Archive for January, 2007

Micropayments

The web has always struggled with the issue of how authors (or, as they are now called, content creators) get paid. I’ve been working with free software since before the web existed, so this question of how to get paid is not a new issue for me, but here I want to focus on web authorship.

Ted Nelson’s Xanadu project, which was a forerunner of the web, was designed to include a micropayment scheme. I haven’t bothered to look into the specific details, but the general idea was that each time you clicked on a link on get to a new page, you paid a price set by the author of that page. This price would normally be very small–perhaps one cent or even less. Some authors would make their pages free.

Similar schemes have been proposed for the web many times. The idea is straightforward for authors: if you charge one cent for every time somebody reads your page, and you get a hundred thousand readers, then you get a thousand dollars. In fact, if you are good enough to get a hundred thousand readers, then you can probably charge more than one cent.

None of these micropayments schemes have ever caught on. Most web pages today are free. Why no micropayments? Some blame the mechanics: it’s too hard to pay. Credit card companies don’t want to see transactions for one cent. There are systems to aggregate the payments, but not enough people know about them, so neither authors nor readers sign up. Others blame the competition: since there is so much available for free, why pay even for an excellent author?

I think these explanations are wrong. I think the problem is simply that micropayments focus on the needs of the author. But most people are readers. If you are reading in a system which uses micropayments, then every link costs something to click on. Even if the price is very small, you are aware that every click has a price. The effect is that, in general, you only click if you are really interested. And that means that you don’t click very often.

If readers don’t click very often, then authors don’t make any money. So authors have no incentive to use the system: they get neither money nor readers. Without authors, readers have even less incentive. It’s a fast downward spiral into irrelevance.

We see a move away from micropayments in other areas as well. Originally mobile phones charged by the minute–a micropayment. Then phone companies introduced flat rate plans with a limit. Those plans are popular: it means that when you make a phone call, you aren’t thinking “every minute I talk is costing me money.” You use the phone more. You may even move up to a higher flat rate with a higher limit. Everybody is happy.

The lesson is simple: if you want to encourage use, make it free or charge a flat rate. If you want to discourage use, charge a micropayment. We use micropayments for electricity and water; this is appropriate as these are scarce resources. We use flat rates for phone, internet, and cable. These are not scarce, and the providers want to increase usage.

Of course, this still leaves us with a question: how do web authors get paid? Many web authors are happy just to have people read what they have to say, so no monetary payment is required. But some authors actually do research (not me, of course) and have expenses which need to get covered. And some authors are really good, and would write more if only they didn’t have to pay the bills. Is there a way for them to get paid without using micropayments?

The current solution, which is not a great one, is targeted advertising. My two faithful readers will have noticed that I am now running ads on this blog, using Google’s AdSense for Content product. The ads are chosen according to an automated algorithm which is intended to make them relevant to the articles being shown. There is no charge to anybody for simply showing the ads. If a reader clicks on an ad, there is a charge, but the reader doesn’t pay it. The advertiser pays it, and part of the payment goes to me, the author.

Of course, this gives me an incentive to cheat and encourage readers to click on the ads. If everybody cheated, advertisers would stop using the program. Therefore, cheating is policed by Google, who will kick me out of the program if they detect it. That gives me an incentive to play fair. Readers, please do not click on an ad on this page (unless you are really interested in what the advertiser has to offer).

Obligatory disclaimer: I work for Google. However, I do not work with the advertising people (I work on the compiler), and I have no influence on or insight into how the ad programs work. As a Google employee I was required to get special permission to run ads on my site.

Since very few people look at this blog, even fewer are clicking on the ads, so I’m not actually making any visible amount of money. In fact, I’m currently making about .07 cents per page view, and if I actually had a hundred thousand readers, then at this rate I would make $70. But it is an interesting experiment for me in, on the one hand, actually getting micropayments, and, on the other hand, seeing the effect of adding advertising to a personal site.

Many people have observed that we are exposed to an ever increasing amount of advertising in our daily lives. Is this good, bad, or indifferent? As the world becomes ever more complicated, perhaps it is good that our attention is drawn to things which we would otherwise not know. But these things are only offered by people with money to spend on advertising. On the other hand, the cost of running an ad on my site, even an ad that somebody clicks on, is quite low. Right now I see an ad about getting a job working on sustainable development (at http://www.developmentex.com/). That doesn’t seem so bad. (Why is this ad being shown on my site? I have absolutely no idea.) I don’t yet know how I feel about this advertising trend (well, I do think that increased advertising to young children is a very bad idea). I’m going to have keep thinking about it.

In short: advertising has taken the role which micropayments were intended to fill. Is there another approach for authors to get paid? I would imagine so, but I don’t know what it is. Whoever figures it out and makes it work is likely to make a considerable amount of money for themselves along the way.

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