Micropayments | The Humane Club Made with Humane Club
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I've 15 years of experience in media, product & technology. By day, I work at a mainstream news site. On weekends, I read & write on media products. Most recently, I was a Knight Fellow w/ International Center for Journalists for 3.5 years.
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I've 15 years of experience in media, product & technology. By day, I work at a mainstream news site. On weekends, I read & write on media products. Most recently, I was a Knight Fellow w/ International Center for Journalists for 3.5 years.

Micropayments

Published Sep 11, 2021
Updated Mar 26, 2022

Today, we micro-pay for many products online, be it Rs. 30 for every Swiggy delivery, Rs. 300 for a quick Uber ride, or Rs. 100 for a disposable Gillette razor. We have also micro-paid to buy movies, songs, and audiobooks.

But can you implement this same strategy for your individual articles, videos, or podcasts? It depends on whether you are supply-pick or demand-pick.

Principles

Supply-pick platforms aim to be habit-forming. Companies like Swiggy (delivery), UrbanCompany (a gig marketplace for handymen like electricians and plumbers), BigBasket (groceries) and Uber of course are supply-pick, i.e., suppliers choose whether to give service.

  • They maintain low prices (micropayments) and have well-defined commodities with well-defined expectations.
  • Their primary focus is on providing convenience so acquired customers keep transacting regularly.
  • For example, Uber charges a low transaction value (0.001) but with high frequency (multiple times a day) and is habit-forming.

In contrast, demand-pick platforms tend to charge larger amounts. Companies like Coursera (online education courses), AirBnb, Fashion, and Etsy (artisanal hand-made products) are demand-pick marketplaces, where customers choose what to buy.

  • Demand-pick platforms focus on surfacing choice and help you choose the product that is right for you.
  • For example, you have Airbnb, which one would use twice a year but would end up shelling out hundreds of dollars per transaction.

Hence, there are pick-me-up, click-bait headlines but no pick-me-up Uber drivers.

Most media is demand-pick

Whether you’ll

Supply-pick media: Well-known movies, songs, and books are commodities with well-defined expectations. If you want to buy a movie, then it does not matter whether you buy it from iTunes or YouTube.

YouTube charges ~$2 for a movie in India

Demand-pick media: Any media that has high variance and whose expectation cannot be defined, tend to be

  • Publications and reporters know they are in a demand-pick market. Hence, they too invest heavily in their brands.
  • Apple also knows this. Hence, iTunes does not allow Metallica and Taylor Swift to change the fonts of their listing, but Apple News does.

But, what if the price is too low: If the price per product is very low, demand-pick marketplaces tend to be priced as all-you-can-eat buffets subscriptions.

Demand-pick media marketplaces struggle to charge micro-payments. 

  • Before reading an article, how would you know if the piece is worth paying 0.1 or 0.001?
  • At least in an Uber car ride, the measurement can be standardized based on distance. One way around this could be that the author or publisher could set a fixed price for any article, say 0.1. But since it is impossible to define a news article’s expectation, readers can feel that they overpaid or the publisher left too much on the table.

Hence, most demand-pick media marketplaces are all-you-can-eat buffet subscriptions. NYT, Netflix, Spotify, Apple Music, and Medium are all subscriptions. These publishers focus on building a relationship with their audience. The promise is that the audience will get their money’s worth from the overall spread. But, the audience must decide which exact to consume and that the publisher can only suggest. Audible takes it a step further. It says you can listen to 24 books in a year. But in case you do not like a book, you can return it.

FAQs

Isn’t Substack micropayments, demand-pick media marketplace? Substack is a ‘software-as-a-service company first, marketplace second. Substack, and other creator economy tools, are selling shovels in the middle of a gold rush. In return for the technology they offer, they charge a 10% commission. The writer still needs to have a huge enough fan following to monetize meaningfully on Substack.

What about Twitter with its tipping functionality? It is worth noting that social media — Facebook, Twitter — aren’t primarily a marketplace. Their primary goal is to promote social interactions without any buying or selling. So despite Twitter’s Tip Jar introduced monetization, the media marketplace is a ‘feature’ on top of its core business – social.

Does this apply to news products?

A news publication isn’t a marketplace. So would it work for a news publication? Raja Ramamoorthy R, the head of products at Vikatan, talks about his experience in a LinkedIn post on the topic. He says, “When we put a price tag on an article, a reader subconsciously adds more expectations and value to the content before buying or reading it. The higher the expectation, the more the judgment. Nothing will kill a micropayments product than disappointing users after consuming the value.”

“While micropayments might be a long-term volume game for publishers, it’s a short-term value game for readers.”

Raja Ramamoorthy R, the Head of Products at Vikatan

One reason for the lack of consistency in news and journalism articles is that writing ‘well’ remains a high-skill activity, unlike taxi driving. In this YCombinator article titled Read This Before You Build Uber for X, they share this graph that shows how as skill required increases, the volume reduces. Good beat reporters take years to build a deep understanding of a topic and are specialists.

Credits: YC blog – Read This Before You Build Uber for X

But any news product will always have a mix of average quality articles and good deep articles. One way to overcome this expectation problem is to be like Holloway.com and only ship high-quality paid editorial products, thereby setting an expectations benchmark.

Even more fundamentally, micropayments are on the wrong quadrant of the 2×2 matrix.

There are only two variables to focus on: 

  • How frequently do customers purchase, and hence is the product sticky or habit-forming
  • What is the value of the transaction

Let’s take few examples. Uber charges a low transaction value (0.001) but with high frequency (multiple times a day) and is habit-forming. On the other extreme, you have Airbnb, which one would use twice a year but would end up shelling out hundreds of dollars per transaction.

Between these two extremes are most media products:

  • Most news product subscriptions, Medium, and Netflix charge a small monthly fee and have weekly active usage.
  • Audible charges a higher annual fee, $150 per year, and provides 24 audiobooks.
Types of marketplace businesses

Micropayments for news would be a low-value, low-frequency product.

  • Low value because you can only charge a small amount per article, considering NYT’s monthly subscription costs, at least in India, is less than a dollar.
  • The news would also be a low-frequency product because it is a demand-pick market with many free substitutes.

Now add to it the risks that Ramamoorthy raises of disappointing audiences and cultivating a target audience that only wants to play short-term games with you.


Personal notes:

  • How do I know some of this? Unfortunately, I spent 12 months of my life chasing a low-frequency, low-value mirage of my own. In 2011, I had just quit my job with Amdocs and returned to India. I started TracksGiving, a service (SDK) that e-commerce companies could integrate at check-out, allowing shoppers to donate change to social causes. 
  • My frequency of writing isn’t as good as I would like it to be. August was a month with a hectic news cycle — Olympics, Independence Day, Taliban 2.0, Paralympics, India-England series — and staying on top of the news cycle is exhausting.

Since news and journalism are demand-pick, editors at Apple News write persuasive pitches for curated articles. More on this in the article below.


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