Micropayment and Micro-fundraising from Users
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Since the 1990s, people such as Nicholas Negroponte of MIT’s Media Lab and Jakob Nielsen, a leading web usability consultant have predicted the rise of micropayments (small online transactions by users). Micropayments for news content have also had skeptics, including the Project for Excellence in Journalism and Clay Shirky, who said, “Micropayments work only where the provider can avoid competitive business models.”
Some detractors have argued that users do not like micropayments because they are too inconvenient and a big psychological gap exists between free and “almost free.”Over the past year, online and iPhone applications have begun to increase users’ familiarity with micropayments. Also, the gaming world has had success with in-game micropayments, which may indicate the potential of motivations other than convenience—namely, reputation. Potentially, if micropayments were linked to other motivations such as reputation, they might become more valuable for users and publishers alike. For example, a “thumbs up” vote for a story tied to a small user cost could increase the quality of ratings.
Many new ventures are planning to test micropayments in journalism across a wide array of news sites, although nothing has proven successful yet. The Missouri School of Journalism has been promoting The Information Valet Project. Steven Brill, Gordon Crovitz (former Wall Street Journal publisher), and Leo Hindery have started Journalism Online. PayChoice has created a Vendor Relationship Management (the reciprocal of Customer Relationship Management system) that enables micropayments across a wide array of news sites.
Non-profit publishers have also utilized micro-fundraising from small individual donors who believe in their social mission. Both Mother Jones and AlterNet saw a rise in small individual donations in 2008, which represented 11 and 14% respectively of their overall revenue. For Mother Jones, 9% of their paid print subscribers donated last year, which indicates that there was a large group of readers who recognize the value of Mother Jones’s work beyond what they paid for the content itself.
As technology makes user subsidies easier (at any amount), news organizations may find value to capture, especially as other motivations come into play.
News as a Loss Leader
For a long time, publishers have used news as a “loss leader,” a product sold below costs to create other sales. For most of their history, newspapers have provided the paper at a loss in order to sell ads. In the computer industry, printers have been a loss leader to sell ink cartridges. In gaming, Second Life by Linden Labs has provided a free virtual world paid for almost entirely by selling virtual real estate. Steve Jobs saw music as a loss leader to sell iPods and iPhones, which is partly what allowed Apple to price songs at 99 cents. This price was attractive to consumers, but not enough to pay for developing the iTunes platform.
Many people have criticized the iTunes-for-news idea. However, journalism should not be so quick to dismiss the iTunes example. One aspect is still fundamental: News can be a loss leader to build a brand, create a channel and get users to pay for something else.
While independent media organizations do not have the capacity to become a device manufacturer, TMC members may be able to use their collective news-production capacity to cut deals with companies that can. Some newspapers have simply looked beyond news as its only product. For example, VG Nett, offshoot of Norway’s largest newspaper, runs a weight-loss club that has 150,000 users paying $90 a year. Furthermore, in Asia, social networking market leaders QQ and Cyworld make most of their money from digital goods such as background music to avatars and casual games.
Could digital goods be a potential loss leader for news too?
We’ll continue this discussion in the next post.
This blog is an excerpt from The Big Thaw, a guide to the evolution of independent media, written by Tony Deifell of Q Media Labs and produced by The Media Consortium, a network of leading independent media outlets. Learn how your organization can use this report. For more information and recommendations from the study, click here.
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