The Macro Problems with Micropayments


Micropayments companies – companies that make it somewhat faster and easier to purchase small units of content such as a company profile or an article – have existed since the early days of the Internet. You may remember names such as First Virtual, Cybercoin, Digicash, Millicent, Payword, Micromint … and that’s just a partial list. And despite a raft of failures in this space, new players keep coming. For example, a start-up called CoinTent just raised $1 million to pursue its vision for micropayments.

Why are micropayments so hard? I see two primary issues. The first is in establishing market traction. A successful micropayments play needs to not only get a lot of users, its needs to get a lot of publishers, and it needs to grow both sides simultaneously. Moreover, there needs to be a big overlap in terms of interests. I’ve always thought a B2B micropayments start-up might succeed more easily than a broad-based B2C micropayments venture. But then I look at my own web research habits: I’m all over the web, and the content I am most willing to pay for is typically the most obscure. Even if a micropayments company could sign up 10% of online content providers, an unimaginable percentage, it wouldn’t much simplify my life.

More subtly, and more significantly, is the natural hesitation about buying something that the seller won’t show you in advance. Content is an experience good – you can’t assign a value to it until you’ve seen it. And of course, content providers can’t really show their content in a meaningful way prior to the sale. Over the years, I have purchased “articles” that turned out to be 24 words long. I have bought “books” that were 14 pages. Of particular concern to data publishers, I have purchased company profiles that contained little more than the company name and address. It turns out this data publisher had a lot of detailed, high value company information, but on only some of the companies in its database. And it’s not just an issue of length or depth. I have purchased journal articles that were quite lengthy and detailed, but that touched only fleetingly on the topic I wanted to learn about, something that’s very difficult to discern in advance.

In short, micropayments for content is hard, because there’s so much content out there, and the inherent need to say “trust me” to potential buyers. At least at this stage of development, micropayments don’t look like a big opportunity for content publishers, data publishers in particular.