Micropayments: A Viable Business Model?

References & More Reading

Cameron, Chris. "Micropayments and Subscriptions: How Business Models for Startups are Shifting." Read Write Web. 17 March, 2010, <>.

This article talks about changing business models that companies currently dealing with. Cameron notes how none of the social media websites are charging for use, but thinks that will have to change in order for them to make money. He thinks this will happen through micropayments and the biggest problem will be remembering passwords. But people remember passwords for routinely used services, so companies like Google, Facebook and Apple will have to lead the micropayment change.

"Common Markup for micropayment per-fee-links." World Wide Web Consortium (W3C). Ed. Mitchel, Thierry. 25 Aug. 1999, <>.

This is the W3's document for their attempted micropayment scheme. It would have allowed people to embed in their website's html a way to initialize a micropayment with information such as price, title, buyid, duration, expiration, type etc. W3 eventually abandoned their work on integrating micropayments into html, but this has the documentation that they were working on.

Fisher, Frank. "Saving journalism, a farthing at a time". 18 May, 2009. <>.

In light of decreasing advertising revenues, Frank Fisher argues in his article that micropayment is the financial scheme that can save journalism by making online publishing profitable. He believes a large-scale micropayment system should be modeled after Google Ads, in which tiny payments are added up and paid on a monthly basis to reduce transaction costs. The major advantage for such an implementation is scale, since individual users can sign up once with Google and gain access to thousands of sites that have adopted the same standard.

Hershman, Tania. "Toward a Click-and-Pay Standard." WIRED. 3 November 1999, <>.

This article was written in 1999 when the W3 was still considering integrating micropayments into the html standard, and people thought micropayments could be the next big thing. Companies such as IBM and Compaq were each creating their own versions of a micropayment platform. IBM's system has a unique hypertext link that converts into a dollar sign that indicates potential for micropayment. Amir Herzberg of IBM says that the micropayment platform is different and fundamentally better than keeping track of usage and charging users at the end of the month.

Ingram, Mathew. "Can Flattr Plus Twitter Make Micropayments a Reality?" GigaOM. 9 May, 2011. < micropayments-a-reality/>.

This article discusses the prospects of the joint venture between Twiiter and micropayment startup Flattr, who recently announced the upcoming release of a new feature that will allow users to send a payment to someone using only their Twitter user name. Ingram believes the Twitter network will provide Flattr with the scale that it desperately needs, but he withholds judgment regarding whether enough people will be convinced to join such a brand-new and completely unproven payment system.

Jenkins, Henry. "Selling Online Content-25 Cents at a Time." Technology Review: The Authority on the Future of Technology. MIT, 10 Sept. 2003. Web. 22 May 2011. < /13301/>.

Comic writer McCloud is experimenting with 25-cent micropayments for his comics, which can be downloaded and revisited any number of times after one payment. He is doing this system via a company called BitPass, which issues a digital equivalent of a phone card to purchase with any vendor. Many argue, however, micropayments inherently place a burden on consumers. Giving the consumer with the decision to pay for individual items is paralyzing - many would rather just pay $1.50 for the whole thing. An economy based exclusively on subscriptions would evolve toward media concentration because subscriptions play to the advantage of large media companies that can offer the broadest range of content. Micropayments would support fragmentation and diversification of Web content, allowing a broader range of producers to compete for consumer dollar.

Karame, Ghassan, Aurelien Francillon, and Srdjan Capkun. "Pay as you browse: microcomputations as micropayments in web-based services." WWW 2011, International World Wide Web Conference Committee. 28 March 2011.

The article proposes an alternative solution to the micropayment system of paying per view of an article or web page based on research indicating that only 3% of users are willing to pay to read news online and users are unwilling to create and then recharge accounts for commodity services. The alternative solution is for the user to run microcomputations for the website while he/she is viewing the content. This would generate revenue and offset the need to charge users to view content. But, this solution raises the question of if it ethical to perform these operations without the user's consent.

Marlin, Steven. "Big Bucks In Micropayments." Informationweek 1035 (2005): 68-71. Academic Search Premier. EBSCO. Web. 21 May 2011.

This article discusses micropayments in the context of 2005 and how many companies are itching to take advantage of small payments, but a viable system for processing such small payments has not quite taken off yet. Three different transaction models are introduced: pay-as-you-go, prepay, and postpay. Prepay and postpay are the two most common systems in use today and are used by companies such as Apple and Facebook. In order to offset high card-transaction fees, some micropayment service providers aggregate small payments from a single customer into one bulk payment in order to save on transaction fees.

McCloud, Scott. "Misunderstanding Micropayments." Scott McCloud | Journal. 11 Sept. 2011. Web. 22 May 2011. < -09-micros/micros.html>

When micropayments first emerged on the market, their poor implementation played a large part in their failure. Many consumers felt that they were paying for their time rather than the content. Without broadband, paid content was inhospitable. McCloud argues three concepts about micropayments: 1) online prices can become standardize - its the only way pricing is intuitive with consumers, 2) the number of online purchases wont exceed real-life purchases because consumers will just buy in bulk, 3) users will not become over saturated with choices - the more the better. Micropayments can address the problem of file-sharing, where artists are bypassed and robbed of commission. Artists can motivate users to purchase content rather than steal it with low prices on each individual piece.

McGrath, Rita. "Why I Hate Micropayments." Harvard Business Review Blog. 21 May 2011. < micropayments.html>.

McGrath believes that current micropayment systems are annoying disruptions that do not provide a positive consumer experience. In general, payment experiences that are seamless (such as Amazon's one-click, which stores your shipping and credit card information), transparent (such as Apple's iTunes where you buy the song(s) you want a la carte so you know what you are getting), or inevitable (such as cable and phone companies who can lock consumers in because of the nature of the services they provide) are seen more positively by consumers.

Nielsen, Jakob. "The Case For Micropayments." Jakob Nielsen on Usability and Web Design. 25 Jan. 1998. Web. 23 May 2011. <>.

Currently advertisers own websites, and have consequently inundated web space with advertisements. Micropayments will allow users to receive an enhanced user-experience and reduce adds. Subscription fees are an all-or-nothing deal that fences users in or out of a product. Micropayments reduce the threshold for entry, allowing users to frequent more sites. To become successful it will be necessary to develop a spectrum of user interfaces for micropayments so that users can follow cheap links with no overhead and without having to register. All the while, the user must be still be protected from being innocently hit with large charges.

Odlyzko, Andrew. "The Case Against Micropayments." Lecture Notes in Computer Science, 2003, Volume 2742/2003, 77-83. <>.

This paper outlines some of the obstacles in the adoption of micropayment systems, most of which are based on psychology, sociology and economics, and not on technology. Studies in behavioral economics found that consumers are more likely to pay a flat rate than numerous small payments. Other studies have found that barriers to entry, such as paying per page view, deter overall usage. These factors will likely restrict the role of micropayments in the economy.

Tripunitara, Mahesh, and Tom Messerges. "Resolving the Micropayment Problem." Computer 40.2 (2007): 104-106. Academic Search Premier. EBSCO. Web. 21 May 2011.

This article realizes that the main problem behind micropayments are transaction fees and that those fees are unavoidable, even in the most idealistic merchant-broker agreements. The authors talk about "cryptography based solutions" such as aggregating payments into lump sums and users generating payment tokens.

Shirky, Clay. "Fame vs Fortune: Micropayments and Free Content". Clay Shirky's Writings About the Internet. 5 Sept, 2003. <>.

This article discusses the reasons why micropayment systems do not work in today's age of free digital content. Shirky claims that the act of purchasing anything, regardless of price, creates mental transaction costs that result in a small but significant level of inconvenience for users. He further argues that free content is an "evolutionarily stable strategy" because it offers an advantage that cannot be beaten, only matched.

Van Buskirk, Eliot. "Facebook's Virtual Currency Push Hints at Micropayments Battle." WIRED. 19 Sept. 2010, < virtual-currency-takeover-hints-at-micro-payment-battle/>.

This article discusses the impact that Facebook Credits could have on micropayments. This micropayment model however involves prepaying and then subtracting small amounts of money from the prepaid amount. Thus people buy Facebook Credits and then use them for in app purchases. However Facebook, Google, and Apple could all have similar products soon, possibly leading to a virtual currency showdown.

Zeledon, Max. "Micropayments: Where Charity and Social Networks Meet." BusinessWeek Online (2009): 11. Academic Search Premier. EBSCO. Web. 21 May 2011.

This article talks about small payments made to charitable causes via Twitter. It talks about some of the "major hurdles" against such a system, like the psychological barrier of getting people to want to use and trust the system and again and overcoming transaction fees. Many people will be wary of added complexity to existing social sites, trusting transaction validity and security risks of private information.