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Jan. 28, 2009, 7:23 a.m.

Micropayments for news

I know.  You don’t want to hear about it.  Readers will not pay for news online, period.  We tried that and it didn’t work.  Information wants to be free.  Attention, not content, is the new scarcity.  Free is a business model.  I’ve explained this, myself.

But the “make the reader pay” crowd just keeps sending new combatants with new fodder into the fray.  The latest is Jon Austin, one of the perpetrators of  The Same Rowdy Crowd, in a very long and well-informed post entitled “Fixing the Newspaper Business or ‘Do I have to Do Everything Around Here?‘”  You can read it for its considerable entertainment value (and very thoughtful chain of comments), or save yourself half an hour with Paul Gillin’s summation, or Austin’s own:

Let me wrap up by reviewing the preceding 4,543 words: 1) journalism is not dead, dying or irrelevant; 2) micropayments are the answer to the economic discontinuity afflicting newspapers, and; 3) advances in distribution and display technologies will make digital paper a reality and a viable alternative to paper.

Basically, Austin suggests (a) that news sites adopt a micropayment system in which content is priced in pennies, or perhaps even fractions of pennies, or perhaps even variably priced for different content and for different readers; and (b) that what he calls versions 2.0 and 3.0 of e-paper gizmos will enable newspapers to get to a realistic pay-for-content model.  (Version 1.0 being the Amazon Kindle or Sony Reader, version 2.0 the promised Plastic Logic reader and maybe Kindle 2.0, and version 3.0 a fully flexible, very thin, paperlike, color reader: basically a reusable newspaper).

One problem with this vision is that the Kindle and other e-readers are, for now, one-way content downloading devices that don’t send back data that could be used in a pay-per-click micropayment system.  So newspaper content delivered to e-readers is paid for on a subscription basis, and the results so far seem to point to viability for this model: The New York Times has reportedly signed up 10,000 Kindle readers, or about 1 percent of its 1,000,000 paid circulation base.  It shares the lead among the best-selling Kindle newspapers with the Wall Street Journal, and its not hard to envision the Times and Journal building their e-reader base to 100,000 each on e-readers 2.o, and to 1,000,000 — equalling or beginning to replace print — once 3.0 arrives in a few years.  At $10-$15 a month, that would be real money, even for the Times and Journal.  I mention all this because Austin mentions e-readers as “Thing 2,” but e-readers don’t entail micropayments for microcontent, except maybe as a way to pay for digital “single copies.”

So back to “Thing 1,” micropayments.  This has been a long, drawn-out argument already.  Clay Shirky detailed the case against micropayments as long ago as 2000, as did Andrew Odlyzko in 2003.  To their arguments you might add, “if consumers would accept micropayments, somebody would have figured out how to do it by now.”  The biggest issue is really that any payment at all is an enormous deterrent to usage.  In a web world that has been operational for nearly 16 years now (yes, really!), free has indeed turned out to be a business model that works.

But.  Think about this: micropayments can flow in any direction.  If attention, rather than content, is what has value, because it is scarce in the web world, then why can’t a portion of the micropayments that flow from an advertiser to a content publisher for delivering a page view (or a clickthrough) be diverted to the reader of that page?

If a web users views 500 web pages in a day, which is entirely possible and probably not an unusual level among intense online readers (my history showed 400 yesterday), even at just a quarter-cent per click, that becomes an expensive reading habit (around $450 a year) relative to typical costs for news on paper.

But in a web environment, not far down the road, in which the delivery of commercial content delivery to me is greatly enhanced by whatever I’ve been willing to share about myself in personal profiles on social networks, and by whatever has been gleaned about my preferences from my willingly shared social connections, my searches, my feeds, my content referrals to others, my purchases and my reading —  a world in which the whole web, for practical purposes, has become one big social network —  in that environment, don’t talk to me about paying micropayments.  I — the deliverer of the scarce resource called attention — I don’t want to pay. I want to get paid.

You can pay me, perhaps, in reward points of some kind.  You can charge me for some of the content I view. (I’d willingly pay a few cents, but not the standard $2.95 or more, for the occasional archived news story or Wall Street Journal piece I want to read.)  But on the whole, if my personal CPM is reasonably high, and I continue to read widely, I’ll come out ahead.  And actually, the right model would pay off or break even even for less-intensive web users willing to share some profile data.

But, you may object, clickthrough rates are miserable and online CPMs keep falling — how can there be enough money in the equation to pay readers?  The answer, I think, is in the web’s evolution through 2.0 and toward 3.0.  In a fully social, partially semantic web, vastly better commercial content, vastly more targeted — in  fact, to a large extent invited — will be possible.  The web today attracts only $11 billion in advertising, less than 5 percent of the U. S. total.  With a smarter web and an economic recovery, that will grow exponentially and faster than the associated content creation cost, which opens up the opportunity not only  to finance online news enterprises, but for consumers to get their slice of the pie.

POSTED     Jan. 28, 2009, 7:23 a.m.
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