Just a few weeks ago, we wrote about how Flattr had integrated with services like Twitter and Instagram to make it incredibly easy to support content creators (including us!) by just favoriting a tweet. Not surprisingly, in the first month after that went into effect, we saw a boost in revenue from Flattr. Unfortunately, Flattr has now announced that Twitter has forced the company to stop this integration.
Flattr had been using the Twitter API to figure out what people had favorited, and had been gathering data about the specific tweets. However, Twitter told the company that it was violating section IV. 2 C from its API terms. That term says that:
Your advertisements cannot resemble or reasonably be confused by users as a Tweet. For example, ads cannot have Tweet actions like follow, retweet, favorite, and reply. And you cannot sell or receive compensation for Tweet actions or the placement of Tweet actions on your Service.
It's that last part where the trouble came in. Of course, it seems clear that that particular line in the terms of service was designed for situations where people are "selling" tweets or something similar. Not for cases where a service like Flattr is helping people make money from supporters. In response, Flattr even said that it would waive its standard 10% fee on any Flattrs that come via tweets. Twitter told them it wasn't good enough. Now, you can argue that "rules are rules," but rules need to make some sense. And it's unclear what kind of sense this makes. There's nothing about the way in which Flattr is using Twttier that is negative for Twitter. It seems like a really nice and useful addition. Obviously, we're somewhat biased, because it also helped us make a few bucks (not much, but some), but I can't see how it makes sense for Twitter to block this functionality.
We've written about Flattr a bunch of times over the past few years, as we find it to be a really interesting experiment in both micropayments and in supporting content creators. If you're unfamiliar with the concept (which was created, in part, by Peter Sunde from The Pirate Bay), each user of Flattr puts some amount of money (total is up to the user) into its account each month, and they can then click on "Flattr" links around the internet. At the end of each month, Flattr tallies up the total amount of content you've "flattr'd" and divides your monthly allotment by that amount. Thus, if you want to give creators $10/month, and then flattr 10 pieces of content, each creator will get $1 (actually, $0.90 after Flattr's 10% cut). If you flattr 20 pieces of content, each one gets $0.50 (er... $0.45). The thing we liked about this is that it gets you past a big part of the mental transaction costs of micropayments: that is, if you have to think about "is this piece of content worth $0.50 or $0.10?" you're already going to lose a bunch of potential customers who don't even want to bother with thinking about it. But, with Flattr, they don't have to think about it for each piece of content. Once they're convinced to take part and fund their account each month, it makes no difference to them how many piece of content they flattr.
As some of you know, we've had a Flattr widget on every one of our posts for the past couple of years. It brings in a small amount of money each month -- maybe between $50 and $100 or so. Of course, part of the issue is that there are some usage hurdles. The service has a small but dedicated user base, but it seemed to stagnate over the years. On top of that, there was a bit of a chicken and egg problem, in that the process of finding content that is Flattr-enabled is still somewhat haphazard -- and then Flattr users need to remember to flattr that content. However, that's now getting much easier as Flattr has announced integration with a number of different services, including (most importantly) Twitter, Instagram and Soundcloud (also: Vimeo, Flickr, github, 500px and app.net). So, now, if you connect your accounts, you can give money simply by favoriting tweets.
And, yes, that means if you want to toss a bit of change our way, you can now do so with a Flattr account by favoriting the tweets on our official Twitter account or my personal Twitter feed as well -- both of which are connected to the Techdirt Flattr account.
Of course, the other hope in all of this is that it will help lead to more people using Flattr in the first place. That's because Flattr users who favorite a tweet of someone who is not using Flattr are still designating those flattrs for that account. That doesn't mean that Flattr is holding money for those accounts (since that could add up!), but simply accumulating flattrs. Thus, if I "favorite" a Twitter account that doesn't use Flattr once a month, and that person finally signs up for Flattr a year later, it would count all 12 of my favorites as if they came that month (thus giving users on other services incentives to sign up sooner rather than later). Flattr is working on automatically notifying people who can "claim" money, but initially they're hoping the community will do that job for them, with an "unclaimed" page that highlights those with the most Flattrs on the various connected networks. Someone call Randall Munroe and let him know he has a whole bunch of unclaimed Flatttrs for the xkcd Twitter account. Ditto Wikipedia and the Torproject. Similarly, someone might want to alert Linus that his Github account is leading the way in unclaimed Github flattrs as well.
There are, also, some obvious social networks that are missing -- though I've been told that Facebook, YouTube and Tumblr are obviously key among them. It sounds like Google+ may be a bit further down the list. All in all, we still love the idea of Flattr, and think that this is a good step as it evolves its business. It still requires getting people to sign up to pay -- and that, of course, will always be a big hurdle -- but making it easier to do something once you have joined seems like a very good thing.
One purpose for which micropayment solution Flattr (which we use here on Techdirt) has certainly caught on is providing a way for people to support podcasts. Apparently, simple integration allowing people to designate some money for podcasters has just "felt right" for lots of users who do exactly that. And some podcasting/podcatching apps have tried to accommodate this. Instacast, a popular app for downloading and listening to podcasts on the iOS platform, integrated Flattr back in February, but in early May the arbitrary gatekeepers at Apple rejected the app because the Flattr integration went against Apple's demands that all in-app payments go through its own system. Vemedio (the makers of Instacast) along with the folks at Flattr appealed to Apple that this was ridiculous... but Apple issued a final decision rejecting the app. In response, Vemedio is very reluctantly removing Flattr from its app, meaning podcasters just lost a good way of making money, all because Apple can't control it. More evidence of Apple becoming a rather evil gatekeeper, rather than an enabler of new and interesting ideas.
Back in August, we wrote about two companies Flattr and Kachingle that were trying to create a very easy to use form of micropayments, that do away with the mental transaction costs, as a method of getting people to voluntarily support content they enjoy monetarily. Since then we've been experimenting with Flattr (you can see the widget to the left) and it's been quite interesting, especially since Flattr finally opened its doors to anyone, rather than being invite only, as it was when we first started. We'll have a more complete report about our Flattr experiment sometime soon...
It's a pure publicity stunt, and when I saw it announced I wasn't going to write about it. Except... the NY Times and its lawyers have now changed that. While Kachingle leaves out some of the important details, apparently, three people from the NY Times, including the VP of Digital, a lawyer and someone working on the NYT's paywall, called Kachingle, demanding they take down the promotion, saying that it was "annoying" and that it would not stop the paywall. After Kachingle refused, they said they were sending a cease-and-desist letter (which, as of this posting, apparently has not arrived at the Kachingle offices).
In other words, the NY Times just made sure that Kachingle gets a ton more attention for its publicity stunt, and looks like they're simply not open to any alternative business models. I am curious as to the legal reasoning behind the cease-and-desist. I will say that, from the information posted, it is not clearly stated where the money designated for the NY Times' bloggers is actually going, which I would guess may be the legal concern. I guess I could see a trademark claim, in that the NY Times could say that this implies that the NY Times has a business relationship with Kachingle when it does not -- but I think that anyone reading the actual site would immediately recognize that there's clearly no endorsement or relationship with the NY Times. In fact, that's why Kachingle set up the page...
Anyway, if Kachingle ever gets and posts the C&D, we'll be sure to update the post... But, really, what benefit is there to the NY Times in doing this? Threatening Kachingle with legal action seems downright petty and closed minded. Why not let the company run its promotional campaign, see if you learn anything from it, and move on?
I recently wrote about Flattr and how it's a different take on micropayments that seems more interesting to me (though I'm still not convinced it'll get big enough to make a difference). In that post, I also noted a competitor, Kachingle. Apparently, another company is about to enter the space, named Twixa, but it has a slight twist on the concept. Rather than asking users of a site to click a button to pay with their own money, the "ThankThis" offering from Twixa gets a sponsor to pay the money. Basically, any time you clicked the "Thank This" button (which looks similar to the Flattr button), rather than some of your money going to the site, a sponsor's money goes to the site. Of course, it also puts up a simple ad, which is how the sponsor finds this worthwhile. In some ways it's almost a direct play on the fact that some sites ask people to click on their ads to get cost-per-click cash from advertisers -- even though that's often frowned upon as a form of "click fraud." In this case, however, it's encouraged with the participation of sponsors. I'm still not convinced that enough people would really click to make a difference, but it is quite interesting to see how this space is evolving.
Much of the press coverage around Flattr, the "social payments" startup, focuses on the fact that it was founded by Peter Sunde, who is perhaps better known for being the (former) spokesperson for The Pirate Bay. I have no doubt that this is a big reason why the company got a lot of its initial attention, but I think what's a lot more interesting is that this is one of the first "micropayment" platforms that actually tries to get around the historical problems of micropayments for content. There have been lots of micropayment companies out there, and almost all of them failed -- and it wasn't difficult to see why. First, they underestimated the "mental transaction costs" that micropayments entail. Just making the decision if something is worth paying for is a huge "cost" for users. Second, they heavily underestimated the "penny gap," which is the effort that it takes to get someone to go from "free" to paying even a penny. Next, it's an attempt to fight the basic economics of what supply and demand is pushing for the content be priced at. And, finally, required micropayments make it very hard to promote that content via word of mouth or sharing.
Many have tried to tackle the problem of micropayments by assuming that the only real problem is the lack of a clean and easy design. Undoubtedly, a clean and easy design makes it easier to use micropayments, but doesn't tackle all of the other issues. And it's that part that makes Flattr interesting to me, in that it actually tries to get past some of those issues. MediaEvolution recently did a short video interview with Peter about Flattr, where he explains the basic concept:
As he notes, Flattr is actually somewhere between a payment platform and a donation system. But what's most interesting is the way it gets past the mental transaction costs/penny gap issue. It does that by getting people to only make the decision once. You agree to "fund" your Flattr account each month with a set amount, and then when you click on "Flattr" buttons on various content, you're not increasing how much you pay -- you're just subdividing your amount by one more part.
In other words, if you agree to put in $10/month, you'll always spend $10/month no matter how many things you "Flattr." It's just that the amount each thing you Flattr depends on how many you click. So if you click on 10 things, each will get a dollar. If you click on one hundred, each will get ten cents. So, there's no more mental transaction costs or penny gap, once someone has been convinced to sign up for Flattr (which is, yes, still an issue to consider).
The other neat thing that Flattr has done is to effectively set its own site up as something like a "Digg with money." Just to see what happens as an experiment, we've set up Flattr here on Techdirt. You should see the Flattr button to the left of each blog post for now. It looks kind of like a Digg This button, that shows a counter of how many people have "Flattr'd" that story. I don't expect a huge number of folks to Flattr any particular story -- especially since the service is still in private beta, but there is some interesting potential here. One of the complaints people had about Digg was how it got gamed. If Flattr could get widespread usage, it could potentially become a more useful sort of "Digg" because people actually have money riding on who they vote for. I think this aspect of the site is still a bit underdeveloped, but it has some potential.
Since Flattr is still in private beta, we do have a bunch of invites to hand out to folks, if you want them. If you're interested in getting an invite, please use our contact form with the subject "Flattr Invite." We don't have unlimited invites, of course, so first dibs will go to folks who are already Techdirt Insiders (so make sure to mention that in your email request). After that, it'll be first come, first served.
There are some others in this space as well. In the US, there's a company that's been around a bit longer called Kachingle, which Mark Glaser from PBS just wrote about, including an interview with Kachingle's CEO. Conceptually, the two are very similar. Kachingle seems to focus more narrowly on journalism/blog sites, whereas Flattr is for all sorts of content. Kachingle also has a set price: everyone has to pay $5/month, unlike Flattr which lets you choose how much you want to spend per month (in euros, for now). Also, Kachingle doesn't seem to be doing anything Digg-like (yet).
It's also interesting to note that both are big in Europe. With Flattr, this isn't as surprising, seeing as the company is in Sweden, but apparently Kachingle is big in Germany, despite being a US company. As always, I'm still not convinced that "donation" models are really that sustainable, and I've always been skeptical of "micropayments" in general. However, I find both of these attempts to be at least worth watching, as they seem to try to get around the usual hurdles associated with these models.
Mark Glaser, from PBS's MediaShift invited me and NY Times columnist David Carr to have a back-and-forth debate over email, concerning business models for newspapers -- specifically questioning whether micropayments or a paywall of some kind makes sense. Carr supports some sort of "user pays" model for content, whereas I tend to think the idea would backfire badly. PBS has published the two part debate here:
Part I, where we disagree about what people will pay for, and talk a bit about newspaper economics (they're bad...).
Part II, where we continue to go back and forth, but eventually reach a bit of common ground in the middle (no, really!)
There's probably not that much surprising to folks around here if you read this site regularly, but it was a fun debate.
Now this is funny. One of the undercurrent themes found in all of the "newspaper guy blaming Google for newspaper demise" stories is the idea that Google should also come to the rescue of newspapers. Usually, this means by just forking over some of its massive profits, but other times it's based on odd claims that Google has a responsibility to create the new business model for journalism. Well, it appears that Google is stepping into that breach... but it strikes me as an elaborate practical joke. That's because Google has alerted the newspaper world that it's working on a micropayment solution via its seldom-used Google Checkout offering, that could be used as a form of a paywall. Of course, we've been waiting for newspapers to actually offer just such a paywall, so that we can watch it fail and get on with our lives. Perhaps I'm way too cynical on this particular move by Google, but it strikes me as Google handing newspaper execs the rope with which to hang themselves. The problem with a paywall isn't that the technology doesn't exist to make it work -- it's that consumers won't buy into it. But, if the newspapers want to try -- and Google wants to provide the rope -- good for them. Update Seems like a bad time to point out that retailers are having serious problems with Google Checkout, huh?
It's been funny watching newspaper execs and journalists go on and on and on about how important it is to "save journalism" and then come up with plans that will likely hasten the demise of newspapers -- such as micropayments. We've discussed in great detail why micropayments are unlikely to work (they've pretty much failed everywhere they've been tried with news content), but Kevin points us to an argument that shows why micropayments would likely be a terrible thing for journalists as well. When you have a direct association between revenue and a particular article, then suddenly it becomes possible to determine quite specifically how much people are willing to pay for a certain journalist's articles. Thus, management now has incentive to reward journalists who get more people to pay -- meaning those journalists have every incentive in the world to try to come up with stories that will make people pay, which might not be "good journalism."
Of course, some will (and have) pointed out that there's already some of this done, with tracking of advertising revenue on certain articles, but this would be even more direct -- and the key point is that it leads to trying to maximize the experience of a single article, rather than the entire experience:
An article is worth far more than the number of direct sales it generates. Even more importantly, thinking of each article in isolation shortchanges the value of the publishing enterprise as a whole. There are many things that make the New York Times better than the Podunk Daily, but "readable articles per day" is the least of them. (Which means that in addition to being bad for consumers and journalists, by destroying brand value micropayments would also hurt publishers. The trifecta!)
In fact, in this hour of crisis, newspapers should be moving in the exact opposite direction to generate revenue -- focusing not on specific articles, but rather on delivering valuable experiences to their readers, whether that takes the form of articles, databases, multimedia, user-generated content, or whatever else will serve the audience's needs. It is the entirety of that experience that will deliver goodwill and revenue opportunities down the road.
There are all sorts of bad ideas around trying to get people to pay for news, but perhaps the worst is the idea of micropayments. Micropayments are trotted out every other year or so as the "savior" to paid content by people with little understanding of economics. The problem is that micropayments never work in a competitive market. First, the "cost" is much bigger than the nominal sum, because of the mental transaction costs ("is this worth buying?") that add friction to the process. Second, and more importantly, it's a self-defeating move. In adding micropayments, you automatically decrease the value of the content. This may sound paradoxical, but what matter is why and how people value content. These days, many people value content for the ability to engage with it, comment on it and share it with others. Micropayments take away that ability, and thus decrease the value of the content. In some sense, adding a micropayment option gives people fewer reasons to pay! Micropayments have been tried over the years, and every time someone announces them the press goes all nuts about how they're the business model of the future for content. And then the projects go nowhere for a few years, whither and die. And the press never seems to notice.
So, it should probably come as little surprise that it's the press itself that's going to try such a plan. The Wall Street Journals' managing editor, Robert Thomson says that the WSJ is going to start offering a micropayment offering for individual articles. Of course, it sounds like it's not always micropyaments either:
"It's a payments system -- once we have your details we will be able to charge you according to what you read, in particular, a high price for specialist material."
A "high price," by definition, isn't a micropayment of course. And it's just as likely to fail miserably. Putting a paywall in the way of people, and they'll find the content elsewhere. Put a paywall in front of good content, and it just opens up the opportunity for other, smarter, publications, to provide the news for free and run away with all the advertising money.