Posted August 27, 2007 6:37 pm by with 1 comment

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The New York Times today covers the history of micropayments. Once heralded as the next wave in economics and banking, micropayments were quickly maligned in academic circles. Processing costs were just one reason of many cited to explain why the phenomenon would never catch on—especially online.

And yet today, micropayments seem to be thriving online. Single-song download services, with songs priced as low as $0.94 and stock photos from $1 are just a few examples of a system that seems to have found its home on the Internet.

After citing this example, however, the New York Times goes on to state that micropayments are ultimately failing online—and one reason for this is Google AdSense.

For sellers of the lowest-priced content — anything under 75 cents — micropayments have been made irrelevant by the easy availability of online advertising, Mr. [George Peabody, an analyst with Mercator Advisory Group,] said. Programs like AdSense from Google, which allows even the smallest Web publishers to have relevant ads placed on their sites, make micropayments unnecessary. The program pays Web publishers what are often very small amounts each time a reader clicks on an ad.

Before you jump all over this argument, which I know you’re going to, the Times does state in the very next paragraph:

Looked at another way, though, AdSense is based on micropayments. “All the criteria are there,” said Mr. [Benjamin M. Compaine, a consultant and lecturer at Northeastern University who specializes in media economics] . . . , “but the money isn’t coming from the end user; it’s coming from the advertisers.”

Another good point that the Times makes is that “Consumers ‘expect to pay for music and movies, but not so much for the printed word,’ said George Peabody.” Taking off from that point, Read/WriteWeb’s Josh Catone wonders if perhaps micropayments might be a better solution to monetizing YouTube (since their InVideo ads have received mixed reviews).

Although a paid model didn’t work out for Google Video, might it work for YouTube? Josh points out that in addition to music downloads, iTunes does well with television show and movie downloads (and not to mention other paid download models, from Netflix to Wal-Mart). Josh also predicts that if a service can make video downloads that are DRM-free and DVD burnable, it will be a huge step forward for the industry.

What do you think—InVideo ads or premium paid content?

  • Yes, it would be nice to receive a few cents from each view of a video that has gone viral with hundreds of thousands of views. Unfortunately, the payment process would eliminate 99% of those views and viral videos would become a thing of the past.

    Paying for premium videos may draw in some revenue but more than likely would just increase the traffic to those video sites not trying to nickel and dime their viewers.

    As to the InVideo ads, time will tell. I think it is a good idea except that humans have an ability to ignore anything within ear or eye shot of anything they have no interest in.