Thursday, July 08, 2010

PayWalls

I've just read 4-5 paywall coming articles in the last 24 hours, get used to it kids, the age of advertising supported content being the only way is gone.

So the question is what billing mechanisms are publishers going to use? Credit cards? Paypal? one off payments per year? monthly subscriptions?

Whats going to be the preferred system - site wide access only or per article "tiny value" transactions?

Are multi-publisher stored value "virtual wallets" going to make a big showing? 

What do you think as content providers? what do you think as content consumers?


Cheers,
Dean

4 comments:

  1. Are multi-publisher stored value "virtual wallets" going to make a big showing?


    Yes.


    Whats going to be the preferred system - site wide access only or per article "tiny value" transactions?

    Market will tell.


    So the question is what billing mechanisms are publishers going to use? Credit cards? Paypal? one off payments per year? monthly subscriptions?


    If its site-wide, CCs or other online billing ( paypal, amazon, google , etc) will work; or there might be a site-wide credits system ( fill up an account, consume over time).


    But I see smaller transactions being crucial - and that means there will be a battle of virtual currencies / wallets.


    CC transactions right now - through any provider - are too large. You're looking at .30¢ + a percentage commission. Of a charge < $5, its large; off a charge <$1 its possibly not worth it. Mobile payments are twice as much -- a friend in the industry told me that they end up taking about a 65% cut on average -- if you're lucky.


    there are some companies that are getting a bit greedy / crazy on the virtual currency market though. one place integrates with CoinStar machines - you can turn spare change into virtual coins at the supermarket. but the commission structure is abhorrent:
    - coinstar takes 10% off if you select cash ( ie: you get $90 for $100 in coins )
    - you can take a 100% value gift card or currency value - however... the gift card seller gives coinstar a 20-30% break. ie: you sell a $100 gift card for $75 cash
    - for virtual currency, this goes though Rixty - a broker - who then takes their cut off the top - which could be 30%
    - most folks don't want to use their own virtual currency, they utilize a network / brand of virtual currency. so rixty converts the deposit into facebook coins or something like that.
    - that network then takes their own cut, often around 30% as well


    so at the end of the day, $100 in real world currency ends up being $75 -> $52 -> $37 -> $25 ... because everyone wants a cut.


    Admittedly, I used a long and egregious chain of commissions to illustrate this -- but it is indeed a common chain.


    Apple is smart on how they game it for iTunes -- they auth your card early on for a credit line, then accrue billings over 1 week. 30¢ for each itunes track is prohibitive for them... but 30¢ amortized over 1 download a day for a week -- significantly lower.

    ReplyDelete
  2. Dean - you forgot "iTunes Store" as one of the major "payment mechanisms". Apple's done a great job showing that people will pay for content they want and that will bring them plenty of business (they're effectively an "aggregator", backed, of course, by credit card). I'm sure you know that monthly's like PopMech and Wired are experimenting with the "journal as application" model and Apple may also mature its in-app-purchase model to support journals that are published more frequently.


    As to other "real" payment technologies - PayPal, eg, is not a "real" payment technology, it's just a shil for your credit card - I think the credit card industry has worked hard to make anything else impractical here in the US. They'll process transactions as low as a dollar, which is almost micropurchase level. So, I think the best we'll see is new ways to aggregate small payments into a processable card transaction.


    Among other things this will negate that need for a special "virtual wallet". The other problem with that concept is branding. Multi-role smart cards have failed not so much because the technology isn't there, but rather because the branding needs to be clear. The same will be true of virtual wallets - if you get one from say CitiBank, why would CitiBank want you to use your ChaseManhattan payment card with it?


    I think one avenue of promise - admittedly frightening - is to have one of the multi-site authentication systems take on the payment aggregator role. The elephant in the room here is Facebook - they have the 500m user accounts and relationships with external publishers. And who can forget "Facebook Beacon" - it's clear they're interested in this space. OpenID and OAuth are other (less scary, more neutral) options.


    At any rate, I agree Dean that paid content is on the rise. And I'm glad to see it. Ad-supported content is like cheap food (http://www.time.com/time/health/article/0,8599,1917458,00.html) - we don't see, or choose to ignore, the real costs (loss of privacy, ir-readability of most websites, intrusion, etc).


    Dave

    ReplyDelete
  3. As to other "real" payment technologies - PayPal, eg, is not a "real" payment technology, it's just a shil for your credit card - I think the credit card industry has worked hard to make anything else impractical here in the US. They'll process transactions as low as a dollar, which is almost micropurchase level. So, I think the best we'll see is new ways to aggregate small payments into a processable card transaction.


    1) Paypal has a micropayments system. I don't think there is a stated minimum transaction for the micropayments account. its just 5¢ + 5% per transaction. ( vs .30¢ + 2% per transaction on normal paypal )


    2) Paypal does that by aggregating small payments into single transactions


    3) PayPal does have a "real" payment technology -- the bank account linkage. That's why so many of their products are geared towards requiring people to sign up, and incentivizing them to list bank accounts in addition to credit cards. The transactional EFT/ACH/whatever charges they pay are considerably lower than dealing with transaction fees + commissions to credit card companies.




    I think one avenue of promise - admittedly frightening - is to have one of the multi-site authentication systems take on the payment aggregator role. The elephant in the room here is Facebook - they have the 500m user accounts and relationships with external publishers. And who can forget "Facebook Beacon" - it's clear they're interested in this space. OpenID and OAuth are other (less scary, more neutral) options.


    Facebook , Twitter and Google are all reportedly working on -- and going to compete fiercely on -- micropayments platforms. they'll all likely have some form of open source to them , as a way to make it seem less scary and neutral, but its going to be a bitter bitter fight.


    Jonathan

    ReplyDelete
  4. Well, the truth of the matter is that everything has a cost. As I say, the business model of free eventually runs up against the business model of rent. We want everything for free, but then we want to complain about privacy issues. I don't think we can have it both ways.

    Remember much of the free model came about because in those early dotcom days, the content owners didn't think the internet would represent a big audience. It wasn't because they really thought about how giving away their content would impact business down the road.

    For years we've run commercial TV on the advertising model and we accepted the commercials that interrupted our shows because that was the business model. While they didn't collect direct information, advertisers certainly knew about the groups watching specific shows.

    The challenge today is that consumers need to either accept the advertising model or learn to pay for things. I haven't seen any biz models outside of those two major options. At least I haven't heard of any.

    I think we'll see an end to the privacy issues in the future. Just my 2 cents.

    David

    ReplyDelete