Posts Tagged ‘Micropayments’

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The lady doth protest too much, me thinks.

Monday, September 13th, 2010

There is a constant flow of articles in the media, explaining why micropayments have been tried many times since the earliest days of the internet and have always failed. The arguments are then developed along the lines that having failed in the past micropayments will therefore never work in the future. These arguments fail to take into consideration a number of factors, not least, technological development, changing attitudes to not paying for content and economic realities.

I also wonder if micropayments are doomed not to succeed, why does a week not pass by without some expert feeling it necessary to write about the futility of the efforts of those developing micropayment systems –

“The lady doth protest too much, me thinks” ¹.

One reason commentators like to roll out when beating this particular drum is something called “mental transaction costs”. This is the energy required to decide whether something is worth buying or not, regardless of price.

The thing is, it is not as simple as this. Of course we all consider the price of something before deciding whether something is worth buying but the amount of effort we put into this, is also a function of our ability to pay as well as the price. Something which we might expend energy thinking about purchasing when we are a poor student, doesn’t warrant a second thought when we have a regular income.

If we find content creators ( music, games, writing, research…….. ) whom we like, or are recommended to us by people we trust, most people will not think twice about making payments of 10p – 50p. If they don’t like what they purchased they may well berate their friends and not buy anything more from this particular content creator and if they like what they purchase they will be back for more and more importantly recommend the particular content creator to their friends.

The most important single central fact about a free market is that no exchange takes place unless both parties benefit. Milton Friedman ²

The real reason why micropayments failed to take off in the past was not so called “Mental transaction costs” but the amount of friction involved in authorising the payment. No one is going to go through the rigmarole of entering a password and a load of personal data to authorise a transaction of 50p. Such transactions need to be capable of being authorised with 1 or 2 clicks maximum.

From the consumer’s perspective, what is needed is either a form of Webpurse into which a sum of money is preloaded and from which individual payments are made or a method of accumulating transactions and then paying for them once a month or when they have accumulated to a reasonable size. Such systems already exist but unfortunately they are not universal in that they usually lock you into a particular middleman’s walled garden as with Apple’s on-line stores.

What these systems do however demonstrate is that micropayments are here and here to stay. This is ably demonstrated by the multi-million dollar market for in-games payments, the large and growing market for virtual products using virtual currencies and of course the Apple stores.

¹  Shakespeare’s Hamlet, Act 111, scene 11

² Milton Friedman was an American economist, statistician, and a recipient of the Nobel Prize in Economics

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Good Causes set to benefit from CarrotBid on Facebook

Friday, August 27th, 2010

If you think you’re too small to make an impact, try going to bed with a mosquito.

Anita Roddick¹

A bit of Carrot news for a change. CarrotPay has launched CarrotBid on Facebook. CarrotBid is an application which raises funds for good causes whilst demonstrating how easy it is to make micropayments, using CarrotPay’s Web Purse and WebCoins.

CarrotBid is a lowest bid auction. For the uninitiated this is a style of auction where the winner is the person who makes the lowest unique bid. Eg. A current CarrotBid auction is for a Sony Vaio laptop EB Series with a retail value of US$1129. If the bids are in the range of, say $0.01 to $5.98 and the lowest unique bid is $0.28, then this is the price that the bidder pays to secure the laptop. Bids cost 10 cents each with the bids being hidden from other bidders.

The first sponsor is Sennheiser whose generosity will help maximise the amounts raised for good causes such as Save the Children, Kid’s Company and Habitat for humanity. To help users familiarise themselves with the bidding process, all first time users are receiving 10 free bids.

Check it out on the CarrotPay page on Facebook. Try it out with your free bids and help raise funds for the causes which we are supporting and not forgetting,  if you like what you see  tell your friends.

The day is coming when a single carrot, freshly observed, will set off a revolution.

Paul Cézanne ²

¹ Dame Anita Roddick (1942-2007) was a British businesswoman, human rights activist and environmental campaigner, best known as the founder of the Body Shop.

² Paul Cézanne (1839-1906) was a French, post impressionist artist.

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Flattr and Kachingle social micropayments systems – The story so far.

Thursday, August 5th, 2010

Remember there’s no such thing as a small act of kindness. Every act creates a ripple with no logical end.   Scott Adams

One of the many internet services I use is Google Alerts which I use to search for articles to do with micropayments on an ongoing basis. It isn’t actually working at the moment, but that is another story.  Earlier in the year a couple of names started to feature regularly in the articles which appeared in my Reader every day. Kachingle and Flattr.

Kachingle was the first out of the starting blocks at the end of 2009. The founder of Kachingle had identified the problem which we touched on in a previous blog, namely that many believed that advertising would pay for online content and that this has subsequently proven not to be the case. The kachingle solution for rewarding the creators of content is “Micropayment monetization …. with Zero mental transactions costs.” This is is achieved by the user paying a fixed amount each month ( Say USD5.00 ) and this amount is then shared fairly among the Kachingle registered sites which they visit, based on their usage patterns. The system is very transparent showing who has visited and “kachingled” each site and what their effective contributions are to particular sites. Kachingle’s charges are 15% which includes all the costs of getting money into and out of their system.

Flattr appeared in March 2010 and is a similar system based in Sweden where users pay a fixed amount per month and this is allocated over the sites which they have “flattred” during the month. In order to be able to have a Flattr button on your site, you do however have to become a user ( a flattrer!), make a monthly financial commitment and therefore Flattr other sites. There has to be a bit of irony in the fact that one of the founders of Flattr is Peter Sunde, one of the Pirate Bay operators who in early 2009 was found guilty of assistance to copyright infringement, fined and sentenced to a period in prison. A verdict which was appealed against, with the judge being accused of bias. Mr Sunde’s notoriety would appear not to have done Flattr any harm, a practical demonstration of that age old saying that there is no such thing as bad publicity. Flattr charges 10% but this does not include the costs of getting money into and out of their system.

How have these innovative systems faired since their respective launches. The jury is still out as to whether this concept will be able to deliver sustainable revenue flows to the creators of content and whether they can become financially viable. Kachingle, which initially seems to have focused on blogs and news commentary sites, has seen a steady growth in the number of content creators who accept Kachingles and just as importantly the number of users who are making monthly payments. One interesting development is that Kachingle which is very much a US based operation appears to have seen a big uptake of their system in Europe. Similarly Flattr which is being used for a much wider range of digital content has seen a steady growth in the number of sites which accept Flattr. It is however difficult to see how much of this growth is due to site owners flattring each other and how much is due to independent users of “free” content actually making a financial contribution towards these sites.

A number of points worthy of note:

1. Many sites accept both Flattr and Kachingle demonstrating that the systems are not mutually exclusive from the content creators point of view.

2. There is a much greater and faster uptake of both systems in Europe than in the US.

3. Analysis of the data available on the Kachingle site shows that the average payments being allocated to individual sites are in the range of 20 – 30 cents per user with one active site showing an average of 19 cents and a range of 3 cents through to USD2.08 per user.

What conclusions can we draw from the story so far?

The steady growth of both systems demonstrates that many consumers of content do recognise that the creators of this content should be rewarded for their efforts and are willing to put their money where their mouth is. What is required are systems which allow users to make payments in small amounts, as easily as possible with low to zero mental transaction costs.

One flaw of these systems is that it is not possible to differentiate between a piece of work which is truly eye opening and useful and something which is run of the mill. If I have a monthly payment of say €5.00 and I Flattr 50 sites during a month then the average payment that each site will receive from my contribution will be 10 cents. If in a subsequent month I am away on holiday and busy on other matters and only Flattr say, 2 sites then the amount allocated to each site increases 15 fold to €1.50.

Whilst some form of these social payment systems should be part of the future landscape they are still very much “Work in Progress” and it will be interesting to see how they evolve if they are to help content creators earn a reasonable living. Many content creators will, I believe, use not one system but a combination of systems to generate revenue for their content as follows:

1. Social payment systems such as Flattr and Kachingle.

2. Donate buttons which allow users to donate specific amounts for highly valued cotent using an easy to use micropayment system built on an electronic purse.

3. High value niche content delivered to the customer against payment. Again this will be enabled by an easy to use micropayment system built on an electonic purse.

The initial progress these social payment sites are making also demonstrates something which we at Carrot believe very strongly in and this is that friction free micropayment systems will enable content creators to charge directly for their content thereby enabling them to deal directly with their customers and in the process keep a much greater percentage of the revenue which they are able to generate.

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Posted in Micropayments | 3 Comments »

Web Micropayments – Ignore, Mad or Dangerous?

Wednesday, July 28th, 2010

It’s the same each time with progress. First they ignore you, then they say you’re mad, then dangerous, then there’s a pause and then you can’t find anyone who disagrees with you. Tony Benn, British Politician

On any given day we carry out, as a matter of course, any number of financial transactions. The other morning for example, on my way to a meeting I purchased a newspaper, £1.00 changed hands, the paper was mine. Then it was off to Cafe Nero to kick start the day with an Expresso and a not so healthy, chocolate muffin. Cash changed hands the expresso and the muffin were mine to consume at my leisure.

After the meeting it was a short taxi ride to my next meeting. At the destination, cash changed hands when I paid the fare. After my second meeting it was a short walk to the station where a bagpipe playing busker ( guess what country I was in ) was rewarded with some spare change from my pocket, I then quickly purchased a bottle of water, caught my train and settled down with the newspaper for the 40 minute journey back to my office.

All of the above transactions were carried out relatively quickly and seamlessly. There was no request for card numbers or personal information. There was no being sent to another person to make the payment and then returning to the original person to pick up the goods. There was no starting the process again because I had made a mistake with a piece of information. There were no rejections of the transactions.

At no point did I think, I am not paying for this, I should be able to get it for free,  it is my right after all ! When it comes to low priced goods and services if the price is fair and it is easy to pay, we make the purchase and pay.

Why can’t it be like this when we want to make small value purchases on the web. What is needed for low value purchases to become just as easy and routine. Firstly, why do we need to enter all these numbers and personal data when we want to make a payment ? One word “Fraud”. Because of fraud we need to prove the identity of the person making the payment, yet we don’t need to do this when we make small value purchases on the street. We validate the money ( the coins and notes ) not the person.

If we did the same thing for purchases on the web then the process could be much simpler and faster and the resistance to paying a fair price for low value products would be reduced. WebCoins when used for small payments on the web, would allow transactions to be carried out quickly and with very little friction. They have an added benefit for the merchant when compared to physical cash in that because WebCoins would be accumulated electronically there is no need to physcially count the money, have a safe and then arrange for the cash to be transferred securely to the bank.

To answer the question in the title, given the negative comments made by many commentators, especially those who believe in free we are probably now in the phase where the idea of micropayments is perceived to be Dangerous, the final stage before acceptance !

Another quote, not because it is particularly relevant, just because it appeals.

I calculated the total time that humans have waited for web pages to load. It cancels out all the productivity gains of the information age. Sometimes I think the web is a big plot to keep people like me away from normal society. Scott Adams

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Kindle Books Outselling Hardcover Books, What Does The Future Bring?

Wednesday, July 21st, 2010

There is an interesting story making the rounds on the web that I recently read on TechCrunch. Amazon.com released a statement claiming that the “tipping point” has finally been reached with its Kindle books now outselling hardcover books on its site. They claim that over the past year for every 100 hardcover books sold on their site, they sold 143 Kindle books and in the last month a ratio of 100:180. Also as an important note, this number does not even include the free e-books being downloaded by Kindle users. The full story can be found here.

Mind you this is only hard cover books and does not include the larger number of paperback book sales, but it does signify that e-books are gaining traction. With more and more titles and publications being offered in the Kindle store and the price of the Kindle being dropped to $189 more people seem to be making the switch to e-books. The Kindle store now offers more than 630,000 books, of which over 510,000 are $9.99 or less, as well as millions of free titles. They also offer a wide array of magazines, newspapers, blogs, and other publications. Most publications found in the Kindle store such as newspapers and magazines are using a monthly or yearly subscription payment model for anywhere from $2.99-$29.99. Also many of the e-books sell for between $2.99-$9.99 and a large portion are free. However, this does open up a huge opportunity for micropayments.

The Kindle store offers publishers the chance to monetize their digital content, charging for books, magazines, articles, documents, etc. This is yet another growing avenue for micropayments. It is almost certain that e-books will continue to grow in popularity and revenue, but it is yet to be determined whether they will overcome traditional books.

Personally I don’t see traditional books ever becoming extinct, but I do think that e-books will overtake traditional book sales in the not so distant future. Their convenience (ability to instantly download a book or article) and their cost (significantly cheaper than traditional physical books) make e-books much more appealing than ordinary traditional books. I don’t argue that there is always going to be people who are reluctant to change or simply want to read traditional books, but I predict that in the next few years (3-5) we are going to see e-books creep ahead of traditional books in sales. Of course this would mark a huge increase in the number of micropayments users are making to buy these digital publications. This is just another example of how online micropayments are forming the way we do business on the web in the future.

What do you think? Are e-books poised to overtake the book market as the predominant choice of readers or are they merely a profitable niche market? How do you see micropayments playing into this equation?

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To Pay or Not to Pay – That is the question

Wednesday, July 21st, 2010

We cannot solve our problems with the same thinking we used when we created them – Albert Einstein

It has been fascinating, observing how the debate surrounding paying for content has evolved over the past few months, especially since Rupert Murdoch threw down the gauntlet a year ago by announcing that News Corp’s content would, in the future, have to be paid for and that the days of news aggregators stealing their content would be coming to an end.

There was the usual vitriolic reaction to anything that the “Dark Lord” of the publishing world suggests, with many taking the ideological position that all content on the internet should be free, that users had a right ot free content etc etc The discussion has however moved on and a recent debate on OSnews¹ demonstrates perfectly where we find ourselves today.

Content creators should be paid for their efforts – It is simply a question of how this is to be achieved.

David Adams fired the first shot with the provocatively titled post: “The End of the Free Internet” . This post goes on to argue that despite the recent flurry of paywalls and the poor advertising rates currently being obtained, this is not the start of a trend which could see the end of free content, as has been suggested by other commentators.

This provoked a reply with a post titled “Rebuttal: Against Free”. The writer strongly disagrees that free and advertising-supported content is the future. The solution for paying content creators is, he suggests “Micropayments, with the only reason it hasn’t been widely deployed is because it has to be dead simple to use” Both articles received many comments, mostly raising valid points covering the issues and practical problems associated with micropayment schemes, such as:

By the time payment processors take their cut, the payment is not so micro.

Banks and payment systems will not be willing to work for fractions of cents.

Micropayments will eliminate what little anonymity is left on the internet.

There is no amount you can charge that is small enough to bring the psychological burden ( of deciding whether something is worth the cost ) close to zero.

Micropayments may grow out of donation systems or subscription systems.

There is now a general recognition that the creators of content need to be rewarded for their efforts and that the advertising model is not the complete solution. There is a belief that micropayments should form part of the solution, along with subscriptions, advertising and some free content. What many commentators are not yet aware of is that the excuses for not implementing micropayment system are no longer valid. Looking at some of the concerns:

The payment processors cut – CarrotPay charges 2.5%, no matter the size of the transaction – End of story

Payment systems will not be willing to work for fractions of cents – With automated processing systems this is not an issue – CarrotPay charges 2.5% no matter the size of the transaction – End of story.

Anonymity will be eliminated – Web Coins are the Internet equivalent of the cash in your pocket and just as anonymous.

A Micropayment system has to be dead simple. There are systems being used today where the customer can set an electonic purse to automatically make payments below a specified value (which can be reset at anytime) with the customer simply being advised everytime a payment is made or, if this is too easy, requiring a single click to authorise payment when the customer presses a buy button.

The question is not really “To pay or not to Pay” it is more how are content creators to be paid for their efforts. The answer is not as simple as saying that all content will be free and supported by advertisers or that all content will be have to be paid for by subscription or paid  for on an article by article basis. The future will be that many content creators will be paid for their efforts through a mixture of all these methods. Easy to use, frictionless micropayment systems will however make it much easier for the creators of content to extract the full value of their content by selling direct to the end user. This should result in middlemen and aggregators playing a reduced role as micropayments systems evolve.

www.OSnews.com ¹ OSnews is a site whose motto is “Exploring the Future of Computing”

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Micro-Syndication

Friday, July 16th, 2010

After reading Geoffrey Graybeal & James Hayes’ paper, All The News That’s Fit To Pay For Online:The Case for a Modified News Micropayment Model on the Social Web, a concept was spawned here at Carrot. Graybeal & Hayes outlined a sharing based rewards system (what they call microearn) that would be a pivotal aspect for any paid online news content model to succeed and thus Micro-Syndication was born. The authors of this paper laid the foundation for the concept and we put our brains together to make it happen.

Today’s web culture is all about personalization, social interaction, and sharing. People are constantly posting links on their social media pages, sending information, articles, or music to friends, and so on. Of course the vast majority of this is free content and even when it is payment protected the person sending the link is getting nothing out of it other than the satisfaction they may provide their friends. In fact many people rely on the advice of a certain friend for much of their news, always checking their friend’s profile to see what links he has posted. We call these sharers, sifters, because they read through news content, discarding the unimportant or not so great, finally choosing the best stories to share with their friends. Sure everyone shares articles when they’re free, but when charging for news content, who’s to say these sifters will continue to share pay walled content with their friends?

So when charging for news content online, why not provide financial reward for those who share the link to one of your articles? Sifters could earn a commission off of their referrals. For example sifters could receive a referral reward of $0.01 every time someone they refer buys a $0.12 article. Surely such a tactic would cause revenues to steeply climb as it increases the news publisher’s sales staff drastically. Now essentially anyone can become a paid promoter for a news site and all of its stories.

Here is a brief very non-technical look at how Micro-Syndication works:

A Micro-Syndication button is added to all of an online news provider’s pay wall protected articles. A sifter comes along and pays to read an article. If the sifter chooses to share the article they simply click the Micro-Syndication button which prompts a new page or pop-up on the news publisher’s site. The sifter enters their CarrotPay Merchant ID and optionally their name, email, etc. The site will then return a customized link or file for distribution. Each time someone clicks through using the sifter’s link or file to purchase an article, a percentage of the sale goes directly to the sifter’s CarrotPay account as CarrotPay Buy Buttons can easily facilitate split payments.

The beauty of Micro-Syndication is that it can be used not only for news articles, but for any shared online content. Websites could use Micro-Syndication to promote any type of product (music, images, games, etc.). It is very easy to do, provides incentive for people to promote your goods, and sharing is already a very common practice that internet users are in the habit of doing.

So what do you think, is this a model that could work? Would you become a sifter and use Micro-Syndication? Let us know your thoughts.

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Posted in News publishers | 1 Comment »

Extra, Extra! Pay To Read All About It?!?

Wednesday, July 14th, 2010

There has been a lot of buzz lately surrounding the fact that most online news content providers such as The Times, the Wall Street Journal, and the Financial Times are charging users to view their articles, with the New York Times, the Boston Globe, and many others poised to follow suit in the near future. The subject of charging for online content has stirred up some mixed emotions and has created many skeptics who are irate over this turn of events.

We can argue until we are blue in the face whether it is right or wrong to charge for news content online. We can also argue whether it will even work, whether people are willing to pay to read their news online. But in the end it is inevitably going to happen because after years of losses it is proven that news content providers simply cannot run a sustainable business online without charging readers a fee. So that leaves us with the dilemma concerning what type of payment platform is best suited for users and online news providers.

When discussing the alternative methods of charging for online news content, three different methods seem to emerge. There are those who argue that a subscription model (of a day, month, or year) is the way to go. There are others that say a time metered rate is the best alternative. And finally there are those who argue that a pay-per-article payment platform would work best. Of course it is difficult to say which is in fact best as it is not that cut and dry, however I will weigh the pros and cons of each method to get an idea of each platform’s positives and negatives.

Subscription based models seem to be the most commonly adopted which is not all that surprising. Print newspaper sales have always been primarily subscription based so why change for the online news? It is not a complicated platform and readers are comfortable and very used to this form of payment for news content. News content providers have the opportunity to offer a variety of subscription models such as daily, monthly, or yearly. For one single fee, readers can enjoy unlimited access to everything the online news provider has to offer.

This brings up an interesting point though. Is anyone truly interested in everything an online news provider has to offer? Does anyone read every single article, look through all of the classifieds, and complete every puzzle? Don’t most people buy the paper to read certain sections (Business, Sports, Fashion, etc.) or even specific articles?

Then what about a time based fee where readers gain unlimited access of online news content for a limited time? This way readers can pick and choose the articles they want to read and granted they don’t read at a snail’s pace, would get more bang for their buck than using a subscription based model. The idea behind a rate per minute (or 5 min, 10 min, etc.) is that users will efficiently read only those articles that interest them.

However, there seems to be a few problems with a time based payment platform. For one, it takes the enjoyment out of leisurely reading and browsing, turning reading the news into more of a task related focus on retrieving as much pertinent and valuable information as one can as quickly as possible. Not to mention such a payment platform would certainly deter slower readers. I could see a plethora of other headaches arising such as readers who forget to sign out leaving their clocks running for hours and their rates soaring with a continuing variable cost. On the other hand what about readers who don’t even finish one article in a fixed time platform because they had to run off to do something else for five minutes?

Finally we have the per-article payment platform, where users can read the first paragraph of an article, but have to pay a small fee to read the whole thing. Using this method readers have time to pick and choose the articles they are interested in reading and can pay to read each specific article at their convenience. Readers can cheaply purchase a few articles that caught their eye. Many readers only buy a newspaper or magazine to read certain articles or sections anyway.

But what if you are the kind of reader that enjoys reading all of the news “cover to cover”? This type of payment platform is simply not the most cost effective way for such a reader to peruse all of the articles. Also the payment system would have to be easy for the reader to complete as it could get annoying to fill out lengthy forms each visit just to pay $0.20 to read a couple articles.

Each payment platform has its fair share of benefits and downfalls. Also, each online news source is unique therefore different payment platforms may be right for different sites. Perhaps the best payment platform for an online news content provider to adopt is a hybrid or mixture of two or all three of these methods.

So I pose the question to you, which online news content payment platform is the best? Did I miss any? Let us know what you think is the right payment platform for online news content providers to adopt.

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Posted in News publishers | 3 Comments »

iTunes for micropayments? – An off key solution

Tuesday, July 13th, 2010

Apple is in a position they’ve been in a lot of times before. They’re like Moses showing the way to the promised land, but they don’t actually go there. Tim O’Reilly¹.

Over the past few months there has been a variety of blog posts and articles written in the media suggesting that iTunes is the holy grail when it come to finding a solution to the problem of processing micropayments received from the sale of low value products for digital delivery.

How realistic is this ? Not very.

One issue which needs to be clarified is, what is a micro-payment ? Some seem to see micropayments as lying in the range of US$1.00 through to say, US$9.99 with the pricing of individual music tracks at $0.99 being used as an example. These are not micropayments, micropayments are much smaller, say in the range of 1cent through to 50cents.

Looking at how the iTunes system works therre are a number of reasons why it is out of tune with what is required of a micropayment system which both rewards the creator of digital content and is easy and safe to use from the perspective of the consumer.

Firstly the products to be sold need to pass the gatekeepers to Apple’s walled garden, where the products are available for purchase. A process which can sometimes be both time consuming and arbitrary when it comes to products not being accepted.

Once a product is sold the revenue has to be shared with Apple. Apple’s share may be acceptable for products priced above US$1.00 but there is not going to be much left over for the creator of products priced in the range of  5 – 50 cents.

From the customers’ side there is always the concern of having to hand over personal data including credit card information to a third party for them to hold and charge your card from time to time. This method of charging also exposes the customer to risk through the technique of bundling multiple transactions, possibly including fraudulent charges, with these bundles being charged to the credit card periodically rather then when the transactions are incurred.

This danger was recently highlighted by the headline for an article written by Joseph Menn in the FT² the other day ,which caught my eye:

“Hacking fear grows for iTunes accounts”.

Apple last week banned an independent developer from the iTunes App store after complaints from US consumers who discovered that their accounts had purchased his ebooks. Apple stated that “…..about 400 users…. were impacted”. Experts however disagree with this, due to the fact that one of the developer’s ebooks reached number 21 in the US books chart. A level which would require significant sales, thereby implying that many thousands of accounts could have been compromised.

“He got greedy – if he had been more subtle about it, he would not have been caught” said Joel Feather, one of a group of successful app programmers who complained to Apple.

Apple will now need to tighten up the ordering process, possibly requiring customers to enter the security code off their card whenever a purchase is to be authorised, thereby adding more friction to the purchasing process. Friction or rather lack of friction is vitally important when it comes to micropayments, the purchaser is simply not prepared to enter any data to authorise a payment of 50cents, this has to be done with one click of the mouse at most.

For micropayments to succeed we need a system which allows the creator of content to obtain the maximum from the sale of that content by losing very little in the way of charges to middlemen and payment processors. The authorisation process needs to be friction free and the customer should have to hand over the absolute minimum of personal information, i.e. Digital Cash, an electronic form of cash in your pocket.

¹Tim O’Reilly is the founder of O’Reilly Media and a supporter of the open source movements.

²FT – www.FT.com and the print copy of the Financial Times

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Information wants to be free! – Part 3

Tuesday, July 6th, 2010

The Internet is the world’s largest library. It’s just that all the books are on the floor. John Allen Paulos¹

Some further quotes from Ken Doctor’s excellent book Newsonomics:

Page 19 – Though the web allows us to be our own editors, the truth is most of us like the opinion and judgement of others – editors in the old parlance.

Page 79 – The reading revolution is not a rejection of newspaper content. The newspaper is simply an anachronism. Why would you cut down all those trees, put gas in a truck to deliver the papers, and then have to settle for old news, when you can transport yourself to any news or opinion source on the globe at the click of a mouse.

Many consumers of news and commentary get their news and analysis from a combination of newspapers, magazines and websites, generally using the internet to keep up to date with events and print for analysis and commentary. As mentioned in Part 2 the newspaper industry naively believed that advertising would pay for the production of their content and that this would enable them to offer the same content as the print version, but free of charge. The reality has turned out to be very different.

Although advertising revenue will form part of the solution, publishers are experimenting with various models of charging for content by erecting pay-walls with customers paying a monthly subscription to access the content on the site. The most successful applications to date appear to be FT.com (which at the time of writing allows customers to see a small number of articles, after which they need to pay a subscription to see further content) and the Wall St Journal. Both these publications are however producing content which is valuable to the people chosing to read it (Information wants to be expensive because it is so valuable).

The conundrum facing publishers who want to charge for content is that the erection of paywalls can trigger a decline in the number of visitors to the site with a consequential fall off in advertising revenue. The revenue from subscriptions therefore needs to be greater than any potential loss in advertisng revenue if this approach is to succeed.

Other methods of charging for content are also being considered now that small payments can be processed both inexpensively and with zero friction ( ie no data entry and one click to authorise payment ).  With the ability to process micropayments as low as 1 cent or 1 penny, publishers are now seriously looking at charging for content in the following ways>

1. A day pass – This would allow unlimited access to the site for a 24 hour period with readers paying say 50 cents to a 1$.

2. Metered usage – readers pay for the time on the site at say 2p for 5 minutes with 1 hour costing 24p.

3. Pay per article – readers get a preview of an article and decide whether they want to read the whole article or not for which they have to pay, say 5p etc.

Finishing up with a couple of quotes 1 from Newsonomics:

Page 82 – There is no iTunes for news, and when it comes, it almost certainly won’t be the newspapers and broadcasters themselves who bring it to us.

and the 2nd from the blogsite “thatColumn@blogspot.com” – A Jeremy Clarkson inspired rant at the new Times and Sunday Times paywalls

……let me spend on a per-article (repeat-read allowed once paid) basis, and I’ll join tomorrow. So not till you institute micropayments.

¹ John Allen Paulos is a professor of mathematics at Temple University in Philadelphia who has gained fame as a writer and speaker on mathematics.

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