Debating Micropayments

from the yes-and-no dept

Clay Shirky got a lot of attention last year for his essay on why micropayments don’t work – focusing mainly on the addition of “mental transaction costs” as an additional cost above and beyond the monetary micropayment cost. Not everyone has agreed (especially those involved with micropayment companies). Vin Crosbie has now chimed in to explain why Shirky is wrong about micropayments by saying that the mental transactions of micropayments don’t always need to stop the transaction. As an example, he points out that people pay for water, telephone calls and electricity in micropayment fashion and never seem too bothered by it. This is true – but what’s missing is that in all three cases these are both necessities and there are (or, in the case of telephone, were) no other options for providers. When there’s no competition, you can charge and people will accept it – especially if it’s a basic necessity. However, when competition does come about, the pricing starts to drop, and the idea of additional fees-per-transaction start to go away. Witness what is happening with the telephone industry. With the rise of VoIP systems, almost all telecom companies in the US are now offering some sort of flat-rate deal where there are no micropayments for each transaction. In the case of undifferentiated content, where there are plenty of other content providers online (with the possible exception of very specialized content), it will be very difficult to charge any form of micropayment.

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Comments on “Debating Micropayments”

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Vin Crosbie (user link) says:

Debating Micropayments

Mike, I understand your points. In micropayment markets where there is competition, supply & demand economics do indeed force the price of a commodity even lower than amounts that we currently term micro. For example, when the price of a a long-distance telephone call starts to drop below a penny per minute (a minute being the minimum quantum to measure) then the price effectively becomes ‘free’ and the vendor must resort to charging only a fixed monthly service rate (such as $20 per month with unlimited long-distance).
But you forget that in such cases the price isn’t really free because the vendor is still charging the user a monthly fee ($20). By contrast, Shirky’s contention was that information will really be free, with no costs at all (neither monthly nor metered) for the consumer. I don’t think that will happen. I don’t think that advertising revenue alone will support professional production of online content nor millions (or eveb tens or hundreds of millions) or amateur blogs.
As readers of my ClickZ column probably by now know, I’m against 98 percent of publishers’ attempts to charge for online content. But I do think there is a need and market for that other 2 percent, particularly at microtransaction levels. We just don’t yet have the mechanisms by which to do that.

dorpus says:

Sophisticated Scam Alert

I almost fell for this one — someone called about “federal government grants”. I happen to have a federal grant for grad school right now. I thought maybe it had something to do with my fellowship. But I hesitated to say much about myself, and it became clear that he did not know I already have a grant, or which organization it was through. The guy, who had a thick Indian accent, called himself “John Morty”, from “Government Grant Information Guide”. At first, he claimed it is not a private sector company, but then later admitted it is a private sector “financial consulting firm”. He wanted to know detailed information about me so he could give me a “guaranteed grant” of $7,000, whether for education, small businesses, or home ownership.

Reading about scams on techdirt helped give me the right reflexes in dealing with this guy. I did not give him a shred of personal info.

KD says:

Re: Re: Sophisticated Scam Alert

Dorphus’ rant has nothing to do with micro-payments, but, I’m glad he made the rant”: I just got a call from “someone” with a thick Indian accent claiming to be from “government grant information guide” offering me a minimum $8000 federal grant… I searched on Yahoo and presto!!!

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