Why micropayments won’t work

So there’s talk around that content providers, specifically the newspaper groups, are maybe looking at micropayments or small fees for users to view content.

It’s considered almost a necessity as they confront the fact that they may never turn a profit from running display ads.

It’s a relevant concern, and one that would be facing a number of them. Loads of users, minimal engagement, reasonable losses.

Australia is not immume. It seems the real money in Internet advertising lies in classifieds and search. High margin, low relative cost and no journalists.

That’s not to say display is a mugs game. There’s some revenue there … but moving forward the technology you possess and the valuable audience you attract (ie not a general mix of all people) will be the key. Even if you tick all the boxes it’s a tough slog and the margins will never be Goog-esque.

Anyway, back to the idea of ‘micropayments’. As an idea it’s novel but ridiculous.

People already pay for the Internet. They get a bill from their ISP every month. I get one for $80 every month. It’s only $9 less than my Foxtel bill.

Are Internet users going to pay a fee on top of their ISP bill to access news/information? Doubtful. As far as they’re concerned, they already pay more than enough.


5 responses to “Why micropayments won’t work

  1. You’re probably right – consumers won’t adopt a pay-per-click model. But I’m not sure ISP bills are the best argument against it. News is a costly commodity that has to be subsidised and, at least in the mass media sense, display ads just aren’t generating enough revenue.

    I think news companies have to do what they’ve always done – trade on brand loyalty. Sell the brand, not individual stories. Subscriptions for products giving you full access. The emphasis still on providing the best news product for your target audience – not being driven by hits for individual stories. I think this model protects traditional reporting (which is not actually broken, can we just say) and is probably the most palatable to consumers (after all, they’ve done it since news reporting began).

  2. I think the main issue is that people won’t pay for what they can get elsewhere for free.

    Crikey can command a subscription fee because the value is not just in the content itself but in the sense of having exclusive access to it. You can’t get that insider status elsewhere for free, the way you can substitute news content from The Age with that of the ABC, for example. It works for Crikey’s niche market, as it does for focused content like WSJ.

    It occurs to me that with micropayments, it can be less about the money itself than the effort that goes into making the payment. Sites that enforce no-charge subscription can lose almost as much traffic as those that force you to reach into your pocket and enter your credit card number. A micropayments platform can only work if it has an ultra-low-friction payment method with next-to-zero frustration or delay, otherwise people will just look elsewhere.

  3. The best argument against what you say here is the mobile space. People pay a monthly bill and then they buy ring-tones, apps etc on top of this.

    Micropayments I believe will come to fruition (decades after Beanz etc tried to make it happen) because iTunes will reach a critical mass of people; and iTunes enables micropayments incredibly easily.

  4. Fionn Hyndman


    I think Micropayments are a matter of the market and the model. Have a look at this ppt on slideshare


    It shows a comparison of sites in the social media space and shows (from slide 42) the comparison of various networks including Facebook and QQ (using 2007 as the year to compare). At the time facebook had 60m active accounts, QQ had 300m, both had a reach of circa 200m. QQ revenues were about 520m USD as opposed to facebook at about 150m, with QQ showing a profit.

    Part of this is down to the way QQ interacts with users and has them interact with payment models (mobile and micro payments).

    It can work, it is just dependent on method, location and what people are paying for.



  5. Fionn Hyndman

    sorry – for 2008 figures try http://www.slideshare.net/plus8star/asias-best-of-breed-1102923

    slide 68.

    QQ now has revenues of 1bn USD Vs Facebook of 350m

    QQ is less per registered user but that is largely down to more accounts per user in China. Apparently they are running at 70% profit. Not bad eh!?!


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