This article was first published by What's New In Publishing
Elon Musk’s recent Tweet sparked some excitement in the micropayments space.
It triggered a response from Ben Thompson in his podcast episode on Sharptech.fm. This article is to address his concerns about micropayments and identify the fallacies in the arguments of other media pundits like Joshua Benton of NeimanLab. I will make my case in favor of micropayments as a supporting actor for digital publishers’ reader revenue and first-party data journey.
A cursory search on Twitter for “pay-per-article” brings us numerous tweets from people demanding for micropayments.
Our appetite for content spans multiple genres and infinite media sources, but we have finite resources and realistically cannot subscribe to every media outlet out there. Micropayments are less about the price of the content but rather about user convenience, choice and freedom from having to manage multiple, recurring commitments.
We are not talking about flat $0.10 per article across the entire site. Let’s say an average subscriber reads 10 articles per month and the full subscription costs $10 per month. Then the notional value of each article is $1. So at the very least, $1 per article should be the starting price for a never-subscriber. Ideally, the content price should be adjusted for the content form factor, content category, and geography of the user. Perhaps “micro-access” is a better term, but for now we will go with micropayments.
Ben starts off the podcast by quoting Jedd Legum’s Tweet.
Ben theorizes that this is the real problem, and Andrew Sharp chimes in “I was gonna say, it (micropayments) feels very intuitive to regular people who are completely uninitiated, and so I think that’s why it continues to pop up in our inbox every couple of weeks.”
These “regular people who are completely uninitiated” are their audiences who are not ready to subscribe. They also forget that people could be subscribed elsewhere so no matter how hard they try, getting such users’ recurring commitment to a second publication is unlikely. This audience is their “never-subscriber”. Even today NYT has never-subscribers galore. Of the 200M+/- unique visitors that land on nytimes.com every month, 8M+/- of those are subscribers. Even if we discount the numbers above, it is safe to say that 190M (95%) of NYT’s audience are never-subscribers.
Instead of paying heed to what never-subscribers need, the podcasters ignore the micropayments opportunity cost of incremental revenue and first-party data of users willing-to-pay for specific categories of content. This data – who is willing to pay, how much, for which type of content – is the epitome for a good DMP and CRM led publisher who wants to stay ahead in their recirculation and advertising strategy. One could argue that registration walls are akin to $0 micropayments, but registration walls bring home free loaders without the nuances of rich first-party data.
Both Ben and Joshua lay out multiple problems with micropayments. Let me address them individually.
Decision Anxiety And Regret
Ben argues that “this is one of those things where customers don’t understand themselves very well”. Ben goes on to say that audiences are better off thinking about an article they wanted to read but didn’t buy the subscription than being “faced with decision making with purchase constantly”. Let’s break down this so-called logic.
Ben invariably assumes that users are visiting the same site constantly. The truth however is that nearly half of digital subscribers don’t go to the websites they have paid for even once a month. Joshua Benton himself tweeted about this shocking statistic.
Based on this data, a never-subscriber’s visit frequency to any single site is likely to be 1-2 times a month at best; The anticipatory decision anxiety is no different than deciding between buying vegetables on Amazon Fresh, taking on the risk of bad quality vegetables delivered, versus driving over to the grocery store.
Ben also talks about purchase regret which readers may feel after paying for individual articles, but imagine the subscription regret people go through when they forget to cancel the subscription or trial they were forced to sign up for, when all they wanted to do was to read a single article.
In his article, Joshua cites the Gallup/Knight Foundation survey last fall. They asked American adults: “Suppose you were trying to access a news story online and had to pay to keep reading or watching it. Which ONE of the following would you be most likely to do?”… A measly 1% would “Pay for access to the story or outlet.”
He calls this “friction at the story level” and that an overwhelming majority of people faced with the need to pay a news site money will say “no, thank you.”. He attributes these results to negative consumer sentiments towards micropayments, when in fact, the results of this survey speaks about paywalls and subscriptions at large. Had this survey split “Pay for access to the story or outlet” into two parts: “Pay for one-time access to just the story” and “Buy a recurring subscription to the outlet” we would have seen dramatically different results. If anything, this survey further proves that 99% of readers fall into the never-subscriber segment.
Nevertheless, friction is real for any digital service that requires online payments. Therefore, it is critical, especially for micropayments, to have minimal friction for a user that does decide to pay – this can be done by ensuring a fast and simple user experience and payment methods, shown to the right user with the right pricing.
Lack Of A Payment Layer
In the podcast episode, Ben argues that audiences would have to pull out a credit card for every single article purchase and that every purchase has a 29-30 cents fixed fee attached to it.
In reality, most card users today have their cards on file with Apple Pay or Google Pay. Mobile audiences prefer local eWallets or banking rails over physical cards to make quick payments. Moreover, none of the modern payment options charge any fixed fees whatsoever (Stripe, Paypal are no longer the market innovators). This is why the “regular people who are completely uninitiated” that Ben references, keep asking for micropayment options. To succeed in micropayments, aggregating and bringing the world’s payment options under one roof is the first hurdle any publisher with global audiences has to consider.
Second, to make repeat micropayments efficient, publishers would have to allow users to register a wallet – a store of value in fiat currency or tokens. However, wallets are regulated by monetary authorities because they store unconsumed value which is a risky affair for the regulators. So to make micropayments a reality, publishers would have to get a wallet license from their monetary authority.
There is a third hurdle, this time from the reader’s perspective. If a number of large publishers get over the first hurdle of payments aggregation and the second hurdle of acquiring a wallet license, readers would have to set up separate wallets with each publisher. This would be extremely inefficient for readers.
Therefore, rather than attempting to create their own micropayments solution, a publisher should work with an aggregator with licenced wallet, global payment method aggregation, and single identity across publishers. To Ben’s credit, he acknowledges that if ever there were someone who could solve the micropayments conundrum it would have to be at the “aggregation layer”.
Terrible Idea For Publishers
Ben says “once they convert they stay subscribers for a long time” and that the lifetime value of a subscriber is 1000 times that of a micro-subscriber. The fallacy lies in thinking about subscriptions and micropayments as an “either or” scenario. In reality, micropayments provide a complimentary scenario where subscriptions and micropayments serve different segments of any one publisher’s audience.
If publishers segment never-subscribers and provide better monetization options for never-subscribers, they would extract multiples higher life-time value from incremental revenue and first-party data. Subscriptions, micropayments, and ad-supported models service different segments of any one publisher’s audience. Micropayments are an ally that not only supports in building an authentic subscriber funnel and personalized recirculation strategy, but also helps in developing a high yielding advertising strategy.
Every publisher acknowledges that less than ~5% of their audience will ever subscribe. Their challenge is in figuring out which 5%, but the good news is that there are many audience segmentation technologies out there to help decipher never-subscribers from potential subscribers. Some segmentation strategies to identify never-subscribers can be: Users who have rejected subscription paywall earlier, Users referred via social media, Users from non-core geographies, or low propensity to subscribe algorithms.
He also argues that breaking news is worthless the moment it is published. He is nullifying his own cause for subscriptions when he says this. As Nir Eyal said in his HBR article, the only way subscribers remain subscribers is when they derive disproportional value from their subscription month on month, i.e. the stored value from the fixed subscription fees increases every month. As an example – As Netflix produces more originals, their library has an ever increasing stored value to the subscriber. Ben is dissuading users from micropayments so they can subscribe to his “process”. But most readers don’t care about process, they care about content.
Both Ben and Joshua conflate the history of the music industry as a validation for the subscription business model, but implying that iTunes didn’t work and Spotify did is grossly wrong. Spotify and Netflix brought a paradigm shift in the form that audio and video content is consumed today. With the industry moving from downloads to instant streaming, consumers wanted an unlimited library of audio and video content. It’s not that audiences didn’t enjoy the unbundling of the music albums with iTunes, it’s just that they wanted access to more supply, which is what Spotify offered. After a few deals with large record labels, Spotify had the monopolistic power of aggregation on their side and hence they could command a subscription.
But look at what’s happening now. Audio and video content are once again fragmented, and both Spotify and Netflix are struggling to maintain their subscriptions market share, increasingly diversifying with advertising revenues.
The simple point I am trying to make is that audiences need multiple options, and publishers need to extract value from all readers, by using different models for subscribers and never-subscribers. Easy access, via micropayments, to just that one piece of breaking news a reader was referred to via Twitter or WhatsApp is more valuable to the reader than spending time figuring out how to bypass a micro-paywall.
We have to believe that Kevin Systrom’s (co-founder of Instagram) Artifact, Noam Bardin’s (ex-CEO of Waze) Post.news, and Jim McKelvey’s (cofounder of Square) Invisibly are building for user need and where the puck is moving, not where the puck has already been. All three platforms are content syndicates aggregating content from across publishers and layering micropayments-based monetization on top of it.
A different breed of the distributed micropayments aggregator has evolved. The ones like Fewcents, Zette, Axate, and many more. They plug into the site of the digital publisher but maintain a common wallet and identity across publishers. I call them the Reader Network.
Micropayments will have to be solved by an “aggregation layer” after all. The real question is which aggregation model will win? Syndication or Reader Network? As to whether Twitter is able to address the needs of all never-subscribers of the publisher (audiences from direct, search, social media, email, etc.), possibly Elon Musk can answer that.