Micropayments v2.0 - This time it’ll work!
If you listened to any of the tales of riches and fame, spun by the golddiggers of the first internet bubble (from 1995ish to 2000), you may have caught one persistent theory:
The micropayment story.
A seminal paper written in 1995, called the Digital Silk Road kicked off a veritable zoo of startups intent on making micropayments work: Facilitating payment on the order of 5 cents to less than a tenth of a cent for near trivial content. Back then blogs weren’t hip yet, so the usual suspects back then were online newspapers and web comics. This list isn’t exhaustive:
FirstVirtual, Cybercoin, Millicent, Digicash, Internet Dollar, Pay2See, BitPass
Source: Clay Shirky
Any of those sound familiar to you?
No, me neither - and I’ve had an interest for small payments for quite a while now. All of them failed. All of them failed quickly.
As you may know, three of the four current fourstarters are involved to some degree or another with a new payment-based startup: Tipit.To. I’ll let the homepage of tipit explain what it’s about.
So, why mess with small payments when they don’t seem to work? I found a few articles which explain the reasoning better than I can - saner souls who have made some very logical arugments as to why the original idea of micropayments can’t work. Fortunately almost none of the arguments actually apply to tipit - on the contrary, most of them actually mean tipit is going to work.
Around 1996, Nick Szabo posted, as far as I know, the first serious argument against micropayments (The Mental Accounting barrier to Micropayments) which argued that there’s a fundamental flaw in micropayment reasoning: Either the payments total up to insignificant amounts, but then there’s not all that much money to be had, or they do tally up to significance, but in that case you can’t claim that the cost, ‘micro’ as it might be, is accepted without much thought. There’s more to it than that, but that rung particularly true for me: even 5 cents is far too much if you’re supposed to pay that much multiple times a day, every day.
Couple of years later, Clay Shirky got in on the micropayments game, torching the viability of the whole idea by highlighting that Free content works already, and works better for handing out fame - which is what bloggers and the like are after far more than money. He argues that, in fame v. fortune, fame wins. And that means micropayments lose. Clay went up against Scott McCloud who locked a comic away behind BitPass, for 25 cents.
Recently, McCloud relented and released that comic for free, causing a revisit from Clay.
Like a breath of fresh air, this post started off a fresh discussion about how to make things better. Nick highlights one form of micropayments that do work: iTunes. Brian Will pointed out his idea for what is essentially tipit, which he described in some detail here, and Nick reviewed the tipit concept!
