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”

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).

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

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Flattr, co-founded by The Pirate Bay’s Peter Sunde, is quite a simple system. The user signs up to donate a certain amount — $5 for example — each month, and then “flattrs” people for their content, with the recipient getting an amount equal to the monthly pot divided by the number of flattrs the user has made. It was originally for tipping bloggers who had Flattr buttons on their sites, but last month the company expanded the functionality to allow the automatic tipping of people posting on Twitter, SoundCloud, Instagram and other sites.

However, Flattr has now removed the Twitter functionality after Twitter asked it to desist. As Flattr co-founder Linus Olsson explained in a blog post on Tuesday:

“Recently Twitter contacted us and told us that we are violating their API terms citing the second part of a clause (IV. Commercial Use, 2C. Advertising Around Twitter Content) saying ‘Your advertisements cannot resemble or reasonably be confused by users as a Tweet. For example, ads cannot have Tweet actions like follow, retweet, favorite, and reply. And you cannot sell or receive compensation for Tweet actions or the placement of Tweet actions on your Service.’

“This is a quite logical clause as it would stop companies to sell e.g. retweets and followers. It’s an understandable rule to keep the Twitter network clean but in this case the rule is strangely stomping out innovation on their platform.”

Now, Flattr is a for-profit firm that takes a 10 percent cut of payments carried out over its system. But even after Flattr offered to forego that cut in the case of flattred tweets, Twitter apparently said no. So, from today, favoriting tweets won’t result in the tweeter getting money — although those using the Flattr browser extension can still “flattr” tweeters through this alternative mechanism.

I’ve asked Twitter whether it sees another way in which Flattr can operate on its platform, but am yet to receive a response.

On the face of it, this action of Twitter’s seems to tally with its recent shutting-down of Ribbon’s service, which used Twitter’s Cards technology to allow full-on payments to take place within tweets themselves. However, Ribbon and Flattr appear to have broken two different rules — in Ribbon’s case, it looks like the company wasn’t making the right kind of Cards access request, and in Flattr’s it was the contravention of the tweet action regulation.

It’s probably too early to tell whether Twitter has an ulterior motive here, but Olsson suspects it does. As he told me:

“I would speculate that they want to control all the ways that money is changing hands on Twitter – if they control that, they can control the flow and in future get a cut of it. That would be a logical business model for Twitter – if you use Twitter to sell something you need to pay Twitter for it. I’m just speculating here, of course.”

Flattr will now put this theory to the test, Olsson added, by building a system “where you can send a flattr to someone on Twitter by tweeting them instead”. In the meantime, the service continues to expand its reach by adding YouTube to the roster of services through which flattrs can be made.

I should probably add by way of disclosure that, since signing up for Flattr a month ago, I have received two flattrs for tweets of mine: one for €3 ($3.92 – I’m guessing the user didn’t favorite many tweets that month) and the other for €0.16. After Flattr took its cut, the remainder was €2.84, which is just less than the €3 that I have set as my monthly budget for flattring others.

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However, “flattring” someone has until now remained a slightly clunky business, with the content platform needing to carry a Flattr button and with the user having to remember to click it in order to reward the creator. No longer – changes revealed on Monday make it possible to flattr someone simply by clicking the “like” or “favorite” button that’s already next to their content. At launch, 8 services are supported: Twitter, Instagram, SoundCloud, Github, Flickr, Vimeo, 500px and App.net.

That’s right: this makes it possible for you to earn money just by being an awesome tweeter.

Cashing in

Let’s remind ourselves of how Flattr works: users budget a certain amount of money that they want to donate or pay each month. Let’s say User X wants to spend $10 a month. Each time User X flattrs someone, that flattr gets added to a tally, and at the end of the month the money gets divided by that number. Flattr itself takes a 10 percent cut, so, if User X flattrs people 100 times in the month, each recipient then gets 9c.

According to Flattr co-founder Linus Olsson, there have been around 1.5 million flattrs performed since the service launched three years ago. Ignoring the fact that some pay a lot and others very little, the average monthly spend per user is around €4.50 ($5.80) and the average flattr is around €0.50. From this, we can deduce that, on average, users flattr around 9 times each month – this is really not much, and it highlights the need for Flattr to make the changes it announced today.

As Olsson explained to me, it was one thing to have a button that blog proprietors could integrate into their own self-hosted site, but it’s quite another thing to handle the content spewed out on platforms such as Twitter:

“The main way of flattring before has been the button, but the problem with the button is with most content sites today it’s impossible to integrate the button. So we have been thinking how to make it simpler to flattr and possible to flattr in places where the button cannot be added.

“The logical way was to use existing like and favorite buttons, which one can argue are empty right now. Now you can make those functions worth something. We see it as giving them the value they should have.”

This integration has not involved partnering up with Twitter and the others; instead, Flattr is simply using their APIs. “That’s one reason we didn’t do this when we started three years ago — it wasn’t possible,” Olsson pointed out.

More widespread, but more subtle

The use of APIs comes with several benefits for Flattr. For a start, it gets the startup around the problem presented to it by Apple last year. Apple rejected a podcasting app called Instacast on the basis that it included Flattr payment functionality – this apparently broke the App Store T&Cs, because it didn’t give Apple a way to claim its 30 percent cut of all in-app payments.

Now, because Flattr’s method of tapping into the core service’s APIs obviates the need for a telltale Flattr button, Apple would have no way of knowing whether the use of an app that’s plugged into Instagram or Twitter, for example, might result in someone making money without Cupertino taking a slice.

The other problem partially solved by the API approach is that of unclaimed flattrs. A Twitter user, for instance, doesn’t have to sign up to Flattr in order to have people flattr their tweets – they do, however, have to create a Flattr account in order to get the cash. So, when they create that Flattr account, authorizing Flattr on their Twitter account will tell the system that, yes, they are the person whom User X meant to credit.

That said, there is an outstanding problem: right now Flattr has no way of automatically informing people that someone out there is trying to give them money; it’s up to the user to tell their intended recipient to sign up and claim their payment (the payment only leaves the user’s account once it is claimed).

Will it work?

As I stated above, there is a lot of goodwill behind the micropayments concept, but also a number of failed attempts to make the concept work in reality.

If you view this as a chicken-and-egg dilemma, then Flattr is very much doing the right thing. After all, you’re less likely to get into being a Flattr user if the person you want to give money to hasn’t made it super-easy to take Flattr payments. Conversely, if there aren’t scores of people using the service, there is little impetus for content platforms to incorporate the Flattr button.

In theory, quietly plugging into platforms such as Twitter and Instagram makes it a heck of a lot easier for the service to gain scale. However, it raises another issue: visibility. If there’s no Flattr button, how is the company going to educate users about the scheme? How will they know that this system is in place, allowing them to reward their favorite content producers?

Olsson reckons the imminent introduction of automated notifications for content creators will help the service spread: “First people get unclaimed flattrs, get a message about them, collect them [then] flattr others.” I’m not so sure. It’s true that the services we’re talking about didn’t sport Flattr buttons in the first place, but I can’t help but feel that some extra marketing element would be needed in order to really educate potential users about the service.

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The company is working with titles from O’Reilly in the US and Profile, Guardian Books, Constable & Robinson and SnowBooks in the UK.

ValoBox, which announced its publisher lineup at the Books In Browsers conference in San Francisco on Thursday, allows readers to search the text of a participating publisher’s book and then buy individual chapters or pages.

Publishers set an ebook’s price and ValoBox splits it up, primarily based on the book’s table of contents.

“We’re interested in the way micro-purchasing works within books,” cofounder and CEO Anna Lewis told me in a meeting at the Frankfurt Book Fair. “Some content lends itself well to being available on a page-purchase level, and some publishers have said they want a one-chapter minimum.”

Publishers receive a minimum of 60 percent of sales and an additional 25 percent when they sell it through their own channels. Readers can also share content and will receive a 25 percent affiliate fee if someone buys it through their link. ValoBox takes a 15 percent cut of each sale.

I asked Lewis and her cofounder, Oliver Brooks, why a micropayments model will work for ebooks when it largely hasn’t for newspapers. Brooks cited the “accessibility of the purchase” through ValoBooks. “Quite a few micropayment sites would require you to check out to make a small purchase,” he said.

ValoBox’s model is prepaid and users get $2 of credit to start. Lewis and Brooks said the model should be useful whenever “people use books as ‘extra material that people can refer to’ — a community talking about what they’re interested in, gardening, recipes, etc. You could say, ‘here’s the book, and I recommend chapter four.’”

While  ValoBox’s reading is entirely web-based for now, the company plans to add “data portability” that would allow readers to download the content they’ve bought.

Lewis and Brooks previously founded self-publishing site CompletelyNovel.

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In an overnight blog post, which was briefly published and removed, Google Wallet product manager Pali Bhat and engineer Rob Ennals said Google Wallet will support content payments typically ranging between $0.25 and $0.99, with content obfuscated after an opening preview and a 30-minute “instant refund” for unhappy users.

Already publicised elsewhere on Google, a site showcases debut uses currently live by Oxford Reference, Dorling Kindersley and Pearson’s PeachPit.

This development marks the arrival of a big beast in to a micropayments facilitation space populated by several smaller vendors like ZnakIt, but also bigger providers like PayPal, whose own digital content platform has been gathering pace.

Google’s system works like similar rivals, for example, Cleeng, redacting article text in what Google is calling a “rich preview” and “rich obfuscated content”. In the same way, images that must be paid for can also be pixelated.

Payment must be made before readers can see the whole article. The Google Wallet overlay enables swift (dare I say “frictionless”?) payment for users who already have a card registered in their Google Wallet account. It’s all rather quick.

Will any of it work, however?

In its blog post, which also lauds its advertising tools for monetising free content, Google acknowledged:

“Users love free content, and so we expect that advertising will remain the most effective monetization model for most content on the web. However, we know that there is more great content that creators could bring to the web if they had an effective way to sell individual articles that users can find with search.”

Google tells publishers the Wallet content is: “Compatible with ads. By running ads alongside the preview content, you can get an ad impression even if a user doesn’t buy the content.”

Since consumers are buying content here, Google is providing perpetual archive access so that consumers can access the same material in future.

It is notable that material from Google Wallet’s first content clients is instructional (PeachPit’s Photoshop tutorial, Dorling Kindersley’s knitting guide) and informational (Oxford Reference’s arctic sea-ice article) – all relatively timeless.

So far, there is no out-and-out news content amongst the flagships. Google is inviting more expressions of interest from US publishers.

Google has been making good advances with Google Wallet for digital goods this year, introducing in-app payments and recurring subscriptions, plus payments for games.

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Starbucks is going to invest $25 million in Square as well. Prior to the Starbucks agreement, Square was said to be valued at $3.2 billion valuation and was rumored to have raised $200 million in funding. Here are the partnership terms from the press release jointly issued by two companies.

• Customers will be able to use Pay with Square, Square’s payer application, from participating company operated U.S. Starbucks stores later this fall, and find nearby Starbucks locations within Square Directory;
• Square will process Starbucks U.S. credit and debit card transactions, which will significantly expand Square’s scale and accelerate the benefits to businesses on the Square platform, especially small businesses, while reducing Starbucks payment processing costs;
• Using Square Directory, Starbucks customers will be able to discover local Square businesses — from specialty retailers to crafts businesses — from within a variety of Starbucks digital platforms, including the Starbucks Digital Network and eventually the Starbucks mobile payment application;
• Starbucks will invest $25 million in Square as part of the company’s Series D financing round;
• Starbucks chairman, president and ceo Howard Schultz will join Square’s Board of Directors.

This is a significant boost for Square which has been in competition with the likes of eBay’s PayPal division. Square, which was started to tap into the growing people-to-people economy, has broadened its ambitions. Signing up Starbucks can be viewed as a big part of the company’s desire to go after bigger retailers in addition to independent retailers.

The deal gives Starbucks another way to accept payments in store at its 7,000 U.S. locations. It currently has a successful mobile payment system based on barcodes. But now, it will have a way for Pay with Square users to pay at the register using their phone. Pay with Square allows users to open a tab at a business and pay by just using their face, which an employee can recognize on their Square Register iPad app.

It’s a big win for Square, showing how it can move up into big retail. Here’s what Square CEO Jack Dorsey said in a letter:

Square began with a really simple idea: everyone should be able to accept credit cards. It should be easy and free to get set up, it should use simple technology people already own, and, most importantly, it should instantly adapt to any size business—from the person chasing a dream to the largest organization on the planet. By embracing Square, Starbucks has validated these ideas as powerful tools—not just for small businesses, but for smart businesses.

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The company also announced that it is now guaranteeing that any funds processed by 5 p.m. will get deposited into a merchant’s bank account by the morning of the following business day. Square has been offering next day deposit for many transactions but the later 5 p.m. cut off makes more of the money available the next day. Typically, other processors can take two to five days to deposit money into a merchant’s bank account.

Fast deposits have been one of Square’s selling points. But PayPal has also been touting the ability for businesses using its new PayPal Here product to get access to their funds on the same day if they deposit into a PayPal account and then withdraw it using a PayPal debit card. PayPal is trying to get more businesses to use their PayPal accounts and is offering 1 percent back on purchases that use the debit card.

Square’s latest milestone still puts it behind PayPal, which is expecting to do $7 billion in mobile payment volume this year. And it’s still a far cry from $118.7 billion in net payment volume PayPal did last year. But with the way Square is growing, it could be on a much higher pace by the end of this year. The company, which has more than a million merchants using its payment system, is reportedly trying to raise $250 million at a valuation of $4 billion.

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For publishers, the microsurveys are “basically a substitute for a paywall,” said product manager Paul McDonald. When a user clicks on an article that would normally be behind a paywall, he or she can answer a question instead of paying for a digital subscription.

Google already has a paid content product, Google One Pass, that lets publishers sell digital subscriptions, but Google Consumer Surveys is different because it doesn’t require customers to purchase subscriptions or log in.

Google pays publishers $0.05 for each survey response, with publishers seeing average revenues of $15 per thousand page views, McDonald said.

So far Google has around 20 publishing partners and is looking for more. When I first tested the product on the LimaOhio.com website, I couldn’t get the surveys to appear. McDonald asked me if I had my AdBlock app on. I did, and when I turned it off, the surveys popped up. “It’s a loose paywall,” McDonald admitted, and “a very small percentage of users use AdBlock.”

Google can pay publishers because advertisers and small businesses are paying to run the questions. These companies “have market research needs that are not met by existing solutions,” in part because traditional market research is so expensive, McDonald said. “This is market research that is self-serve but has the same qualities of a high-end platform.”

The customers create surveys and select the audience who will see the questions. Questions seen by a broad audience representing the general U.S. population are $0.10 per response (with a minimum total cost of $100). If companies want to drill down by demographic or select a custom audience with a screening question, the cost is $0.50 per response.

Once a survey launches, customers have access to a custom reporting dashboard that lets them see how different demographics answered their question.

The tool can be used by anyone (including a reporter in search of data). Companies like Lucky Brand Jeans, King Arthur Flour and Timbuk2 are using it now.

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Google is setting up a stall and workshops for the initiative at Games Developer Conference (GDC) in San Francisco, just two blocks from where Apple is expected to unveil its latest iPad this week.

In recent weeks, Google enabled in-app payments in 17 more countries in eight currencies and simplified the process of creating a new Google Wallet account, which is required.

In-app payments have set a light under mobile gaming, ensuring developers can benefit from free downloads whilst profiting later from self-contained in-app purchases. That has put a rocket under titles like Angry Birds.

On iOS, which launched in-app payments in October 2009, the method made up half of the revenue of the top 200 grossing apps, according to Distimo. For Android, which launched in-app payments in March 2011 and takes a five percent cut for Google, that was 65 percent, Distimo said.

Payments subsequent to download are particularly important for Android because, compared with iOS, fewer Android users are likely to pay for initial app downloads.

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Seven viewers of November’s live final of Channel 5′s Big Brother complained to Ofcom that they could not vote in the show, despite having bought Facebook Credits priced 6.5 pence each, because the show’s Facebook voting app crashed under demand. Customers had to buy at least 10 vote credits but some were unable to use votes they paid for.

Channel 5′s vendor Mobile Interactive Group (MIG) enabled the Facebook Credits technology for its broadcast clients in April 2011; iPlatform built the voting app.

Channel 5 told Ofcom it “carefully planned the use of the Facebook application and server capability based on reasonable estimates of expected voting patterns using a new voting service”. But its Facebook app was “temporarily overloaded due to exceptionally high traffic levels across the entire Big Brother application (i.e. not just traffic from those wishing to vote)” so “the server was unable to cope with the surge in traffic”.

Ofcom has not levelled available sanctions against Channel 5 but warned the broadcaster it must comply with its Broadcasting Code.

Historically, Ofcom has only allowed paid interaction with TV shows via phone and SMS. But a trial is in effect by which engagement is allowed by means like mobile apps social networks.

The trial began in August 2011 and ends this coming August 2012. Ofcom is now likely to consider this pioneering case when it reviews whether the other methods should be allowed permanently. Channel 5 said it had increased server capacity “sevenfold” for the next roll-out.

Case document.

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