[Okay, this is an essay I actually wrote back in 2003. I didn't realize that it died when I switched blogging tools, and I was recently asked for its whereabouts, so I'm re-posting it. There are probably a couple things I would change if I were to write it today, but I'm posting it as it first appeared except for one edit for clarity.]
There has been another exchange of volleys on the Wimbledon court of micropayments, and once again I’m eating my strawberries and cream and wondering who’s going to win. I’m glad to see at this point that both Clay Shirky (in “Fame vs. Fortune“) and Scott McCloud (in his rebuttal) seem to be united in their dismissal of the whole “just a penny a page which you won’t even notice or think about because you signed up with this penny-deduction service so you just keep on browsing and don’t worry about a thing” approach. I’m skeptical that the “penny == free” model has actually been stepped on for good (for every bad economic model you see, there are twenty in the walls), but it’s nice to drop the subject for a while.
I still feel like the obvious is being avoided, however. The obvious is this: when you charge for something, fewer people want it. Every year, Ben and Jerry’s stores give away free ice cream. The servings, if I remember correctly, are small. You have to wait a long time to get one. The patrons, judging from their appearance, are not getting the only ice cream they can afford all year. And yet the line goes out the door and down the block on that day and that day only, because people want free ice cream.
Imagine if it was the other way around: Ben and Jerry decide to give away ice cream every day except one. If their business was like the Web, there’d be tremendous breast-beating and heated arguments on how to solve the “problem,” the problem being that hardly anybody comes in on the days they don’t give away ice cream. Oh, my God! Near-total ice cream attrition!
Ben: We’ve got to figure out how to charge the people who line up for free ice cream.
Jerry: Why don’t we just charge them two or three bucks for a cone?
Ben: You fool! You’ve seen what happens when we charge for ice cream. The line doesn’t even go out the door. No, no, we have to figure out a way to charge all the people who are standing in line for free ice cream, without scaring them away.
Jerry: You’re right. Well, maybe buying ice cream is too hard. They have to go to an ATM and get cash, or go through all the trouble of handing us a credit card and signing the slip. If only there was some way to kind of automatically debit their accounts when they eat the ice cream. Electronic spoons?
Ben: No, Baskin-Robbins tried electronic spoons and traffic went down so steeply they even had empty seats in the dining area.
(Ben and Jerry shudder.)
Ben: What if we put a donation jar by the door? People clearly love ice cream, so maybe they’d all just choose to give us about two bucks a cone.
Jerry: No, no, Swensen’s tried that. It worked for a month, but these days all they get is Canadian dimes and the occasional pizza coupon.
(They think.)
Ben: I’ve got it! We’ll charge them a quarter!
Jerry: I thought we couldn’t charge them money.
Ben: No, no. We can’t charge them two or three bucks. Obviously, that’s because they are self-empowered supporters of the ice cream arts who have made an internal calculation that lowered milk prices and improved distribution networks have reduced ice cream overhead to the point where two bucks is an inherently unfair amount to charge for an ice cream cone in the new economy. They’re all just patiently and silently waiting for prices to fall (or, I should say, rise) to the correct level before they buy.
Jerry: Oh! And here I thought they were just a bunch of people who wanted free ice cream.
Ben: That’s why my name comes first. Mark my words, once we raise prices to a quarter, we won’t lose even a single customer to the other free ice cream chains, because if there’s one thing ice cream lovers love more than free Cherry Garcia, it’s justice.
I point this out because there’s a perfectly decent method of charging people for content. My term for it is “charging people for content.” It’s not very catchy. Maybe people will like it better if I give it a hip techy-looking name. Let’s call it “ChargingPeople.” Nice!
I know from experience that you can ChargePeople a buck through PayPal and your take is sixty-seven cents. That’s not ideal, but it’s not the worst markup ever. Every single Web page out there could ChargePeople a buck or two for a month of access. All your favorite independent Web comic strips, your daily link wranglers, your political pundits, they could all charge; the technology is here today. Not only would ChargingPeople bring in revenues, it would reduce the overhead costs of buying bandwidth. In the business world, this is called “killing two birds with one stone.” Only on the Web is it considered a bad thing to have to reduce your clientele to those who are actually going to bring in money.
Now, there’s no guarantee that you’re going to make a living by ChargingPeople. I wouldn’t go hiring a secretary and a press agent just yet. It’s tough to make a living as an artist, and I can guarantee you that it always will be. Why? Because everyone wants to be an artist. Everyone secretly thinks they could write a hilarious cartoon about a cat who doesn’t like dogs, or tell their life story in twenty-seven compelling chapters, or star opposite Annette Benning in Regarding Henry…Again!, or explain to a delighted audience that men enjoy football and women do not.
If someone unveiled a system that would make every current Web cartoonist rich, rich like a diamond broker who is actually made out of diamonds and who therefore hocks up diamonds when he smokes too many cigars, that would just mean that a hundred times their number would plow onto the scene to share the readers, and it would once again be tough to make a living as an artist. Those of us who enjoy Web cartoons would benefit once we waded past the sludge, but I’m not sure that “even more people failing to make a living at cartooning” is the ultimate goal.
The thing ChargingPeople would guarantee, however, is that your costs would be covered. You could start out with the free Web space that seems to come with every dial-up or broadband account, and by the time you need more bandwidth you’ll be making enough to cover it. The best part is, the more readers you have, the more money you make!
And yet, ChargingPeople is far from the Web standard, even though it solves every single economic issue on the Web today, and several of the aesthetic ones. You make money instead of losing money. You make more money the more readers you have. You don’t have to use invasive advertising or promote products you may not personally endorse. The only downside is that your readership shrinks to a fraction of its former glory.
ChargingPeople is especially suited to the independent Web artists out there. First off, only an employee-free operation can hope to make enough money from ChargingPeople to turn a profit right now. Secondly, the independent Web artists are the same ones who are going to write and draw stuff anyway. They’ve been making comics or writing stories since they were in grade school and they’re not going to stop just because they’re in QA now. So as long as you’re making it, you may as well get what you can out of it.
But here’s the dirty little secret of the artistic Web community: We’re not as popular as we like to think we are. It’s fun to look at your access logs and count your visitors and compare yourself favorably to the paid circulation of The Economist. It’s especially nice if you want to rail loudly at the injustice of The Economist making approximately four plabillion percent more revenue than you. But that’s like playing your guitar at the corner of Telegraph and Bancroft and counting the entire population of Berkeley as your fan base. Unless your readership is different from all others I’ve seen, the wide majority of those readers came in from a search engine, a link on a bulletin board, or similar, and they aren’t coming back.
Let’s say you set your cookies and make a vague count of the people who return at least two or three times a month, which is to say “people who give a damn about your site.” And maybe you can compare that number favorably to the circulation of, say, the Green Lantern comic book. So then you can mumble quietly about how you don’t make as much as the combined artistic team on Green Lantern and how if there was any justice you’d get equal income from equal popularity. But people who buy Green Lantern generally have to seek it out, and they plunked down three bucks for it. If those same people could click on a link and have it show up at their door for free, Green Lantern would smoke you. It might even smoke The Economist.
What’s your actual, comparable popularity? Nobody’s going to agree on a number. I’d argue that if you charge the same amount — three bucks for a solid month of material — then the comparative circulation starts to mean something. Others will argue that readers have some internal gauge of what’s fair, and they won’t give you as much because you don’t have to pay shop owners and distributors. Either way, I think as soon as you start charging, you’re going to see your circulation take a dive even from the “people who give a damn” level. Yeah, you’ll get more readers for fifty cents than you will for three bucks, but I doubt you’ll get six times the readers.
Shirky argued that most content will stay free because artists want fame more than they want fortune. I’d take it a step further. The Web-wide reticence among independent artists to actually hunker down and charge for material is because we know that if we did so, we wouldn’t get fame or fortune. We’d get, at best, beer money and a clique.
Very interesting, and well written. I hadn’t seen the original back ‘03. However, it leaves out one big factor: advertising, the subsidizer of “free” content since time immemoriam. I get to read (most of) the New York Times every morning for free; the price I pay is having to occasionally see a Norbit banner ad.
God, I love Norbit.
I wonder if the increased penetration of Firefox and Adblock have affected the ad-supported model at all.
Also, because of the way people work, the gerund form would end up being “ChargePeopleing.” From the same people who brought you “jump roping”
I believe when I wrote this, Web advertising was in a major slump. Also, Web hosting was more expensive. So the playing field has since changed.
CortJstr: That’s actually a pretty good question. In my personal experience, I actually turn it off on ad-supported sites that I like, unless they have so many flash ads on the page at once that my computer comes to a screeching halt (The Onion, for example). Penny Arcade; I keep the banners on, since I know that they personally OK every product they advertise and I sometimes get directed to interesting games or products from them. But there are certainly viewers who just block everything they can out of sheer principle and fear of shrieking, page-eating flash ads with 1×1-pixel “click here to close” buttons.
I try to whitelist sites like that, but the only one I can recall at the moment is Achewood, and that’s mainly because the ads are for his own stuff.
Your supply/demand points are good, but I’m with the folks who say that a big part of the “paying at all” barrier isn’t really the money, it’s the logistics — you become a customer, you have to register, pick an ID and password, find out the ID is already used, and respond to the confirmation e-mail which hassles you about maybe upgrading to a premium membership, all because moving *any* amount of money around, even a micropyament, requires authentication and an audit trail.
And then if you find something cool in there, you can’t send a link to your friends, because they probably aren’t subscribers, and they’ll just get a subscription invitation.
I think this is more or less why slate.com stopped charging, way back in the ancient of days. Any price point that isn’t zero means your visitors can’t share links to your site with their friends, and you instantly throw away the most salient new feature of the web, which is its connectivity.
There is a model that works, though — it’s a sort of “ransom” model, like salon.com does. You can go to salon for free, but after the first paragraph, there’s a big honking 400×400 pixel ad, possibly animated, inlined so the ad blockers won’t block it. If you subscribe, you don’t see the ad, but you can still send links to your friends.
Of course, this is all about the low end of the market. Obviously there’s some number above which regular economics kicks back in, and it’s about the money again.
Urban Garlic, I was just about to bring up Salon, but you beat me to the punch. And then I thought remembered that Lore had brought up Salon in a related post a while back (comparing its revenue to that of a newspaper). But I cannot find that post. Huh.
Kingdom of Loathing might be an aberration in this whole discussion, but it’s worth talking about a little (I’m one of the site’s founders).
We started with a very tiny, free web-game which we’ve gradually expanded. We’ve never had any ads on the site as kind of a personal statement. In the early stages, we added a donation link and gave an in-game item as a gift for donation. As soon as we did that, the game began to pay for itself, and more.
We asked our player base if they’d support some premium content – say a new continent you could visit if you paid a very low monthly or yearly fee (like, less than ten dollars a year). The response was vociferous and immediate: if you guys start charging for any part of this game, or add advertising, we’ll never give you a dime again. Keep it free and keep giving cool donation rewards, and we’ll keep you guys in chewing gum and comic books.
So we kept it free, and we didn’t advertise on other sites or display ads on our site, and people donated enough to make this the day job for about four and a half people. The half guy’s a little weird, but he does good work.
So at least for us, a donation-only model can lead to buckets of cash. Our people donate because:
1) They like us and/or the site, they understand it costs money, and they don’t like ads.
2)They compare entertainment that’s not free to our site; e.g., video games cost $50 for 12 hours of play, I’ve played KoL for 300 hours, so that’s worth at least $50.
3) They want whatever shiny thing they get for donating, solely because it’s shiny.
4) They want the shiny donation reward because it’s also useful for gameplay.
5) They just stole their mother’s credit card.
I can’t help but think the “pay if you’d like” approach is more useful than any of the micropayment strategies — but then, like I said, Kingdom could be an aberration.
KoL could very well be an aberration, simply because IT IS GOOD. The gameplay is good, the content is funny, the community is solid, and the donation rewards are (frankly) awesomecakes. I can think of very few free content I enjoy today that would make me get out my credit card like KoL does.
Firstly, totally agree with Urban Garlic.
Now, I’ve said it before and I’ll say it again, the problem with charging for content is the lack of reliability in the delivery of said content. (Hm. I might’ve been more concise last time.) I subscribe to a few magazines, I know they’ll show up at my door every month. If I subscribed to some webcomic, I would want to make sure it updated every Monday and Wednesday like it promises me. However about 100% of the webcomics I’ve ever read do not do that. You could argue that if they’re being paid they’d update regularly, but as you point out they lack the proper sized fan base to put kids through college.
Also, there’s just a lot of crap out there on the web. I would want quite a bit of reassurance that the content I’m paying for is worth it.
I’d much rather buy a t-shirt, like the one I bought from you, or a coffee mug, like the ones I bought from Not My desk and Spinnwebe, than send you, Chris, or spinn money, hoping you’ll write something funny on a regular basis.
I also like the idea of selling books chock full o’ content, ala Goats and The Onion. Even if it’s stuff I’ve read already, it’s still nice to have a tangible format that’s easier to search when I’m not sure what I’m searching for. The same reason I buy DVDs of tv shows I can see in reruns.
I think the biggest problem with the micropayments has nothing to do with the quantity of money being charged, or with the people want free stuff argument. I think most people would agree, one cent is as good as free, but only on the assumption that it’s just as easy to get the content either way.
That’s where it all falls down. As soon as you charge for something, any amount of money, the effort involved in getting what you want increases immensely. You have to have access to a credit card, which many people don’t. You have to be willing to put it on the internet, which some people aren’t. You have to sign up for some sort of payment system, which many people are too lazy to do. Then you have to type in a damn login and password every time your cookies get cleaned up. I’m sure the difficulty as compared to “click a link and say ‘ooo, pretty’” is obvious.
Re: advertising, I think a lot of the problem is with the utter irrelevance of most advertisements. I don’t want to punch the monkey, I don’t own a home so a mortgage refinancing is useless, and I don’t want a free iPod either. Project Wonderful has been great because ever advertisement is hand-placed on each website by people who are actually thinking about what they are advertising and where they are doing it. Incredibly, many of the advertisements are for things I might actually click on, and I do. Penny Arcade has also done an excellent job of posting ads that even I, as a return reader, sometimes click, on, because they advertise things like interesting video games that I, as a Penny Arcade reader, am interested in.
The problem with “one cent is as good as free” is that it’s like saying that one grain of sand hitting the ground is as good as silent. It’s true in most cases, but it doesn’t scale.
I pay about a dollar per ten miles in gas. That means I’m paying a dime to go a mile, or a penny to go a block or two. I certainly don’t think about the penny I spend to circle the block for a good parking space, but that doesn’t mean I think gas is as good as free.
In this case, if you could magically make a penny disappear from my penny jar every time I loaded Achewood’s home page, I’d gladly pay it, even considering all the times I reload out of boredom. But if half the sites on the Web charged a magical penny, it would vastly impact my web browsing, with the overall effect that I’d visit a lot fewer sites.
I also want to point out that I’d pay five bucks a year to read Achewood, all at once. (I’ve already paid a lot more per strip for the secret subscriber archive or whatever it’s called.) My willingness to pay isn’t based on it being a penny at a time.
After all my yammering is done, my central belief is that the method of payment, all at once or a penny at a time, magical debits or plain old credit cards, does make a difference, but not that much of a difference. Would magical pennies a view at a time get twice as many readers as three or four bucks a year? Maybe. Five times as many? Maaaaaybe. Enough so that most comic strip writers could make a living by simply charging for their comic? Not a chance.
DAMN IT!! I was about to type something by way of a comment, when my nectarine slipped – and now I’ve got nectarine all over my favorite sweat shorts!
Which in turn turns out to be quite a cannily perceptive comment on the overall quality of readership that drifts in off the web.
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