9 Comments

Summary:

There is a conventional wisdom in the media industry that micropayments for online content don’t work, but Greg Golebiewski of Znak It says that this isn’t true, and that media companies need to experiment with the model.

shutterstock_125292026

Growing numbers of newspapers and other media outlets are erecting paywalls, hoping to imitate the success of the New York Times, while others such as The Guardian and the Daily Mail remain paywall free in the hope that they can survive on advertising revenue — but very few seem to be experimenting with micropayments. Why? Among other things, there is a perception that micropayments for content don’t work, because they are too cumbersome and involve too much friction for the user.

But Greg Golebiewski, the founder and CEO of a micropayment provider, thinks this conventional wisdom is wrong, and that media companies are missing a lucrative opportunity.

Golebiewski’s company is called Znak It, and he says he has spent the past five years or so trying to convince publishers and media companies of all kinds that they should at least experiment with micropayments — and that they could actually make more from such a model than they do from a paywall, while also attracting new readers who might never get beyond the subscription barrier. But with only a handful of clients using his system, most of them located in eastern Europe, the Znak It founder is still very much a lonely voice crying in the media wilderness.

“I’ve been trying to sell this idea for the past five years — it’s extremely difficult to break that notion, the theory that micropayments don’t sell. [Critics] don’t have any data, it’s just conventional wisdom or common knowledge, but it’s very difficult to go to them and say we have a flexible system for payments and then when they figure out it’s micropayments, they stop listening.”

Micropayments equal being “nickel and dimed”

Payment

The idea that micropayments are unworkable for content stems in part from a piece by media theorist Clay Shirky in 2009, in which he said that users “don’t like being nickel and dimed.” The psychological friction created by this perception, he said, meant that very few people would go through with a micropayment for content. Suggestions that Bitcoins (as described recently by Jeremy Liew of Lightspeed Venture Partners) or some other system could make the idea more feasible are routinely dismissed by media-industry insiders.

Golebiewski, however, says that his research shows that when given a choice between a paywall or micropayments, readers are overwhelmingly in favor of paying for specific pieces of content rather than signing up for a monthly or annual subscription plan — and that this is particularly true for younger users, who are often thought to be opposed to paying for content online.

Znak It published a white paper last year (PDF link) based on the results of five pilot projects involving a variety of different kinds of media such as videos, music and text content. Out of a total of 43,000 unique users there were 1,281 buyers and the largest single group was 18-24 years of age, although that number could be skewed because music was part of the trial. In that age category, as many as 5 percent of the unique users wound up becoming buyers (paywalls usually get about one percent conversion).

ZnakIt

Part of the problem for Golebiewski and Znak It is the chicken-and-egg factor: there are so few companies using micropayments that it’s difficult to come up with any comprehensive research to prove that they work. Znak It’s white paper is based on such a small sample size that it’s hard to use it as an argument for why the New York Times or another newspaper should go with the micropayment model. But the Znak It founder is adamant that publishers need to try it, if only to increase their reach.

This is a challenge that I discussed in a recent post — the idea that paywalls are good for monetizing your existing readers, but not particularly good for encouraging new readers (apart from the occasional dropping of the wall for breaking-news purposes). Part of Golebiewski’s point is that allowing readers to pay for a single article encourages browsing, which makes it more likely someone will convert into a regular paying customer.

Micropayments aren’t a quick fix

The Znak It founder admits that he has so far only had success with a few eastern European media companies — including a national weekly publication in Poland (where Golebiewski is from) and some small newspapers in other countries — and blames this on the deep-seated dislike of micropayments in North America.

“We started in some of the countries in eastern Europe and elsewhere that were a bit more responsive to our ideas — a bit more desperate if you will. It was easier to go to those smaller countries and start there, they’re a little more open to experiment — they don’t have the big brands and massive traffic, so they are a little bit more receptive.”

The company’s system has two different models: in one, users create accounts with Znak-It and can then use its payment process with any site that supports it, while the second is an “earn free access” option in which advertisers subsidize access for readers who provide some kind of information or engage in some kind of task — such as reading through an ad or filling out a survey. Part of the challenge for Znak It as a small provider is signing up enough clients to make it worthwhile to have an account there (Google has also experimented with micropayments via Google Wallet, and has a “survey wall” service as well).

Despite his lack of substantial progress, however, Golebiewski says he remains convinced that some form of micropayments has to be part of the future of media and content online, since subscription models are only going to appeal to small sub-segment of the total population:

“Many publishers are looking for a quick fix, and I don’t think this logic we are trying to sell is attractive enough — but it will be. It’s inevitable. Maybe if we don’t call it micropayments, maybe we should call it flexible payments. But study after study shows that flexible payments are more popular with users… it has to be the future of the internet as a marketplace.”

Post and thumbnail photos courtesy of Shutterstock / Maryna Pleshkun and Shutterstock / Patryk Kosmider

You’re subscribed! If you like, you can update your settings

  1. and he is perfectly right

  2. Chris McCoy Tuesday, May 7, 2013

    Will only exist in a consumer context i.e. Facebook, Twitter, Pinterest, etc.

  3. Pieter Dubois Tuesday, May 7, 2013

    “Casual payments”.

    Greg is right. Publishers however will only start using them kicking and screaming. Their business model is advertisement revenue fueled by subscriptions. Offline, however, they also sell per issue so why not online?

  4. Evan Schoepke Thursday, May 9, 2013

    Other companies like Flattr, Centup, and Copper.is are also doing exciting things in this space that are starting to catch hold.

  5. Greg Golebiewski Friday, May 10, 2013

    Thank you Mathew for the write-up.

    I just wanted to comment on the results we presented a year ago in our “white paper,” because I receive many questions about how representative they are.

    First, the sample was not small at all: over 40,000 uniques in a month. As expected, the numbers of buyers — 1,281 — and paid transactions — 3,767 — were smaller, of course, but still statistically significant.

    Second, these numbers represent real users and real actions — they are not opinions or declarations, which often are the case in other studies. Here, user visits a site, sees desired content, clicks on it, and — most importantly — completes a pay-for transaction to open/consume that content. Comparing to more traditional CTR or “leads,” our conversion rates are quite “real” and reliable.

    Finally, we do not compare our rates to the paywall conversion rates. Please note that paywall conversion is often calculated as the ratio of the total number of digital subscribers, as they accumulate over time, to the current number of uniques generated by a given site. A more appropriate measure would be to compare the number of new subscribers in each month or quarter to the number of uniques the site had when the paywall was implemented. If you do that, then the conversion rate of the NYT meter — to use that popular example — is not 1.5% or even 1%, as it was often said, but a fraction of one percent. More importantly, it is decreasing, not increasing; in the last quarter, the NYT reported a net gain of only about 40,000 new digital subs.

    Open, on-demand systems do not have this “inherit math problem.”

    1. Thanks a lot for that clarification, Greg.

  6. Robin Coleman Tuesday, May 14, 2013

    I like the idea of micropayments, or as Pieter called them above, casual payments. I also like the idea of knowing that I can’t get myself into a situation where I read more than I can afford, which is why a subscription is appealing–I can budget my subscriptions without keeping tabs on myself day-to-day.

    Has anyone explored doing a micro-payment where, if you’ve got an account, you’ll be charged for content consumed until you reach the subscription level, after which you can keep consuming, but without additional charge? The flip side would be that on months when you don’t consume much, you save a few bucks.

  7. Matthew da Silva Saturday, May 18, 2013

    Yes, I think micropayments are a good idea. I’ve been thinking about this since the beginning of last year, at least, and my most recent thoughts on the payment model are here:

    http://happyantipodean.blogspot.com.au/2013/05/google-wallet-promises-to-help-media-to.html

    Lots of people said that subscriptions wouldn’t work, and the numbers show that they were wrong. The websites that went to a subscription model early – and were criticised for doing it – now look like visionaries, as returns from ads have plummeted. Many people use a few websites for news – say, The New York Times and The Guardian – and so they can benefit from the fact that those companies share the same micropayment platform; other publishers can piggyback on that investment and use the same micropayment engine too. There is inherent scale in the model once you get a few big publishers on-board.

  8. typo: “Znak It’s white paper is based on”

Comments have been disabled for this post