Ask HN: Anybody here got use for micropayments?
5 comments
No. It's a solution in search of a problem. There are plenty of businesses that would like to receive micropayments, but time after time customers have rejected them. Even if you somehow created a system that was absolutely seamless and required zero effort on the part of the user, you'd still have to convince people that they actually want to make micropayments.
The trouble is that if you set a price that is very nearly free then you are inevitably competing with actually really free. Dan Ariely's research has shown that customers massively overvalue anything free. Customers overwhelmingly prefer a free good to a good at any price, even when there is a significant difference in quality. No experimenter thus far has managed to break this natural gravity towards free in preference to any price. Add in the inevitable friction of the act of payment and you've got an overwhelming barrier to entry that without fail drives the mass of the market towards free alternatives.
There have been a litany of failed micropayment services, all of whom failed for the same reason - rather than doing the Agile thing and finding out what the customer wanted, they tried to impose a 'great idea' on a market that has consistently rejected it. Why exactly are you going to succeed where dozens have failed? What are you going to do differently?
http://www.predictablyirrational.com/pdfs/zerofree.pdf http://www.shirky.com/writings/fame_vs_fortune.html
The trouble is that if you set a price that is very nearly free then you are inevitably competing with actually really free. Dan Ariely's research has shown that customers massively overvalue anything free. Customers overwhelmingly prefer a free good to a good at any price, even when there is a significant difference in quality. No experimenter thus far has managed to break this natural gravity towards free in preference to any price. Add in the inevitable friction of the act of payment and you've got an overwhelming barrier to entry that without fail drives the mass of the market towards free alternatives.
There have been a litany of failed micropayment services, all of whom failed for the same reason - rather than doing the Agile thing and finding out what the customer wanted, they tried to impose a 'great idea' on a market that has consistently rejected it. Why exactly are you going to succeed where dozens have failed? What are you going to do differently?
http://www.predictablyirrational.com/pdfs/zerofree.pdf http://www.shirky.com/writings/fame_vs_fortune.html
I can see your concerns, most of which are of course valid. A lot of people failed doing this kind of thing, though there were a lot of failures during a time when the internet clearly was not ready for that kind of thing in general. Nowadays, thanks to people like Rupert Murdoch the thought of paying for something gets at least a little attention (I do not think that news content is suitable for this approach).
The companies we will focus on are providers of exclusive content or services, many of which already sell their stuff using the freemium model. I am not saying that all of these will embrace micropayment, but I am saying that there are a lot of people worried about improving their conversion rate. If the lowest option you offer a customer for buying stuff is a 20$ monthly membership, of course you lose a lot of them. Being able to easily acquire small payments, whole models could chance.
As to your second concern, the whole point of this post is being agile, to get customer feedback before everything is set in stone. We do not want to impose our great idea, currently we have a basic understanding of how a simple and flexible solution could look like, and would like to validate our approach with the help of some cooperators.
The companies we will focus on are providers of exclusive content or services, many of which already sell their stuff using the freemium model. I am not saying that all of these will embrace micropayment, but I am saying that there are a lot of people worried about improving their conversion rate. If the lowest option you offer a customer for buying stuff is a 20$ monthly membership, of course you lose a lot of them. Being able to easily acquire small payments, whole models could chance.
As to your second concern, the whole point of this post is being agile, to get customer feedback before everything is set in stone. We do not want to impose our great idea, currently we have a basic understanding of how a simple and flexible solution could look like, and would like to validate our approach with the help of some cooperators.
Thanks, I read the html-linked content. He talks about the "mental effort" required to make a micropayment and how that's a hindrance to the technology. I agree in that I wouldn't want to take the time to "OK" every payment. But that doesn't kill the entire concept.
It seems what we need is a very, very simple payment model. Suppose, for example, I tell my browser(s) that I am willing to pay up to one cent for an article from the Wall Street Journal. When somebody from HN posts a pointer to a Walt Mossberg review of Apple's latest gadget, the link appears in some distinctive format, like a green-colored link (or with a '$' suffix, etc.) When I click the link, my wallet is debited one cent and the article appears. There's no extra effort on my part, except for an occasional wallet reload.
This would seem like a technically feasible approach that avoids the mental effort of going through with a separate purchase step. OK, not everybody is going to be technically astute enough to set themselves up with whatever wallet technology is used...but this is just another problem to be solved. Maybe PCs and netbooks come with built-in wallets preloaded with a few dollars or euros. Maybe wallets are set up via multi-level-marketing, so the tech-savvy set up their friends and family. Maybe something else.
Point is, I don't think it's an impossible problem. We just don't have the right models yet.
It seems what we need is a very, very simple payment model. Suppose, for example, I tell my browser(s) that I am willing to pay up to one cent for an article from the Wall Street Journal. When somebody from HN posts a pointer to a Walt Mossberg review of Apple's latest gadget, the link appears in some distinctive format, like a green-colored link (or with a '$' suffix, etc.) When I click the link, my wallet is debited one cent and the article appears. There's no extra effort on my part, except for an occasional wallet reload.
This would seem like a technically feasible approach that avoids the mental effort of going through with a separate purchase step. OK, not everybody is going to be technically astute enough to set themselves up with whatever wallet technology is used...but this is just another problem to be solved. Maybe PCs and netbooks come with built-in wallets preloaded with a few dollars or euros. Maybe wallets are set up via multi-level-marketing, so the tech-savvy set up their friends and family. Maybe something else.
Point is, I don't think it's an impossible problem. We just don't have the right models yet.
I happen to be working on a micropayment strategy and implementation for my day job (we're content producers in this scenario) but we're US based.
I am curious to know more about the micropayment problem your startup is solving.
The technical issues--transactional processing, account management, integration with the web experience, etc.--aren't trivial but they are relatively straightforward.
The harder nut to crack seems to be the social issue: Customers don't want to break out a credit card for a $0.01 purchase, so you need some sort of digital wallet or debit account to deduct from. Yet there is no "digital wallet" service with broad enough acceptance to assume that your (or at least my) average customer will have one.
The chicken-and-egg problem seems to be a challenge: Sellers won't offer the digital wallet payment option if there aren't existing customers. Customers won't sign up for a digital wallet if there aren't sellers who use it.
Are you doing anything to address this side of the problem?
I am curious to know more about the micropayment problem your startup is solving.
The technical issues--transactional processing, account management, integration with the web experience, etc.--aren't trivial but they are relatively straightforward.
The harder nut to crack seems to be the social issue: Customers don't want to break out a credit card for a $0.01 purchase, so you need some sort of digital wallet or debit account to deduct from. Yet there is no "digital wallet" service with broad enough acceptance to assume that your (or at least my) average customer will have one.
The chicken-and-egg problem seems to be a challenge: Sellers won't offer the digital wallet payment option if there aren't existing customers. Customers won't sign up for a digital wallet if there aren't sellers who use it.
Are you doing anything to address this side of the problem?
You raise some very valid points, most of which we also identified as key questions to our enterprise. As to the social issue: we anticipate the chicken-egg problem on an even broader scale. Our target group are not companies who already do sell a lot online, but the ones who did not even start doing so, missing a suitable solution to acquire payments. So we focus on projects where the direct selling of goods or services starts from the ground, which we expect to work to our advantage, in regard to convincing companies of using our service, even without an exisiting customer base.
We will not pursue the customers directly at first, and concentrate on finding partners for integration. These will be probably startups themselves, willing to try unorthodox methods to get ahead.
In regard to the digital wallet, our strategy is to aggregate the most important existing payment services to allow charging of accounts. With suitable integration, this de facto pre-paid approach can be turned into a nearly-instant experience for the customer.
We will not pursue the customers directly at first, and concentrate on finding partners for integration. These will be probably startups themselves, willing to try unorthodox methods to get ahead.
In regard to the digital wallet, our strategy is to aggregate the most important existing payment services to allow charging of accounts. With suitable integration, this de facto pre-paid approach can be turned into a nearly-instant experience for the customer.
Disclaimer: We are based in Germany, so while it should not be a problem for anyone in the EU to use our service, we cannot at this moment provide anything for anyone outside Europe.