had conducted thousands of experiments on a certain project without solving the problem, one of my associates, after we had conducted the crowning experiment and it had proved a failure, expressed discouragement and disgust over our having failed to find out anything. I cheerily assured him that we had learned something. For we had learned for a certainty that the thing couldn’t be done that way, and that we would have to try some other way."

Presumably, people will keep trying “some other way” of running micropayment systems until they find one that works. PayPal’s new “micropayment” system may be on the right track, but transaction fees will have to be reduced still further before payments below a dollar are economical.

Meanwhile, digital companies including computer game studios have been moving forward with the “freemium” model, discovering that they can actually make more money by giving a basic version of their product or service away free and charging for “extras”, than they can by charging a subscription fee. It worked so well for MMO Dungeons & Dragons Online that the Lord of the Rings Online MMO, owned by the same company, soon went freemium as well—and then it made the jump to games run by other studios, such as Champions Online and potentially Star Trek Online.

But freemium can be tricky to do right. Internet humorist Lore Sjöberg looks at some iPhone games that also use a kind of “freemium” model, whereby you get to do game things more often if you shell out a little real-world money. Lore points out that the makers of these games have to perform a careful balancing act: if it’s too boring, people won’t play it at all, but if it’s too fun they’ll play it but not pay anything for the privilege.

So the ideal freemium game would be fun, but make you wish it were more fun, which is a pretty adequate description of most of the games I’m playing, ostensibly for the purpose of research. I currently spend about 10 minutes out of every hour directing my villagers, pirates, park rangers and agrarian zombie stewards to labor for me, which is pretty sad if you think about it.

I could see freemium for e-newspaper or e-magazine content walking the same balancing act: how do you give people only enough to make them want to buy more? The Financial Times has a sort of freemium model—if you register, you can read ten full articles per month without paying anything—but it might still be too limited for the kind of thing Coldewey is considering.

One thing’s for sure: when all is said and done, there’s going to have to be some way of paying for online content—if not because the content producers “deserve” to be paid for their work, then for the more pragmatic reason that if they aren’t paid, they won’t produce it. (Some people argue that creative writers would write because of an internal drive to create even without money, but even if this was true, it wouldn’t hold true for news reporters and others who write as a salaried day job.) Perhaps a freemium/micropayment model will be that way. It only remains for someone to come up with one that works.


  1. It’s a chicken/egg problem. Until enough consumers use the payment system, merchants don’t support it. If merchants don’t support it, you won’t reach a critical mass of consumers. A LOT of parties are interested in making micropayments work. In my opinion the two companies that have the best shot are PayPal and Facebook. PayPal already has a large base of merchants and users. Facebook has a large base of users and has already released an authentication API that can be used by third parties. For instance, Teleread could add a button that would allow me to post this comment using my Facebook profile. If I’m authenticated on this site, why take it a step further and allow me to make a purchase that deducts a few nickels from my “Facebook Wallet”? Just to be clear, I have heard not the slightest rumor that Facebook is thinking about micropayments. That’s just my analysis.

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