Micro payments online - can they be profitable?
April 24, 2005 1:46 AM   Subscribe

Micro payments online - can they be profitable?

(those who remember my last question know I want to write. this is me racking my brains for ideas on how to make money until I get there.)

I'd like to sell really small applications online. Small as equivalent to a piece of candy, for something like 30 cents a piece (think of it as computer candy. yeah, it's targeted more at kids but please don't think me evil. at least it isn't bad for anyone's teeth...). From what I see the transaction fee of tools like PayPal exceed my price, meaning not only no profit but pure loss.

Is there any tool I can use that will leave me with a profit?

(btw, do kids have access to PayPal and such?)
posted by mirileh to Work & Money (9 answers total)
You need a credit card to activate a paypal account, so most don't.

Right now, there's no good way (that I know of) to make any sort of substantial profit off of micropayments.

Are the applications downloadable? If not, advertising (see google adsense) will bring in much more than what micropayments will.

If these are downloadable windows programs, feel free to send me an email about something marginally profitable that I could set you up with.
posted by null terminated at 2:04 AM on April 24, 2005

I was going to snark and leave an answer of simply "no," but I recalled that mobile phone ringtones have a very successful micropayment model. Maybe you can pay by mobile somehow.
posted by grouse at 2:15 AM on April 24, 2005

Micropayments were really pioneered by online comics, specifically Scott McClouds well recieved book reinventing comics.
posted by Dean Keaton at 2:59 AM on April 24, 2005

Isn't McCloud using Bitpass? Because they're featuring on the frontpage of fuckedcompany....
posted by PenDevil at 6:08 AM on April 24, 2005

Micropayments just aren't really profitable. Mobile phones companies can attach micropayments to larger monthly bills, but the overhead costs for directly billing and receiving small amounts will almost always kill any profit to be made in micropayments unless you're certain you have a sizable captive audience to leverage some scale. In truth though, there just hasn't been enough critical mass for micropayments to take off and to have a multitude of services to choose from.

Bitpass's CEO recently got canned. We'll see how much longer they last.

(IMO trying to squeeze micropayments out of kids online won't work at all.)
posted by DaShiv at 6:34 AM on April 24, 2005

My opinion is that largely micropayment isn't a bankable income strategy. I have a few reasons in mind, but I'm sure there are even more:

First off, accepting a payment of any size at all incurs transactional overhead. How does one cope with the fact that merchant card processing costs are 150% or more of the sale price? Getting that thirty cents might cost you fifty cents. Now what are you going to do, make it up on volume?

Then you have to deal with the human factor. Authorizing a credit transaction (which is just about all you have to work with online) is much more cumbersome than sticking a quarter in a slot or throwing a buck into an open guitar case. Thousands if not millions of potential internet transactions are already aborted, abandoned before being concluded, or never started in the first place simply because of the hassle of an additional step. What are you going to do, keep credit card numbers on file and do single click checkout? All that does is move the weight of the problem to the critical, trust building, first transaction. If something is only worth thirty cents, is it worth my time valued at 50 times as much (or more, much much more) to transact for it?

And in your specific case: Kids can't authorize credit transactions. Even if somehow you manage to accept transactions from kids, you can expect anything from a high chargeback rate, to loss of merchant card privileges, to even being dragged in to some freaked out parent's lawsuit.
posted by majick at 6:52 AM on April 24, 2005

majick hit on it. I researched and thought about building a workable site using the Street Performer Protocol or its relative, the Rational Street Performer Protocol. Through working the logistics, I realized any transaction with "real" money made the overhead obscene.

Credit cards often take 30 cents on every transaction plus one or two percent. Speaking from a $10 transaction, no problem -- 33 cents or so.

On a twenty-five cent transaction, the cost to process it is more than the transaction itself. There is little way to have a viable model using the simplest payment system we have. Automated clearing house transactions (ACH) are pennies, but people are more careful sharing savings and checking account numbers than credit card numbers -- understandably so.

It is almost as if an we need an alternate currency. People need to see perceived value. Remember Flooz? It failed. On the other hand, virutal goods like those from Everquest cross over to real money quite easily.

I'm still interested in pursing blog centric RSPP web app. If anything, just as a fun project. Maybe someday...
posted by pedantic at 8:59 AM on April 24, 2005

Despite the rampant naysaying, I see little reason not to give Bitpass a try. There is not an up-front charge. Their take for small transactions (15% if you host your own content, 30% if you have them host it) is high, but your operational costs, once the content exists, are zero.


I'm saying it's worth a shot, I'm not saying the Naysayers were wrong. It would be, I think, tough to make real money with it. According to Scott McCloud's (mentioned above) blog, he had sold a couple thousand copies of his micropayment mediated comic book The Right Number over the course of around 6 months - this was a work by a relatively well-known artists, who is likely to appeal to and be heard by just about anyone who wants to be a pioneering bitpass consumer (like myself- I got me a Bitpass account and yeah, I seldom use it, though it was very easy to set up and is very easy to use), it got press at comic-book- and web- and geek-centric sites... obviously at 25 cents a pop minus 15%, Mr. McCloud wasn't quitting any of his day jobs. Like all this kind of thing, Bitpass seems to suffer from the whole adoption problem. It is better conceived and implemented than any of its predecessors, but still: you gotta convince people to sign up for an account, put money into that account, then buy your thing. For any first-time user the hassle factor is as bad as any other online sale, and of course you just gotta trust that you're going to find $X worth of stuff to buy with it, not just the initial 30 cent purchase.

Still, particularly if the content already exists, or if you're going to make it anyway, why not put it up, just to at least have it available?

There is a micropayment section on McCloud's links page from his website:

scottmccloud.com - Links

Here's an essay by him responding to objections to micropayments as a concept:

Misunderstanding Micropayments - Scott McCloud

A final off-topic and perhaps unwelcome bit of unsolicited advice... as another aspiring writer, any time you spend developing these alternate income strategies is time not spent on the writing. Time better spent than, oh, answering questions on Ask Metafilter, perhaps, but nonetheless. The world of writing has a large though hotly competitive supply of well-established paying markets. Consider whether investing time into selling an untested product into an untested market using a commerce mechanism in the earliest stages of development is really likely to pay off better than trying harder to get access to conventional writing markets.

Nevertheless, if you get the thing, whatever it may be, up on Bitpass, email me, I'll buy it if nothing less than to say nyahh-nyahh to all the downers responding to this thread. And you, my friend, will have a shiny new quarter in your digital pocket.
posted by nanojath at 11:54 PM on April 24, 2005

Thanks to you all! especially to Dean Keaton for pointing out BitPass!

BitPass sounds interesting but if I was on the other end, it would annoy me to have to spend more than the intended 25-30 cents (Peppercoin might have a way around this but they only seem to cater to the big guys). I just might test it anyway (ANYTHING but a day job).

nanojath, loved your answer! I agree that time spent on financial endeavors is time (wasted) not writing. If I could write full time I would. But at the moment I need money to pay the bills desperately and I'm not a paid writer yet. All the other options I have (computer programming, technical writing, administrative, legal) are jobs that drain ALL the energy out of me and leave me too depressed to write (or do anything for that matter). That's why I'm looking into this.

I'll let you know if I use BitPass (btw it's for software not content).
posted by mirileh at 3:13 AM on April 25, 2005

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