Micropayments may be here.

July 1, 2003 7:56 PM

Bitpass.com: A micropayment service for content providers. Many many worthy sites have been lost because they could not afford to continue, even though users would have been happy to pay for their service. Unfortunately, a system has not been in place to service the small transactions (paying fifty cents for a ten cent transaction is the opposite of making money). Enter Bitpass. Facilitating transactions as little as one cent, maybe online artists, cartoonists, pundits, humorists, etc, can start making money.
posted by o2b (23 comments total)

The hope is, obviously, that although Content Site X, with financial need $30,000, doesn't have the necessary 1000 people willing to pay $30, that it DOES have 120,000 people willing to pay 25 cents.

That math may or may not hold up. There's probably a point of diminishing returns. Sure, people are willing to part with 25 cents, but they feel their small contribution isn't worth taking the time to fill out the form, etc.

I'd like to see a positive example of a site saved by micropayments (amazon had a program for a while, didn't they?). The key would seem to be making it super, super easy.
posted by scarabic at 8:03 PM on July 1, 2003

As an example:

A popular online comic strip receives 100,000 visitors per week. The artist starts offering, say, one strip per week as a micropayment exclusive, cost: ten cents.

If 10% of the user base antes up, that's 10,000 purchases, and $1,000 per week, $52,000 per year. That's a decent wage, even in New York.
posted by o2b at 8:03 PM on July 1, 2003

This is a cool idea, but small payments = small revenue. Unless you have huge volume. In which case it will be a niche product that uses this type of service that can 1) justify small payments and 2) command large volume. Are cartoons in that catagory? Not sure what service this would work well with.
posted by stbalbach at 8:03 PM on July 1, 2003

scarabic beat my example, but I have more:

I learned of this via PvPonline, and while I don't know if Mr. Kurtz is planning on implementing micropayments, I know that Scott McCloud (he of Understanding Comics fame) has already released a micropayment-exclusive comic called The Right Number; price: 25 cents.
posted by o2b at 8:10 PM on July 1, 2003

For some background, McCloud set out his thoughts on micropayments here and here. (They prompted this classic response.)

Sarcasm aside, the real problems with micropayments have been and are likely to remain both friction from the middlemen taking their cuts, imposing rules and limitations, and refusing to deal with "undesireables" and the natural resistance of customers to having everything turned into an economic decision -- "do I want to spend another 10 cents on this comic?"
posted by Zonker at 8:27 PM on July 1, 2003

A quarter?! Ten cents?! I ain't spending anything on the web if I have to. That's good money.

"A nickel will buy you a steak and kidney pie, a cup of coffee, a slice of cheesecake and a newsreel... with enough change left over to ride the trolley from Battery Park to the polo grounds."
--Mr. Burns
posted by graventy at 8:36 PM on July 1, 2003

Not sure what service this would work well with.

Besides porn. ;-P
posted by mischief at 8:45 PM on July 1, 2003

*envisions a metafilter where everyone pays a dime to post a comment* perhaps a dollar for a front page post. It's enough to make a nice paycheck for matt, and low enough to not really make a dent in any user's bank account. (well... most of us). On a good day lately, that would net matt $50-100. not a bad secondary income.

hell, some of the more popular online comics could charge a penny a day and make a great living.
posted by GeekAnimator at 9:08 PM on July 1, 2003

The bitpass only makes sense if there are multiple sites using it that you frequent none of which you'd be willing to ante up a $5 subscription for.

BitPass uses PayPal so there goes ~2.7% of the revenue plus whatever their cut is. Why wouldn't a site just implement a PayPal subscription for $3 a month and skip the extra middleman ?
posted by zeoslap at 9:31 PM on July 1, 2003

As has been noted many times, erotic content has been the a big rev producer in the online world. I can see where micropayments might work very well here. Most porn sites today try to lock you into recurring payments: "we will debit your credit card on a monthly basis until you instruct us otherwise" or some such verbiage. And, they are often in no hurry to honor your instruction to stop. If I could make a one-time micropayment to try a service and know I wasn't locked in, I'd be much more willing to pay.
posted by lometogo at 9:31 PM on July 1, 2003

>some of the more popular online comics could charge a penny a day and make a great living.

That's the problem here. Say I visit twenty sites that charge just a little for content everyday. Lets say a lousy dime. Hey, what's a dime nowadays?

Let's say that month I visited each site everyday and got charged automagically. Then I check my credit card statement and Micropayments R Us just charged me 60 friggin dollars!

Its simply is going to add up, unless we pick one or two sites we're willing to pay for. If we're at that stage I think it makes more sense to just ante up the 20 dollars a year subscription and never worry about micropayments again.

I don't want to sound too critical, there's tons of potential with micropayments, especially as a one time deal, but comic geeks will be forced to pick one or two sites they can pay for. In the end sites like Megatokyo will be making 200k a year and everyone else will be lucky to get a five dollar sympathy check every month.

I don't think its the panacea some would like us to think it is.

What I'd like to see is a centralized counter and a client app that told me how much bandwidth I sucked up that month. It could break down like so:

1. Metafilter: 5 megabytes (80% of bill unpaid so far)
2. somesite: 10 megabytes (10% of bill unpaid so far)

etc

Then I would have the choice to send Matt's ISP (not Matt) some kind of payment to help off-set the costs of hosting. Under this system no one gets wealthy, the end user doesn't spend as much and gets to see his real surfing habits, and sites don't collapse under the weight of sudden popularity.

The above may sound a bit too socialist, but then again so are micropayments.
posted by skallas at 9:33 PM on July 1, 2003

Interesting, Scott's site uses bitpass.

It looks like all they do is provide a virtual card so that you only get hit once by the big credit card/paypal transaction fees and then hit later by bitpass's smaller fees. I really wish their site was easier to read.

So I would buy a macro-payment 'virtual card' of $20 (get hit by bank fee) and slowly give it away (get hit by bitpass fee) like grandma opening up her coin purse? Something tells me this won't really catch on.
posted by skallas at 9:41 PM on July 1, 2003

I have a site nPost.com which could definitely use this type of service. You are right in that this type of service would require a high volume of users to be successful. It is all about the numbers: Impressions, Interest, Purchase... A percent of a percent of a percent is a small, small number. The key is also for BitPass to also have enough volume through it's network so that it too can make a profit!
posted by npost at 9:58 PM on July 1, 2003

I agree more or less with some of the criticisms above, although I still think at a gut level that micropayments are something that ought to work. The secret is stuff that can become a revenue stream: think virus updates. Who'd a thunk -- certainly not Peter Norton -- back in the day that they were on the cusp of a business where people would just hand over a gazillion dollars a month? Once you're signed up, you're not going to readily unsign. We don't think of many utility functions -- say, electricity, or the telephone -- as micropayments, even though many of them are metered at a ludicrously low level; we just think of paying for the overall privilege of having the service available at all times during those 30-odd days.

But the signing/unsigning issue is what worries me. With credit cards, fraud is a major problem. Not identity fraud, but people rescinding charges because they didn't like the service, or objecting to it appearing on their bill, or just trying to get something for nothing. The costs of this fraud, along with other types of fraud, are pretty high and a major reason that short-term credit costs upward of 15% for most people. I wonder about this impacting the micropayment market such that the maintenance costs of managing "bad" payments reach an enormous percentage of the overall revenue. If you object to a $50 credit charge, for example, you can be assured that the merchant and the creditor together will spend probably between $100 and $500 dealing with it -- and that's assuming it's a simple mistake that everyone agrees to roll back. Is a micropayment vendor prepared to do that for every 1000th $0.05 transaction? What would be the impact if they had to?
posted by dhartung at 10:06 PM on July 1, 2003

Okay, self-plug warning, but it's not an FPP so it's legal...

I think that my site, openingbands.com could really benefit from this. We've got a slew of users in the local/regional area who love the site, but don't have $10 to donate... Still, if 100 of them donated $0.25 per month, that'd be $25, which amounts to over half what I pay for colocation of the server right now.. (don't ask where I colo, I get a discount :-)... If 40 generous folks donated $1, I'd be breaking even...

Since it's a community thing, and a lot of the patrons of the site know each other, and know me personally, I can really see using something like this being succesful...

One more idea:

To charge $1 or $2/month for people to have unlimited downloads of local music (which is what our site promotes) would not only help us get a bit of revenue, but keep our bandwidth in check too, because only those who are really interested would be spending the time (and money) to drop $1 or $2... so we wouldn't get bombarded with a huge overage bill because of too many mp3 downloads...
posted by twiggy at 10:43 PM on July 1, 2003

My idea of a good micropayment system for the web: a small button in the browser toolbar you could just click whenever you feel like donating to the web site you're viewing, active whenever the site accepts micropayments. Have it charge your credit card exactly $5 a month (or whatever amount you set), and split that amount between the all the websites you hit during the month.

So, payment is voluntary, easy, and adds up to a fixed amount per month, no more and no less.

The client app would be trivially simple. Just a little button that's active whenever you hit a page on its list of websites. List is updated once a month and is stored locally. Open source, so the people who care about that will trust it. Let users optionally set differring amounts per click, or a minimum % per website, if they want to. No latency added, it doesn't do anything but increment a counter when you click it.

It's also simple for the website operators, since they don't have to do anything but get themselves on the list, and collect money. That's important, since they're the first ones that need to adopt the system.

If some site wants to require payment (of, say, minimum $0.10 per month per user), they can do that extra work, and the client can be made to pop up a message to that effect so the user can approve it. Some popular site doing this might help to get more clients signing up, but it's optional.

Now for the real advantage of this simple system: since the website owner does nothing but collect the money, you can arbitrarily add any site that accepts donations to the list. The website owner doesn't even need to know about it until he starts getting payments! Pick a good list of charitable causes to start with, and people might actually start signing up in large enough numbers for this to work.

If you want to get more ambitious, the client-side toolbar button could use an open protocol, and the end-user could choose between more than one payment aggregator. Then you could try to get this built in to the default install of Mozilla or some other big browser.

There you go. Somebody please try this.
posted by sfenders at 10:50 PM on July 1, 2003

The above may sound a bit too socialist, but then again so are micropayments.

I disagree: micropayments are pure, platonic, idealized capitalism. Frictionless, perfectly efficient markets, and all that.
posted by mr_roboto at 11:08 PM on July 1, 2003

>I disagree: micropayments are pure, platonic, idealized capitalism.

Yeah, you're right, but the context I usually see micropayments in has to do with helping a favorite site pay for bandwidth as opposed to marketing a product/service and using micropayments to make a killing. Notice the FPP or even the about us page.

Actually I did hear a smart proposal a while ago to use a micropayment like system to help create a "musician middle class."
posted by skallas at 11:35 PM on July 1, 2003

Please note:
The case against micropayments, A. M. Odlyzko. Financial Cryptography 2003, J. Camp and R. Wright, eds., Lecture Notes in Computer Science, Springer, 2003. PDF
Odlyzko is amazingly prescient on most issues he delves into.
posted by gen at 12:32 AM on July 2, 2003

the important thing in any such attempt at micropayments has to be transparency to the end user. If i have to jump through hoops to give you a quarter, or even a penny, it's just not worth it.

for example, i just recently signed up for tmobile's tzone service -- their rates mean i get 1mb of transfers a month for $3. Each additional meg is another $3, and it all just gets added to the mobile bill that i already have to pay anyways.

if i only have to pay, say, a flat fee of $5, as others suggest, to micropayments.com or whatever, and then transparently get access to premium content of all of the providers that are signed onto their service, and any overage i download is automatically and simply added onto my bill (which is either a direct payment or a bill i can pay online at the end of the month) i'd probably be happy to fork out the cash. of course, there's two important things here: #1) i only want to pay one company. i don't want to mess around and pay two different people because site y went with micropayments.net and site x went with tinypayments.com. #2) the content better be damn worth it.

for example, i'd be willing to pay a small fee to read some articles in the premium online journals, but for the way my income works, forking out $60 in one lump fee for a whole year for, say, salon (when i decide the content isn't worth it after a month) doesn't make sense for me, but paying a third party micropayments service $5 a month to get access to a proportional aount of content from salon, slate, nerve, and whoever the heck else is premium now, would be totally worth it.

i just am too retarded to handle four or five different payments to different folks each month. if you want to be a payment service, well, i think the service you should provide is that i can pay every premium site that i'd like to access just by paying *you*.

of course, i suppose the logistics on this are pie in the sky, but it's possible someone could pull it together.
posted by fishfucker at 12:58 AM on July 2, 2003

#1) i only want to pay one company. i don't want to mess around and pay two different people because site y went with micropayments.net and site x went with tinypayments.com.

Yes, that's exactly the problem my system attempts to solve, by including a huge number of websites to start off with. Bitpass hasn't got there yet, and the odds are against them.

#2) the content better be damn worth it.

Do it my way, and payment is voluntary, only for content or organizations you think are worth it -- at least until the concept builds up to the point of popularity when it becomes feasible for some places to require payment.

So, that would limit it to people who are willing to donate a few dollars to something once a month. Hey, if the hunger site can become as popular as it did, lots of people must have some charity in them.
posted by sfenders at 5:33 AM on July 2, 2003

*envisions a metafilter where everyone pays a dime to post a comment* perhaps a dollar for a front page post.

Except that MeFi is so popular precisely because people post links and comments. Charging people to provide your content isn't a very reliable revenue stream.

As for micropayments for online comics, I think even whole cents are too much. 25 cents for a whole comic book, that's a good deal, but not for a single panel. A better idea would be to take all the strips and compile them into a book, then sell the book in tree format for, say, $15 (yes, this has been done before).
posted by Civil_Disobedient at 8:08 AM on July 2, 2003

If 10% of the user base antes up

Yeah, I get the basic concept of scalability. I'm just saying that on the internet, people don't convert at 10% for free porn. 10% is a phenomenal conversion rate for any traffic segment. Hope for 2, maybe, someday, if you do everything right... and your feet will be on the ground.

Skallas - I LOVE your idea of displaying to each user how much bandwidth they have used, and a sum they need to pay to defray the cost. Awesome! There are innumerable sites out there run by folk like Matt, who probably don't mind donating their expertise and some time, but whose generosity and innovation are rewarded with month-after-month hosting costs. I'd love to see that barrier to setting up a cool site/service disappear.
posted by scarabic at 9:20 AM on July 2, 2003