Wednesday, April 14, 2010 - The Progress & Freedom Foundation Blog

Who Said Micropayments Can't Work?

Oh yeah, that was me. And a lot of others. Well, we were wrong. The mobile app store market (Apple, Android, etc) is brimming with a bonanza of micro-business opportunities for producers and consumers alike. I am consistently amazing by the range of offerings available today, the vast majority of which remain free of charge. But what is more impressive is the growing array of applications and games available for mere pennies. Sure, some are more than a buck -- but not that much more. I was just looking through the 40+ apps that I've got on my Droid right now (not really sure how many I've downloaded overall since I've deleted a lot) and I would guess that I paid for at least 25% of them--many after being "upsold" by first trying the free versions and then buying. Yes, I know there continues to be a debate about what counts as a "micropayment," but the fact that so many more people are paying just a couple of bucks or less for content in these mobile app stores suggests that its only going to easier for people to pay even smaller sums for content in coming years.

What got me thinking about all this was slide #75 in Mary Meeker's latest slideshow about Internet trends. The Morgan Stanley web guru notes that users are more willing to pay for content on mobile devices than they are on desktop computers for a number of reasons, but the first of which she listed was: "Easy-to-Use/Secure Payment Systems -- embedded systems like carrier billing and iTunes allow real-time payment." The important point here is that the combination of these slick, well-organized online app stores + secure, super-easy billing systems have combined to overcome the so-called"mental transaction cost problem," at least to some extent. We're not nearly as reluctant today to surf away when something says "$0.99" on our screen. Increasingly, we're hitting the "Buy" button.

The really interesting question, of course, is to what extent we can expect this model to grow and become more widely utilized for other types of content. A lot of folks in the news business remain hopeful that a micropayment model can help them monetize their content in an age of business model uncertainty and highly disruptive change. I'm skeptical that micropayments are going to "save the news," since funding hard news and "broccoli journalism" is really expensive, and micropayments alone will never cover the costs. But perhaps they don't have to. Micropayments could become just one part of an array of new business models that media operators could tap in an effort to reinvent themselves and thrive going forward. Subscriptions, advertising support, foundational / philanthropic funding, and more could also be part of the answer. We just don't know what will work going forward. But I've grown at least a tad bit more optimistic that micropayments can at least be considered part of the conversation again.

posted by Adam Thierer @ 1:17 AM | Economics , Mass Media