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Micropayments will fail

2003-09-09 17:21:03.764798+00 by Shawn 10 comments

Erik links to Clay Shirky's editorial explaining why micropayment schemes will fail, and Free is here to stay.

Between the failure of the Internet as a business model, China's apparent ramping up of technological advancement and current U.S. foreign policy/attitude I'm beginning to wonder if we will ever see a meaningful economic recovery. Capitalism - the traditional U.S. free-market version, anyway - seems to be just scrabbling for purchase at the cliff edge.

comments in ascending chronological order (reverse):

#Comment Re: Micropayments will fail made: 2003-09-09 17:39:18.506804+00 by: Shawn

[meta]The subject/title of this post isn't showing up in either of the RSS feeds (looks fine in the condensed PDA feed). Instead I'm just getting the word "editorial". Might this have anything to do with the fact that I posted it via the nntp interface?[/meta]

#Comment Re: Micropayments will fail made: 2003-09-09 21:51:56.637197+00 by: td

Am I allowed to stop reading the first time he says something that's patently untrue? Viz: "the only business model that delivers money from sender to receiver with no mental transaction costs is theft."

Really? How about flat rate? You know, like your phone bill. The cost of delivering the service depends on your usage, but they just charge you for some fixed amount that's more than you're statistically likely to use.

Or how about Netflix, which is similar but with flow control. It's just like flat rate, but without the downside for the seller when his statisticians get it wrong.

I suppose it's wrong for me to point out that theft only avoids mental transaction costs for amoral creeps.

#Comment Re: [Entry #6508] Re: Micropayments will fail made: 2003-09-10 15:26:04.155071+00 by: Shawn

Yeah, something felt a little... off about the theft claim. But I let it go because I think he still makes some excellent points about mental transaction costs in general.

I had a just had a discussion along similar lines with an old boss. He was telling me how a wireless router/firewall manufacturer had sent him a box to try out. He'd been impressed with the box itself but didn't even consider stocking it because of the hassle involved in implementing their per-box-mandatory-registration-for-activation policy. (They were installing residential wireless solutions at the time.)

As he said, some companies "just don't get it." The more steps required to acquire/install your product, the less likely it is to sell.

#Comment Re: Micropayments will fail made: 2003-09-12 15:22:38.901529+00 by: Dan Lyke

For all of his reasons about how micropayments increase the load of the transaction, that's exactly the reason I want them: It sucks that I have to remember the period of my voluntary contributions, or that I suddenly see "help, we need to raise lots of money fast" on one of my favorite sites and take a huge one-time hit on a donation.

He's also got some hoohey about costs in there. Except for us blessed few, I suspect Clay Shirkey might be one of those so blessed, people pay for bandwidth (in fact we pay, it's just in social capital and hidden costs). Just as on paper, a million readers does cost more than 10 readers.

And I want to dig a little deeper, but I'm kinda impressed by the BitPass content that Shirky maligns. The problem with a few bits that I've looked at thus far is that, unlike a bookstore or magazine stand, there's not yet enough of a "what are you going to get" feel. I'm not sure how to fix this, because the point of a bookstore is that you can sit there and browse until you're comfortable, it's just not convenient. We need that functionality with websites.

Maybe that's what Salon is trying to do with their day-pass thingie, but it'd help if Salon actually had interesting content.

#Comment Re: Micropayments will fail made: 2003-09-13 22:52:57.21063+00 by: Dan Lyke

As usual, Columbine and Columbine's readers have more to add.

#Comment Re: [Entry #6508] Re: Micropayments will fail made: 2003-09-14 05:51:03.495368+00 by: Shawn

I don't follow what you mean by this:

> It sucks that I have to 
> remember the period of my voluntary contributions,

Point of clarification: I'm personally all for micropayment structures - for fulfilling my own wants and needs. I've been eyeballing Redpaper lately, as a venue both for buying and publishing.

I can totally see what Shirkey's saying as applying to [most of] the general public, though.

#Comment Re: [Entry #6508] Re: Micropayments will fail made: 2003-09-14 06:16:04.134905+00 by: Shawn

Columbine and I appear to have very differing opinions of how the world should work. Like several of his readers, I don't buy into the "it's all about the money" angle he points out. While it is a good point, I think it's one of the things wrong with our society. No, I don't think everything should be required to be free, but I don't think that something that costs is automatically better or is indicative of higher value. I think that's a myth perpetuated by our capitalist society. Furthermore, in response to one of his responses.

I think it's funny how you wouldn't expect a lawyer to give legal advice for free or a doctor to give medical advice for free...

But I do. This expectation might not be realistic (in that most lawyers and doctors won't if you ask) but I still believe they should. Go ahead and charge if you're going to do a bunch of research or actually give me a diagnoses, but I think I should be able to reasonably expect a simple answer to something like "could I be sued if I quoted some song lyrics on my webpage?" I give advice all the time about how to avoid viruses and what can be done about crashed hard-drives. I certainly don't charge for that.

#Comment Re: Micropayments will fail made: 2003-09-14 17:18:13.33901+00 by: Mars Saxman

I've been trying to sort out my thoughts on this subject, Shawn, and I think you've pointed out the key piece. The main arguments about micropayments all seem to be economic: will they work or won't they? How would you construct a successful system? I don't really care about any of that; I don't want micropayments to succeed. From my point of view, it's a political question; what do we want our world, which increasingly includes our virtual-world, to look and feel like?

Scott McCloud's response to Shirky's article has a line something like, "Fame should not rob you of fortune", talking about the way popularity drives up your bandwidth costs and generally puts you out of operation. But he doesn't see this as a technical flaw, something that should be solved by a distributed bandwidth-sharing mechanism; he sees it as a political flaw, a reason to bring in the old economic model we've been suffering through for centuries.

We can do better than that! People are clearly willing to give away their computing resources for good, interesting, or merely novel causes: witness seti@home, every MP3 sharing system from napster to kazaa, and even the lowly email chain letter. We have the technology; why don't we use it? I can understand why big corporations would not be keen on anything that doesn't let them monopolize, control, and extract profit from whatever is going on, but what on earth is an actual human being like Scott McCloud doing shilling for such a fundamentally anti-network, centralized, command-and-control oriented idea?


#Comment Re: Micropayments will fail made: 2003-09-15 00:13:05.454388+00 by: other_todd

I need to just change my login here to Columbine so that the connection is clearer. Anyway, that thread over on my board got derailed and it's my own fault - I have trouble staying clear and logical when I start talking about writing.

So, put aside the notion of quality, Shawn, that was due to something I said which everyone misinterpreted. Leave quality out of it entirely. What I do feel - and what I was originally trying to say before I stepped on my own foot - is that I don't believe in free services. Someone always pays, sooner or later. And I'm strongly in favor of a viable micropayment system in order to try to encourage people to cough up in small doses, because I think it will make them less inclined to try to cadge something for free (as opposed to subscriptions or other purchase models that demand relatively large payments up front). I think, for the web, pay as you go is the way to go. Just not sure how to best make it happen.

#Comment Re: [Entry #6508] Re: Micropayments will fail made: 2003-09-15 21:51:03.855298+00 by: Shawn

Well, then I think we're pretty close to the same page todd... ah, Columbine (yes, thank you. I don't tend to keep track of who's who in the blogging world to begin with. I had no idea.)

I have nothing against micropayments. I'd be happy to make micropayments (for stuff that's worth it - of course the stuff that's not I just wouldn't buy).

I will agree that *somebody* always pays, somewhere along the line. Where I think (maybe?) we differ is that I don't mind being the one who pays - as long as it doesn't bankrupt me. If I'm getting something out of it, even if it's just the satisfaction of somebody reading/enjoying my work, then I don't always feel the need to collect to "recoup" my costs.

Anyway, that's my personal take on micropayments - for me. With respect to John Q. Public and social behavior, I have no trouble believing the picture Shirky paints. *Should* micropayments, in some form, succeed? Sure. *Will* they? If the current pattern is left to evolve unmanipulated by Corporate America I think there'd be a pretty good chance they wouldn't. But what're the chances of that happening?

What I see right now is that *something* is going to snap. And that thing will either be the American economic model as we know it today or the free-as-in-beer concept. Normally I'd put all my chips on the Corps, but unless tighter, more centralized control can be established over the Internet I think they're going to have a much rougher time of it than they have in the past.