Friday, May 25, 2007

Reasons why micropayments aren’t working today

Micropayment was once a hot topic, trumped by Usability Guru Jacob Nielsen, attracting scores of entrepreneurs to the fold, many of whose startups have folded up their tents and moved.

The case for Micropayments paints a promising future for online content providers - where you get paid for every item you create online – news article, photo, so on.

However, soon companies found out that users could never close on to the awkward user experience.
As Clay Shirky puts it , ‘The very micro-ness of micropayments makes them confusing.’

The Granularity problem
The major micropayment-like success was iTunes but it wasn’t micropayment, at 99 cents a song it was much bigger than 20-25 cents micropayment range.

Pay-per-view problem
Some have pointed out that the pay-per-view type of model works with bigger payment slabs, in select industries such as sports, porn, movie maybe), not for news articles and its variants.

Besides, Users like flat fee models, as the success of mobile consumer plans show.

Distribution problem
Credit card players dominate online and users have got used to them, however usurious the practice may be. Most Micropayment startups had their own system, ending up creating a confusing multitude of choices, no one shining out in particular.

Debit cards are catching on, but not fast enough.

Maybe someday a smart Debit Card will launch a 'micropayment variant additional card ' with money stored in multiples of only $100, which users can spend, send like Paypal, store the value on their mobile SIM card…send it as SMS...the possibility is there.

The biggest reason why Micropayments don't work today
IMHO, User-Generated Content is the biggest reason why micropayments aren’t working today.

Say, I write an essay, what is the guarantee that similar ideas haven’t been done by any one of the active 5 million bloggers?

For every eBook on blogging, there are 1000 free ebooks on blogging.

The New York Times writes a big piece on Global Warming, chances are a blogger might pick on the idea and write a piece.

There is just too much competition.
Newspapers will tell you – they are terrified with the frightening array of alternatives available online.

Someday, Newspapers may solicit contributions via micropayments to fund a promising investigative story, in the manner pioneered by New Assignment.

Nick Douglas at Valleywag has for a change departed from his usual style of criticizing the web monoliths and has written a timely article on the failure of the so-called 'smart set' in the Silicon Valley to see beyond the tiring buzzwords of social networking, web 2.0 and others, asking why aren’t those self-centered geeks inventing new things – a better Micropayment is one of the ideas waiting in the wings. Read his post here.

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