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Why micropayments aren’t dead…yet

Far from being a failed experiment, Esther Kezia Thorpe argues that we need to think bigger when it comes to micropayments.

With the rise of subscriptions and paywalls comes the realisation that there’s a large chunk of a publisher’s audience that they may never be able to effectively monetise. Only an estimated 5% of a publisher’s digital readership will convert to pay for a full subscription, according to Digiday.

But what’s the alternative? Micropayments are one of the alternative revenue streams touted by hopeful tech start-ups and half-heartedly trialled by some organisations. But you’d be hard pushed to think of a publisher in the Western hemisphere who has properly explored micropayments, for better or for worse.

But perhaps our hope that people will pay a pittance for our work is setting the bar too low. Maybe we’ve been thinking about micropayments all wrong.

Why we need to look beyond subscriptions

Let’s start with why we need an alternative. The basic issue with paywalls is that if every publisher put up a hard paywall overnight, people simply wouldn’t be able to afford to take out subscriptions to all of them. Many readers of this article will read widely around other outlets – add up the cost of a $10 a month subscription to each publisher you’ve read today, and the figures will most likely soon stack up to become unaffordable.

This is a line of reasoning that many top media people have already picked up on. Buzzfeed CEO Jonah Peretti said earlier this year that they wouldn’t consider a paywall as they wanted to focus on educating and informing the broader public. “If every news organization puts the majority of their content behind paywalls, it’s hard to have an informed electorate,” he argued.

Chris Duncan, the managing director of Times Newspapers Ltd, believes that paywalls are only viable for a tiny number of international news brands, and highlighted his concerns about outlets that can’t scale in an interview with the Drum late last year.

“There will be a few people – maybe no more than 10 – who will be able to charge a large amount of customers for a direct subscription. Then there will be a number of [free] sites that will be at a global scale and generating an audience and running on that model. The people that I worry about are in that mid-range where they are big but not at the scale they need to get to, or can charge but for only a very limited amount of people.”

Many publishers and media groups are in the process of trying to square this circle and work out a way of sustainably monetising their audiences, whether that’s Medium’s new subscription model for multiple publishers, Blendle’s pay-per-article aggregation service or Readly’s ‘Spotify for magazines’ monthly subscription approach. But we have yet to see any consistent approach emerge, certainly not in English-speaking markets.

The gaming model: Twitch

It’s always helpful to look at other industries and see which ideas can translate across, and Twitch is a favourite example of how subscriptions and micropayments work together seamlessly.

Twitch, an Amazon-owned live-streaming platform primarily popularised by gamers, has two main ways for creators to monetise. The first, which will be familiar to many of us, is a subscription. This is for streamers who are official Twitch partners, i.e. of a certain quality with a threshold number of followers needed to even be considered.

Subscribers to a Twitch streamer are rewarded with special emoticons (emotes) to use in the chatroom, exclusive chatroom access, ad-free viewing and competitions, depending on the streamer in question, but the actual streams themselves are completely open and free to view, with nothing locked off behind a paywall. There are three subscription tiers, ranging from $4.99 to $24.99, and the streamer gets 50% of this.

Now ‘Cheering’ is where it gets interesting. Twitch users can buy ‘Bits’, which is like a currency used to tip streamers, or as Twitch call it, ‘virtual good’ (are you still with me?). 100 of these Bits currently costs $1.40, and these are added to a user’s account for them to use when they’re viewing streams.  When users are watching a stream they enjoy, they can cheer with these Bits, which works as a tip. Twitch takes anything from 20-40%, depending on the amount tipped.

Ah, but these tiny bits of revenue can’t add up to much, I hear you say. Well, just this month, the top three streamers on Twitch have made almost $7 million between them purely from these ‘cheers’. Of course, many streamers won’t even make close to that, but the willingness of fans to pay small amounts in appreciation for that work has proved a valuable revenue stream (heh) for streamers, as well as a good way to connect with fans who may not want to pay the full subscription but who want to show appreciation for a good move, a joke or a skillful game.

The idea of buying up a virtual currency to ‘tip’ publishers is one that hasn’t caught on yet for a number of reasons, most obviously consistency across sites, but that doesn’t mean to say that there’s not merit in the idea of donation options for the more casual user.

The Guardian: a fine line between micropayments and membership

Whenever the micropayments debate comes up, there’s always a loud group of naysayers who argue that publishers can’t survive on people donating 10p for an article they thought was good. And for the most part, these critics have a point. But micropayments doesn’t have to mean just charging people a miniscule drive-by fee.

The reason many people want micropayments, as detailed above, is because they can’t afford that many subscriptions, or don’t read a publication frequently enough to want to pay the full whack. Instead, they want a way to show their appreciation for a publisher, or even an article or author, in a way that doesn’t involve a monthly commitment.

The Guardian picked up on this a long time before the rest of us, to much mockery. The ‘begging bowl’ approach, implemented in 2016, has involved brightly-coloured boxes of various sizes with a range of pleading messages imploring readers to donate. But the Guardian have had the last laugh, as it was reported in spring this year that it had over 300,000 one-off contributors. When combined with the additional 300,000 regular contributors and members, reader revenues now outstrip advertising revenue, leaving the publisher hoping to break even by the end of the year.

What’s important here is not the amount individuals donate to the Guardian. It’s the fact that the publisher has made the process as painless as possible, and whereas there may be suggested amounts for one-off donations, readers can donate as much or as little as they choose. If the infrastructure is there to make a donation to the site, why set the expectation that you’ll only get pennies? The Guardian puts a suggested value for its work, and if you’re at the stage of donating, you’re probably willing to throw them more than a few pence.

The Guardian’s model has seen surprisingly little adoption by other publishers, although Buzzfeed is apparently testing some form of donation. This has been reported as a ‘membership program’, but a look at the details reveals that, like the Guardian, it is more geared to encouraging one-off donations than any form of subscription or additional member benefits.

However these models evolve, they should be a part of the conversation around micropayments. The groundwork to make small, one-off donations to publishers has been laid, and whether that is 50p or £5, it is absolutely essential to make that payment journey as quick and easy as possible for readers.

The model abroad: WeChat

That’s not to say that payments of a smaller size aren’t viable. It’s very easy to get stuck in bubbles about what we thinks works across the whole industry based on our own experiences in the US or UK, but a detailed piece from the Columbia Journalism Review about WeChat emphasises just how open the possibilities are to replicate similar models here, if the conditions are right.

Tenecent-owned WeChat is China’s version of Facebook, Snapchat, Instagram, WhatsApp, Messenger, Apple Pay and all the other key apps we use rolled into one. With 1 billion users, it’s more than a social network; users can play games, go on dates, send money, make video calls, order food, book appointments, read the news and more.

Like Instagram, there is a growing ‘influencer’ market, where agencies can place banner ads and more on popular public profiles. Users can shop and pay for both physical and digital services through the app – like Apple Pay – and as WeChat takes a small slice from each transaction, it’s made the app quite the earner for Tenecent.

Because it is so easy – and so normal – to pay through WeChat, it was only a matter of time until ‘tipping’, or what we’d call micropayments, took off. WeChat’s recently-restored ‘tipping’ button is proving profitable both for individual creators and newspapers, with six of the top 10 public accounts being operated by legacy media outlets. They are also planning to roll out a ‘pay to read’ function, which will put a direct value on the article rather than relying on the reader to set that price.

The money certainly comes in. According to CJR, one WeChat columnist receives $602 per article on average, compared to the $75-per-1000-words they used to get paid by magazines. WeChat payments has grown from 11% of the market share for mobile payments in China in 2015 to a whopping 40% now.

What we need to make it work here

Forget a ‘Spotify for news’, we need our own version of WeChat. Somewhere people spend a lot of their time, where they play games, socialise, go on dates, read news, message friends, post photos, buy and sell…is this sounding familiar?

The uncomfortable fact for news outlets in the West is that the platform which stands the best chance of making that work is, in fact, Facebook. Between their core app, Messenger, WhatsApp and Instagram, Facebook holds the attention of the vast majority of us. Aside from the problems they’re facing convincing teenagers to sign up, what Facebook lacks is any established form of payment system.

But they’re moving in that direction, fast. If you haven’t had a friend choose to have a ‘Facebook fundraiser’ instead of birthday presents, you soon will do. Facebook Pages registered as charities are getting pop-ups highlighting how much Facebook wants to help fans donate through their own system. This is just the beginning.

Next will be marketplaces, and once Facebook get payments properly established on there, Ebay will have more to worry about than Amazon. Then it’ll be publishing’s turn. The Silicon Valley giant is already working on subscription tools for Instant Article publishers. How long until they cotton on onto this ‘donations’ idea?

Of course, this glosses over the huge damage Facebook has done to its relationship with publishers over the past year. Few organisations would be foolish enough to come running back to them with more vague promises of revenue, so it’s likely to be individual content creators who see the benefits of these types of trials first.

Let’s not forget that Facebook is looking to woo Twitch creators with promises of revenue on the platform, should this ‘Watch’ feature ever be rolled out anywhere past the US. It will have tipping systems in place soon enough if it wants to become a serious competitor to Twitch.

The other contender is Google, who are already working with publishers on subscriptions as part of the Google News Initiative, primarily to make it easier to subscribe to paywalled publishers with a two-click process. Should Google see value in managing this virtual wallet, and should publishers be open to it, they could act in a similar way to WeChat in making small donations, micropayments or contributions really work.

The problem with Google is that they don’t have the holistic platform to compete with Facebook. Sure, they may control vast swathes of the internet and the advertising ecosystem, and could make a serious difference to YouTube creators with a tipping system, but they have no place vast numbers of people go to browse pictures, hang out and get news all in one place, unlike Facebook.  

Perhaps Apple will get there first! There have been rumours about Apple allowing publishers to charge readers for individual articles for a while now, but whereas this would be a welcome influx of revenue, it’s certainly not a universal solution to match WeChat’s offering.

What we can do in the meantime

It seems that the solution for now lies with individual publishers. This by far is the healthiest option, given the need for reduced reliance on platforms, but it certainly won’t be efficient until something brings publishers, payments and people together in one seamless experience.

So we return to reader revenue. Unless you happen to be in that revered tier of publishers who have both the scale and the quality audience to really make subscriptions stick, it’s unlikely that more than a few percent of readers will be candidates for your subscription offering. But that’s not to say you should give up on the rest. That 95% who aren’t willing to stump up every month, but still appreciate the work you do.

Make it easy for them to show their appreciation! Put the infrastructure in place to accept donations, tips, ‘cheers’ or whatever you want to call them on your sites. Set a suggested donation based on the value of your work, and I’d bet it’s higher than 10p. With the rush back to quality, trusted sites and the growth in people willing to pay, there’s never been a better time to invest in a straightforward way to capitalise on your reader’s appreciation.

Yes, it’s a less predictable source of revenue – many have questioned how sustainable the Guardian’s donations scheme is. Yes, it’s more difficult to foster a stable relationship with casual tippers. But ask any Twitch streamer about the value in having that option, and the difference in the relationship they can have with that audience, and the benefits become clear.

So, is there a future for micropayments? What the examples above show is that perhaps the way forward with micropayments is to ‘think bigger’; less of the micro and more of the payments. Whether that be in Twitch-style tips, Guardian-style contributions, the seamless payments that micropayments advocates have envisioned should unlock more opportunities than a mere 10p per article.

Let’s believe in a brighter future for not-so-micro-payments.

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