Various attempts to normalize micropayments have flopped over the years, but a new crop of providers think they can reverse the decade-old notion set down by Clay Shirky, that “Micropayment systems…have failed because they are a bad idea. Furthermore, since their weakness is systemic, they will continue to fail in the future.”
Micropayments have had tough times dating back to 2001 when media mogul Steve Brill notably launched Contentville. It was designed to accept micropayments in exchange for online news and information from multiple providers. It didn’t work. And 14 months after the site debuted, Brill pulled the plug. However, with today’s veritable explosion in social media, some companies believe that this time they have the answer.
Buying on Twitter
Chirpify, which has received some press recently due to their $1.3 million in funding, lets users buy products straight from a Twitter offer (payments run through PayPal). Through Chirpify, musicians, small businesses and brands can use Twitter to turn promotions into sales.
It works very simply. When someone you follow provides an offer (Check out our new song!), just reply “buy” and you shall receive. Money automatically transfers through PayPal and a digital download link (or shipping instructions) is provided. In this case, musicians monetize their followers, who in turn directly support their favorite artists.
The people behind Chirpify imagined a world where you can send and receive money with a tweet: buy a hot dog, pay your buddy back, etc. And since it works over Twitter, you can purchase wherever you have access, like your mobile phone. This is starting to sound a lot like another financial innovation that has failed, so far, to meet expectations — Google Wallet.
Beyond Twitter and the social network scheme
Chirpify isn’t the only company trying to turn social networks into storefronts. Sahil Lavingia, who helped design Pinterest at age 17, came up with Gumroad, which allows you to “sell anything you can share.” According to the website, Lavingia thinks people should be selling their small creations like blog posts, poems or music videos instead of just putting them up on Facebook for everyone to see for free.
You can upload your creation through Facebook or Twitter and submit any link in the entry form, like to a Spotify playlist, research paper, song or whatever. Set a price, and watch the money pour in.
So it would seem that these two companies are offering the same ability to make micropurchases, but with the advantage of having social networking sites. However, is that enough to change consumer behavior?
Psychological problems against micropayments
One of the biggest problems with micropayments according to Shirky was the psychological leap that users have to make when they pay for something that is essentially free.
Consider the newspaper.
Shirky explains, “Users have no trouble deciding whether a $1 newspaper is worthwhile…but how could you decide whether each part of the newspaper is worth a penny?” You cannot just break down a newspaper into articles and expect people to buy the articles individually.
Furthermore, making something “essentially free” is not the same as free. A purchase must still be made. Therefore, Shirky continues, “one cannot tell users that they need to place a monetary value on something while also suggesting that the fee charged is functionally zero. This creates confusion – if the message to the user is that paying a penny for something makes it effectively free, then why isn’t it actually free?”
In an email interview with MyBankTracker, Lavingia addressed the psychosocial barriers erected around micropayments, saying, “I think if we make it super easy to buy, people will buy. People have to become more knowledge[able] about the topic.”
Is that so?
Are micropurchases based on consumer knowledge, and, supposing that people are indeed more knowledgeable, will they buy your blog post or other little creation, even for just a quarter simply because it’s easy?
The function of the purchase
To differentiate himself from Chirpify, Lavingia asserted, “We want to make selling stuff like sharing stuff. They want to make selling stuff like talking. They are also a distribution play, and act as a service around PayPal.”
According to Lavingia, the main difference is how either company approaches the actual purchase. While Chirpify wants to bring transactions to Twitter through PayPal, Gumroad just wants to monetize your everyday interactions.
That’s a tough sell. Think of it like this: while your friends used to email you their cool drawings or deep poems, instead they may post a link on Facebook and charge you a nickel? That’s not cool.
So presume no one charges friends; Would you buy any site-unseen poems from a stranger, or even a friend of a friend? Would anyone buy a blog post from anyone?
It would seem that success for either company will depend less on buy-in from consumers than on the participation of major artists. No one is likely to buy an article from MyBankTracker, even though our work is obviously and unarguably wonderful. But lots of people will pay a quarter to buy a song from Lady Gaga.
Micropayments have seen a fair amount of friction in the past, and even with the advent of social networking, iTunes and simpler transaction platforms, Shirky remains unconvinced. Lavingia is unfazed by the demise of Steve Brill’s Contenville (among his other ideas), and so are the investors who put $1.1 million behind the Pinterest genius. But will people ever feel comfortable “micropaying” for web content?