Advertising Cannot Maintain the Internet. Here’s the “Secret Sauce” Solution.

Can pay-for-use stimulate commerce and save modern journalism?

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By David Brin

Where is the next multi-billion dollar business? What opportunities or market-gaps only await sharp people to launch us into a new era? The market had many such openings back in the late twentieth century, making us slap our heads, saying: “Why didn’t I think of that?” The trick, it seems, is to find and develop something that didn’t seem obvious until, quite suddenly, it is. 

Innovation certainly is needed. As former web entrepreneur Andrew Keene asserts in The Internet is not the Answer, our vaunted digital connections aren’t serving average folk. His complaint can be summarized:

1. Security flaws are unraveling our ability to trust internet processes.

2. Many elites who formerly were daunted by the Net’s empowerment of individualism – especially leaders of non-democratic nations — now view it as a tool of control.

3. The online world is rife with new forms of addiction, for which humans have few immunities.

4. The advertising model for how to pay for just about every service online is flawed, cumbersome, invasive and unsustainable over the long run.

Today I’ll focus on problem #4, which turns out to have a strong bearing on the other three. As digital commentator Maciej Cegłowski put it: “There’s an ad bubble. It’s gonna blow.” With margins shrinking and most net revenues going to Google, Yahoo or Facebook, website hosts and online publications are driven to either barge into their visitors’ attention space with adverts, or else sell information about their customers. Consumers are fighting back with ad-blockers, creating a tit-for-tat struggle, with content publishers denying access if they detect that an ad-blocker in use.

The Web’s “Original Sin”

“Advertising became the default business model on the web, the entire economic foundation of our industry, because it was the easiest model for a web startup to implement, and the easiest to market to investors,” asserts Ethan Zuckerman in the Atlantic. “I have come to believe that advertising is the original sin of the web. The fallen state of our Internet is a direct, if unintentional, consequence of choosing advertising as the default model to support online content and services.”

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To be clear, it is not the cost of advertising, per se, that’s limiting. As of 2013, global ad spending topped $500 billion, with 20% of that, about $100 billion, Internet advertising. Projected growth rates were roughly 5%year. That amounts to roughly $90 per living human, or just under $20 per person for Internet advertising. Even transferring it all to the billion richest persons – those who use the Web most – raises a simple question: would you pay $100/year to surf completely ad-free? Oh, but there is no coordinated way for such a payment to go where it will both maintain and expand the vast variety of web-services you want.

Publishers and content creators don’t like it either. Evgeny Morozov asks:

“how reasonable is it to expect that advertising will remain the magic cash cow that helps bring free internet to Sri Lanka or India and allows millions of people to use email and search at no cost? … Advertising was always held in contempt by Silicon Valley; it’s too crude, too inefficient, too evocative of the connections between technology and vulgar capitalism. Early on, Sergey Brin and Larry Page of Google famously wrote an academic paper denouncing the effect it could have on their search engine.”

And yet, we see no sign that even Facebook or Google have a plan to replace advertising’s income stream, any time soon.

The ad-based web economy is based upon monetizing a genuinely scarce commodity, user attention — the one, intrinsically limited thing in this information age, that cannot be increased at low marginal cost. As advertisers demand chunks of this scarcity, it is sure to stir ever-increasing bad will.

Nor do advertisers get (in most cases) much value for their bucks. They have to try, by barging into the user’s view, demanding he or she pay for the thing they are really after with bits of shredded attention — with either time or screen space. Even when the advert is “well-targeted” the user will resent that some corporation knows way too much about her.

An alternative would seem obvious, let consumers pay for content. This would manifest as micro-payments or MP — making small purchases and transactions. At first sight, this seems a variant on the PayPal model, which already lets buyers and sellers transfer funds to each other or to sites like Amazon or Kickstarter. Alternatives like Apple Pay have some unique traits, but all offer secure transactions, validating payer and payee via encrypted keys and passwords.

Then why have all attempts at commercializing micro-payments failed? I assert that MP constitutes an inherently different market realm, with unique problems and incentives that demand innovative solutions, empowering payment-for-content by individuals surfing the web.


Pay? For content? While web-surfing?

And that’s supposed to be… empowering?

Willing to buy

Our first fallacious assumption is that Internet users demand content that is free... that no one will pay a penny for what they can get elsewhere online at zero cost. Any content owner intent on monetizing must either put up a pay wall (which seldom works, outside of music or TV), or demand substantial transfer via PayPal or credit card or else fall back on on advertising — a well that is already tapped by established players.

Examine this truism — that you would never pay a nickel for a New York Times article that you enjoyed. What? Ten minutes of your time isn’t worth five cents? What aggravates users about current pay-for-use methods is not cost, but hassle of transaction. Going through rituals to become a paywall subscriber, then having to sign in each time you return? That’s the deal-breaker.

This isn’t about customer cheapskate-stinginess — it is businesses failing to provide shopping convenience for low-cost transactions.

Rescuing modern journalism… and other uses

Lack of an efficient and effective micro-payments system is exacerbating the decline of modern journalism. Starved of traditional print-ad revenues, city papers and major journals are closing expensive newsrooms, or folding completely. TV networks scrimp on investigative reporting. A few prestigious centers like the New York Times (NYT) eke some narrow-supplementary income through paywalls. But such methods are useless to lower-level players.

It gets worse. Desperate to monetize, news-sites now gather, track and sell user information. As analytics software develops, news organizations are collecting vast amounts of data, not just about what people read but how they read it – how fast, where they linger on the page, etcetera.” As commentator Raju Narisetti explains – “…in 2013 the Washington Post revealed that the NSA had piggybacked on one of Google’s cookies to track users and “pinpoint targets for hacking.”

Services like Ghostery are now revealing to users the extent to which their own, favorite news sites spy on them.

That is no way to maintain their customers’ trust.

What journalism — and many other kinds of content-creators — need is a simple, direct way for readers or viewers to pay or reward originators directly for any particular five or ten minute experience that they appreciate, without hampering the surfing flow. A method that leaves every decision up to the user, including the right to say “that wasn’t worth it, after all.”

Other sectors of Internet life would benefit from this kind of service such as impulse-driven charity, or political contributions, or low-cost entertainment. Moreover micro transactions can flow both ways, with individuals and small groups receiving payments (e.g. for use of personal information) that might help create a more just and even playing field.

An old idea

Why not just use credit cards? From in-person purchases to auto-payments to Internet purchases, there are close to a trillion dollars mediated that way, each year. The average transaction is around $80, with fees between 1.5% and 3.5%, depending on type of transaction. (Internet companies usually pay more.) From the banks’ point of view, overhead cost is the same for small and large transactions, requiring roughly a dollar per charge. Hence, credit cards are unprofitable for the seller at purchases below $5.00.

That leaves room open for other ideas, and many have pondered potential Micro Payment systems. Comic book scholar Scott McCloud championed MP in one of his books, and got behind a payment system called BitPass. Mastercard invested in Mondex. Other efforts included FirstVirtual, Cybercoin, Netbill, Cybercash, DEC’s Millicent system, Digicash, Internet Dollar, Pay2See and most recently Blendle. All of these past efforts, and many others, foundered for various reasons including (as we’ll see) a failure to grasp a core truth about MP — a “secret sauce” — that (I assert) might make it all possible.

According to some, like digital pundit Clay Shirky, this chain of failures was predictable. “These systems didn’t fail because of poor implementation; they failed because the trend towards freely offered content is an epochal change, to which micropayments are a pointless response.”

Tom Standage, deputy editor of The Economist agrees. “The fact is, consumers dislike micropayments. They dislike the cognitive load of having to decide whether to click and pay, and they dislike being nickel-and-dimed.”

One approach has been to view MP as a means for entirely voluntary donations. Thomas Crowl — an innovative thinker about micro-payments — has spoken of the “monied like-button,” or empowering the user to slip a “tip” of small-change along with the traditional thumbs up. A concept that has been explored by Kachingle and a few other experimental sites, though only as a way to conduit donations in very specific ways.

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At the opposite end are closed silos like iTunes and Spotify, that recoup their costs in the price of entry. Silos empower the user to access a world of music – purchasing in small increments — via proprietary systems. This approach works – for now – because the user has all the music they need in the silo. iTunes follows a virtual-purchase model that holds on to users through software exclusivity. Spotify uses a monthly membership and universal use-access. Both approaches rely upon heavy and repeated use of a product that comes in simple, well-curated chunks. So long as the music library is fairly comprehensive, a habitual user scarcely notices the silo walls. That model won’t work when trawling the world for a diversity of news or feature journalism.

One form of micropayment already in use is “referral credit” offered by Amazon and many other online merchants, paying small commissions each time one customer recommends a product to another who buys. These payments are made easy by their in-house nature.

The world outside of silos requires something more generally adaptable. How many people who make only occasional use of YouTube videos would rather pay a few nickels, in order to avoid ads? Or pay artists a quarter, directly, to download music outside silo rules? Or drop a coin or two for an obscure song without having to shoulder a Spotify-style membership? Isn’t this the most natural option… pay-as-you-go?

Empowering genuine two-way commerce

John Naughton, discussing the Web’s 25th birthday in the Observer, noted:

“In addition to being just a read-only system, the other initial drawback was that it did not have a mechanism for rewarding people who published on it. That was because no efficient online payment system existed for securely processing very small transactions at large volumes. (Credit-card systems are too expensive and clumsy for small transactions.) But the absence of a micro-payment system led to the evolution of the web in a dysfunctional way: companies offered “free” services that had a hidden and undeclared cost, namely the exploitation of the personal data of users. This led to the grossly tilted playing field that we have today, in which online companies get users to do most of the work while only the companies reap the financial rewards.”

And people are upset about their personal information being used. David Byrne, lead singer of Talking Heads expressed his frustration, “What if the disillusionment eventually reaches a point at which many feel that the free services and convenience no longer compensate for the exploitation, control and surveillance?” A sentiment also expressed by Internet-journalist Tim O’Reilly: “I don’t mind that you are using my search and browsing habits to give me better search results…. But companies use our data against us, or sell it on to people who do not have our best interests in mind.”

While it is one (absurd) thing to declare “I own all info about me!” and to demand others not-look –- it is reasonable to say that people have “interests” and “value” in their information and deserve compensation for its use, an idea explored by Jaron Lanier in Who Owns the Future? WIRED pioneer and author Kevin Kelly describes how:

“…in a transparent coveillance where everyone sees each other — a sense of entitlement can emerge: Every person has a human right to access, and benefit from, the data about themselves. The commercial giants running the networks have to spread the economic benefits of tracing people’s behavior to the people themselves, simply to keep going.”

An article by Gregory Maus — How Transparent Big Data Markets Could Better Protect Your Data…and Your Rights — suggests setting up transparent, privately-owned, but publicly-regulated markets for such information.

“Imagine something like an Amazon, Alibaba, or New York Mercantile Exchange, focused on the purchase and licensing of Big Data. Suppliers could increase their markets, buyers could increase their options, and all transactions would be public record.”

So, is there an efficient way for individuals to participate in commercial benefits when corporations harvest data about customers and citizens? A method to distribute nano-shares smoothly? Shouldn’t any true market engage in two-way commerce? This can only happen with system of micropayments.

Experiments So Far

The concept is gaining traction. Biographer and journalist Walter Isaacson wrote in Time in 2009 that, “Under a micropayment system, a newspaper might decide to charge a nickel for an article or a dime for that day’s full edition or $2 for a month’s worth of Web access. Some surfers would balk, but I suspect most would merrily click through if it were cheap and easy enough.” Steven Brill of Journalism Online, whose Press+ service charges for digital content, calls MP a needed experiment. “Beyond being a gamble worth taking because of the potentially significant payoff, there is no realistic alternative to charging for quality content that anyone has presented.”

Supporting the 1990s notion – that users will pay with eyeball time (via advertising), but never with cash – Steve Outing, in Editor & Publisher Online, dismisses the MP model.

“A problem with micropayments is that it walls off content and makes it difficult to share with others and spread it around the Web. If I promote an article in a Twitter post, many people will not read it if they encounter a pay demand even for 5 cents; it’s a barrier… especially if the prospective user first has to sign up for some content payment network account.”

Outing prefers the approach offered by Kachingle or Flattr, which allows individuals to financially support the online content providers that they like best. So, if a newspaper wants to get paid for its content when a Web site visitor clicks through to one of its articles, it should ask that the visitor support the site voluntarily, like an impulse donation to Public Broadcasting. In contrast, Ripple is a payment system built upon a distributed, open source internet protocol, consensus ledger and native currency called ripples (XRP). It was designed to eliminate Bitcoin’s reliance on centralized exchanges. More recently, Facebook’s new donate button lets users do more than just ‘like’ a cause, though only within Facebook’s proprietary and password-protected domain, and it takes some member effort to set up.

Blendle — based in the Netherlands – has a website and app that let readers make micropayments for individual articles from major publishers, rather than having to commit to monthly or annual subscriptions. Users register for Blendle and put in credit-card details, then create a newsfeed of stories about specific topics. Blendle founder Alexander Klöpping has persuaded all the major national newspapers in the Netherlands to come on board. “I don’t know anyone my age that has paid a single euro in his life for journalism,” said Klöpping, who is 28, “but we are seeing people are paying.” The service has already caught the eye of major investors: The German publishing giant Axel Springer (which also recently invested in Business Insider) and The New York Times invested $3.8 million in Blendle in October 2014.

Note that this model is an aggregator and still something of a silo. No. Let’s ponder building on past errors and come up with something sensible.

Let it Flow

Starting with the mental image of a “nickel button” that transfers five cents in exchange for experience and information, the same logic will apply as we enter the era of an “Internet of Things,” in which the units transferred per transaction may parse down much smaller. The PaySwarm open standard offered a way for web browsers and devices to perform micropayments peer-to-peer, divvying royalties in increments of as small as 1/10,000th of a cent.

Consider how micropayments might facilitate passing messages along ad hoc networking protocols, like FireChat. Envision how micro-messaging systems, linking a myriad hand-sets, may soon pass text and photos across a continent, independent of cell systems, with each message paying its own penny-total passage with milli-cent leaps from unit to unit. Self-sustained by market forces, such a system would require no central infrastructure. Once money and value are allowed to move in increments as small and agile as water molecules, won’t they flow as naturally as water does along – and nurturing – paths of least resistance? There could be a zillion ways to use quick, one-click micro-pay, most of which we cannot now imagine.

What we do know is that all attempts, heretofore have failed. I assert that key elements have been missing. We will discuss some of them, including a micropayments “secret sauce,” in Part II.

2016 May 9

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39 thoughts on “Advertising Cannot Maintain the Internet. Here’s the “Secret Sauce” Solution.

  1. Sadly micropayments haven’t worked out until now, despite numerous attempts from pretty sophisticated services. The best bet until now was letting visitors mine bitcoin on your site as long as they stay on it but the feds destroyed the platform run by some MIT students.

  2. What a great way to keep the poor from benefiting from the internet. This should be a great way to keep the oligarchy in control.

    Of course the government could give everyone, say a $1,000 dollars they can use every year to buy access to sites that are ad free. Taxes might go up a little on the rich but at least it wouldn’t make this idea a tool that the rich could use to keep the poor beaten down.

    In summary, refine the idea a little bit to include the poor, otherwise you are just beating down those that are already beaten down by circumstance.

  3. Everything you say is true. However, as is usually the case with discussions of this kind, one important element is overlooked. What about those who can’t afford even that five cents? People who access the internet at the library because ownership of a computer is a dream they aren’t likely to have fulfilled anytime soon? Or who are homeless?

    Do we deny everyone who can barely make ends meet the opportunity to receive information not filtered through the propaganda stream of the mainstream media?

    This is an ongoing problem with solutions propagated by educated, well-informed, and—let’s be honest—at least reasonably well-off people who are members of the professional class. What you’ve described is a kind of reverse net neutrality, in which access is controlled not by ISPs but by economic factors over which people have no control. How do we address that?

  4. David, there’s one key issue with micropayments that you haven’t addressed: sharing. The value of any content is greatly reduced if I cannot share it with friends – both in terms of its value to me, and in terms of its ability to propagate or “go viral”. Sharing, reposting, reblogging are a fundamental part of the Internet today, and content which cannot be redistributed by the public is much more likely to languish in obscurity.

    Under a paid content model, who pays for sharing? And how do you prevent the shared content from being copied indiscriminately? If everyone I share with is part of the same walled garden, inside the same paywall, this might work – but what if I want to share with someone who doesn’t have an account on that service?

    As a book author, you are directly impacted by this. In the past, I have often lent paperback books to my friends. Often I would lend the first book of a series, with the intent of getting them hooked on the series or author. This model undoubtedly drives a lot of book sales.

    But in the world of Amazon and Google Books, I no longer have this option. I like buying e-books for the convenience and because I have limited bookshelf space, but I am continually frustrated by my inability to lend books. (I’ve even occasionally bought paperback copies specifically so that I could lend them.)

    • This is the best point. People do not experience the internet alone; even in early days, we shared links with one another. I found this article via a Reddit post. Would I have paid to read it? Probably not…I read or skim dozens of articles a day.

  5. Google Contributor is trying it out… limited success so far. People typically prefer to get stuff “free” and see ads. Would be great to have an option to get behind pay walls with it as well… but I suppose that requires further development etc. on the business end.

  6. Why will ad sales fail to sustain the internet? Because there is an abundance of material. A million guys like me taking five here and ten there actually does impact major players, because there are so many of us. Give the world another billion phones and devices, and it will eventually devolve *of its own accord* into micro-payments anyway.

  7. The only reason any “market” is “efficient” is because “prices” reflect “costs”. A system where prices do not reflect costs cannot be efficient and cannot even persist long term.

    In ecosystems, commensal organisms provided each other with goods and services, much like a market. Oak trees provide squirrels with nuts to sustain a stable population of squirrels, and squirrels supply seed distribution services. Flowers provide bees with nectar and pollen, and bees provide plants with pollen distribution services. Herbivore species provide predators with biomass and predators provide prey species with “weak and sick individual” culling services.

    An ecosystem will (over time), evolve to be “efficient”, in that the “price” (in terms of substrates) of providing a service will reflect the “cost” of sustaining the biomass of the species providing those goods and services.

    If providing a “good and service” costs more biomass than its consumer can provide, then the consumer goes extinct. If the “good and service” costs less biomass, then the consumer can expand and other providers of that “good and service” can participate in providing it too.

    It is the balancing of prices and costs that makes markets efficient. Markets can only function when there are no significant unpriced externalities.

    In the case of internet payments, the large credit card companies have a monopoly and through that monopoly have set barriers to entry so that cheaper alternatives can’t enter the market.

    The ability to do internet micropayments would essentially eliminate credit card companies. If credit card companies can already capture a few percent of online commerce, that is a gigantic profit stream that can be used to block competitors.

    Phone companies already do “micropayment equivalents” (keeping track of customer data, phone calls and bill appropriately). There are no “technical” barriers to a real micropayment system, just business barriers.

    • Robert Frank’s The Darwin Economy demolishes the Invisible Hand story with one simple observation: in many situations there is no such thing as absolute utility, only relative utility compared with others. As Darwin understood, this can lead to perverse incentives in which what’s good for the individual is bad for the group. Government action can change incentives such that everyone is better off.

      • Not at all. Only short term incentives are perverse incentives.

        An organism threatened with death will do essentially anything to survive. That is a perverse incentive.

        In the medium term, what reproducing individuals “need”, is fertile mates of the opposite gender.

        In the longer term, what reproducing individuals need is fertile mates for their own offspring.

        What those offspring then need is fertile mates for their own offspring, and so on, and so on, and so on.

        The ultimate “need” for reproducing individuals is that the gene pool of the species be stable; with enough diversity to ensure no genetic bottlenecks.

        Generating a society where reproductive choice is restricted to certain groups would be to weaken the ability of the gene pool to police itself (that is for good choice of mates to be positively selected for). Inherited wealth does that; it thwarts the ability of those without inherited wealth to compete with those with inherited wealth.

        • I confess I don’t understand the relevance of your comment. Who mentioned restricting reproductive choice? And I assume you are familiar with the problem of free riders in stories about altruism within groups.
          I recommend reading Frank’s book.

  8. David Brin replies:
    (1) Talin your point about sharing is valid and I may borrow a couple of sentences for part II verbatim. I expect that what might happen is that individually watermarked copies that circulate beyond a couple of shares may lead to 5x or 10x added payments, downstream. We’d have to limit it, though.

    (2) Elizabeth Burton asks: “What about those who can’t afford even that five cents? People who access the internet at the library because ownership of a computer is a dream they aren’t likely to have fulfilled anytime soon? Or who are homeless?”

    There are three answers to this very good question:
    First, the user will presumably still be able to “pay with attention,” by accepting advertising… though future selectivity-tech suggests that advertisers may start to exclude those who cannot afford their products, leading to content discrimination anyway, under the old model.
    A better solution would be to legislate-allocate free access at places like libraries or else a baseline viewing credit.
    But the true solution is for millions to share the impulse that Made Dr. Burton ask her question in the first place. If we grow a compassionate society, then the definition of “poor” transforms, with time (as it truly has, across the last many decades.) Only a society filled with sympathetic minds can make progress, as Adam Smith himself avowed.

    • Also, a detail: If reading an article is a nickel, then I can afford to pay a buck to share it with 20 friends. But I can’t afford to share it with 1,000 Google+ followers. So different models will be needed at different levels of scale. I’d be very interested to know what ideas you have on this.

      • Pair the article with a teaser, and allow the teaser to be shared freely (or at a small cost to support the backbone)?

  9. command-f, patreon

    Huh. Zero hits.

    Patreon is working pretty well for a lot of artists, musicians, video makers, and other creative types, including myself. You can basically think of it as “tip jar as a service”, with mechanisms in place for patrons paying creators a flat monthly fee, or a varying one based on how many Creative Things they made (with an upper limit so a particularly productive month doesn’t drain their wallet); creators then typically post their stuff free for everyone online, though there are some folks who use it to make a paywall. It fills a nice niche next to Kickstarter and its various clones, for funding ongoing creation rather than a particular thing.

    • It’s not working very well for the other end, the payers. We have to choose a few lottery winners, between all the stuff we enjoy – monthly subscription fees quickly add up if we gave to ALL the patreons of the stuff we like. The receivers don’t see the problem with that – in general, they don’t care much about all those other ones, the “ecosystem”, as long as they’ve got theirs.

      The result is, ironically enough, that advertising remains critical. Attention is the crucial commodity which will make people pick YOU as the recipient of their $5 per month, rather than any of the 20 others they would probably have done the same for had they thought of them first.

      • I disagree. Support creators who you personally care about. Others will support the others. Part of the genius of Patreon is that it /isn’t necessary/ for everyone to pay, most people can free ride. Instead, artists end up strongly connected to the people who value them the most.

        • If your chance of supporting an artist on patreon was proportional to how much you enjoyed them/cared about them, it would be true, but it just isn’t so.

          It’s not random which of those 20 you’d potentially support you actually end up supporting, you get a strong winner take all effect.

    • One other important thing with Patreon is you can scale your output goals to how much you get in. You aren’t ever left running out of money. It’s obvious whether or not you can quit your day job yet.

    • Patreon is still straddling the fence between a silo and open-micropayment subscription system. For example, I support a podcast that releases free shows and paid shows; the free shows are easily RSS’d but the paid shows can’t be syndicated because private feeds aren’t supported. Clunky. (That said, I do like Patreon for that sort of “public broadcasting” style content.)

      But there’s also a lot of overhead, payment processing, startup costs…

    • As a patreon creator, I still find the thing clunky and unwieldy. It’s really hard to bring new people on board, if they are unfamiliar with the whole infrastructure. Like people who don’t have credit cards and paypal (you have to register at least twice to get from zero to patron). Very cumbersome.
      As Brin said, a “flow like water molecules” could lead to a more organic and accessible way of doing things. I think of something like automatically subtracting minute amounts from your telecom provider account and distributing on the go to the sites you visit. You could vary by time spent on the page, etc. looking forward to what David has to offer in part 2.

  10. “Isn’t this the most natural option… pay-as-you-go?”

    No. People hate being nickeled and dimed. The fact that we hate it is even being exploited as a tool to discourage behavior, for instance in congestion charges (their actual monetary cost is small, their annoyance cost is big!).

    This is really obvious. Saying pay-as-you-go is the most natural reveals which side of the table you identify with, Mr. Brin – even though I doubt you long to pay per GB for your internet connection.

    The natural option is a fixed subscription fee, but not for one thing – for access to tons of tons of things, most of which you will never look at – like on Spotify. But unlike Spotify, the money should follow the individual, it should not be pooled (if I listen to ten tracks in a month, my subscription fee should be divided between those ten artists – in should not be diverted to paying for someone who listens to the same track a thousand times, as it is now.)

    Flattr is closest to getting it right.

    • Cost-per-byte would probably be a lot more reasonable if internet and phone companies were actually forced to compete rather than cartelizing and carving up swathes of the country. Probably.

      Cisco estimates that global internet traffic will reach about 1 x 10^21 bytes per year in 2016. Internet-provider revenue was 5.32 x 10^8 dollars in 2015 but was growing at 10% per year, so let’s say 6 x 10^8 dollars in 2016. Add on another roughly 2 x 10^8 dollars for internet advertising, for a total of 8 x 10^8 dollars on general internet services (assume that all the additional subscription services stay the way they are).

      That comes out to 1.25 x 10^12 bytes per dollar… that’s 1.25 terabytes per dollar, or $0.60 per TB. I’m okay with that rate, or even a couple times that rate.

      • Seems to me, that’s a bit overpriced. In your analysis, you used expectations of revenue, not actual costs. The cost per user for infrastructure should be just the cost of build out amortized over 15 years and the annual maintenance fees divided by the number of subscribers. with a reasonable oversell you should sees cost in the fractions of a cent per terabyte

  11. I think that ‘Intentcasting’, vendor relationship management (VRM) and other concepts from Doc Searl’s book ‘Intentional Economy’ and the Internet Identity Workshop (IIW) needed to be added to the mix. There is a much larger market if the tools existed for customers to tell the world what they actually want. Ad tech combined with the supposition that someone can know more about what I want than I do – has led to this house of cards which is collapsing. Among other references see:

  12. This is a very serious discussion that needs our serious attention and creative energy to invest in solutions or we will lose the freedom we all have to learn and share.

  13. This article gave me the idea to develop a Firefox extension that will search the page from a Bitcoin address, mark it with a recognizable icon for the extension, and when the user clicks it, it registers a microtransaction to that address. When the sum of microtransactions registered in the Browser is big enough to justify a full Bitcoin transaction, it pops up and asks the user to sign an single ordinary Bitcoin transaction, effecting all the micropayments.

  14. What about pairing this with a basic income? This could reduce the size of the micropayments while still maintaining a market system that rewards quality.

  15. Exactly. I have said for almost 15 years: show me a truly friction-free micropayment system and I’m there! I want to support quality journalism. I don’t want hassles with logins and such.
    Oh, and if it cost a penny to send an email, spam would disappear overnight.

  16. I’ve never understood why the advertising market is so enormous, when so very little of it is actually effective. And the more money that is spent on advertising, the more diluted the effect of advertising. At some point, advertising eats itself. It’s pretty clear that advertising has reached that point on the Web. So many Web pages are so clogged with advertising widgets that no browser can render them in a reasonable time (or at all). I used to just surf away from pages like this, but I finally broke down and installed an ad blocker, just to get my browsers to function again. If the means of delivering your ads is crippled by your ads, you have an even more serious problem than nobody paying attention to your ads.
    I really wouldn’t mind paying for content if it were convenient. The real problem that needs to be solved is having to have hundreds of user accounts all over the place. But internet security being as weak as it is, who would trust a single-signon wallet that spans thousands of sites?
    Once upon a time, the typical household would have multiple subscriptions, to a newspaper and several magazines, each costing $20/year or more. This didn’t seem particularly burdensome, and nobody cared much that they didn’t get access to all magazines being published, or even that they had ads; coupons were even seen as a benefit. They chose multiple walled gardens and depended on them to provide lots of content from multiple viewpoints.
    It seems to me that without the distribution costs of paper, Web publications could provide subscriptions for just a few dollars a year, and people could afford (and manage) a dozen or more such subscriptions, providing more content than most people can realistically consume.
    I suspect most sites have yet to try a low enough subscription fee. I don’t think it needs to be nickels, but it does need to be less than $10/year. Still, lots of people pay that much per month for Netflix, so it just depends on what you get for your subscription.

  17. Several of you are asking exactly the right questions! They will be answered in Part II.

  18. Ah, if only we had a public (blockchain?) data-market tied to secure identities… so the more data an identity generates, the more micro-money it gets. That might put a nice opportunity cost on trolls, too, while still enabling pseudonymity for other reasons. It’d be sort of like a forum where the good stuff is gated off for low-karma accounts, so sock-puppet accounts would be hard to use (I wonder how much the decline of “karma” systems, flawed as they were, enabled trolls on newer social-media platforms).

  19. Clay Shirky’s main critique against micropayments was the anxiety
    involved in decision making, the anxiety derived from the act of
    deciding which can’t be optimized away. Can’t see how your argument
    solves this problem David.

    This is a quote from “The Case Against Micropayments” at an O’Reilly site called OpenP2P (google it) which he wrote in 2000

    “Embedding the micropayment into the link would seem to take the
    intrusiveness of the micropayment to an absolute minimum, but in fact
    it creates a double-standard. A transaction can’t be worth so much as
    to require a decision but worth so little that that decision is
    automatic. There is a certain amount of anxiety involved in any
    decision to buy, no matter how small, and it derives not from the
    interface used or the time required, but from the very act of
    Micropayments, like all payments, require a comparison: “Is this much
    of X worth that much of Y?” There is a minimum mental transaction cost
    created by this fact that cannot be optimized away, because the only
    transaction a user will be willing to approve with no thought will be
    one that costs them nothing, which is no transaction at all.
    Thus the anxiety of buying is a permanent feature of micropayment
    systems, since economic decisions are made on the margin – not, “Is a
    drink worth a dollar?” but, “Is the next drink worth the next dollar?”
    Anything that requires the user to approve a transaction
    creates this anxiety, no matter what the mechanism for deciding or
    paying is.
    The desired state for micropayments – “Get the user to authorize
    payment without creating any overhead” – can thus never be achieved,
    because the anxiety of decision making creates overhead. No
    matter how simple the interface is, there will always be transactions
    too small to be worth the hassle.”

  20. For completeness, it’s good to recognize Ted Nelson as the originator of the micropayment model – in the mid 1960’s – along with the word “hypertext” and one of its earliest conceptual and practical models. Ted has many books, articles and YouTube videos on hypertext, transclusion, and micropayment. Here’s a Nelson quote from

    “I’d like to put the Micro back in micropayment, and bring back the rest of the idea.

    First, I must clarify one issue. The way Isaacson phrases it, I thought of hypertext in 1960 just in order to make micropayment possible: “Hypertext — an embedded Web link that refers you to another page or site — had been invented by Ted Nelson in the early 1960s with the goal of enabling micropayments for content.”

    This has it inside-out. I came up with the idea of micropayment to make hypertext possible. (Note that I coined both these words, hypertext and micropayment.) But the hypertext I envisioned was very different from what we see now. In 1960 there was no such thing as an “embedded Web link”, since there was no Web, and my designs were very different.

    Now, some people say the World Wide Web was my idea, but I make no such claim. My idea was better…

    Should the unit of sale be the paragraph? No. Paragraphs come in very different sizes. The sentence? Ditto.

    Should the unit of sale be some fixed number of characters, like a hundred or a thousand? No again. There is no need to fix any arbitrary unit.

    Let me propose a simpler and more sweeping idea. Sell content by the arbitrary piece– charging for whatever length of portion the user sends for. (Fully analyzed, this actually means selling by the character.)

    Is this crazy? It is no more difficult than selling other units, and solves a number of problems.

    Here’s how it should work. [ see ]

    The deep document structures I propose, and their different linkages, views and payment, have been prevented by the present methods of the World Wide Web, based on its viewer standard– called the Web browser, based on computer traditions. I’ve argued about this with Tim Berners-Lee (whom I like and respect), but he is locked to his traditions. He created the original Web simplification of hypertext and now controls the Web through the browser standard. It will not change.

    However, recently there have been breakthroughs in viewing methods that bypass the Web rules– YouTube, and the view for veiled content offered by Amazon and Google. These work in the Web frame but outside the conventional Web page. This may be the best approach to finally getting serious documents. It makes the system “shovel-ready”, in today’s fashionable term.

    Progress involves back-and-forward steps. Old thinking often takes a while to come alive in new minds. Back to the future.”

    From Ted Nelson’s remarks circa 2008

    See Walter Isaacson’s 2008 UC Riverside talk, “A Bold, Old Idea to Save Journalism”

    And Isaacson’s 2008 Time article “How to Save Your Newspaper” referenced by Nelson
    Read the Time article if you’re a subscriber or willing to pay $2.99/month for the privilege 😉

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