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[P]
Getting Paid for Content: from micropayments to shareware models

By dru in Internet
Tue Jul 03, 2001 at 02:51:19 PM EST
Tags: Internet (all tags)
Internet

Discussion of online payment for content tends to be techno-centric: "If we only had micropayments, everyone could get paid for their art." The process of getting people to pay for art, however, has just as much to do with creating a social expectation of payment as with creating efficient technology to conduct it. Additionally, there is the long-standing tension between limiting access and getting paid.

There are a number of interesting ways to get people to pay for content using existing technologies that are considerably more sophisticated than the "click here to send me money" buttons, but have not become as widespread by any measure. What follows is an inventory of some payments models which deal with problems of payment and access, including micropayments, subscriptions, serialization, tipping, the street performer's protocol, and others.


Micropayments

As traditionally concieved, micropayments are very small (< 20 cents) fees that are charged automatically, or with simple verification each time a web page is visited. Ideally, such a system would be implemented near-universally on the client side, so that payment would not cause a barrier to accessibility -- e.g. "you have to have micropayment software to view this page").

Mandatory micropayments fit into two different models. In the first, the fee is the same for every page and is charged automatically. This can happen over the whole web, or within one "trusted" site. In the second model, where payment is variable, and the user is warned (preferrably with a minimal pop-up window) before the charges are incurred. A "wallet" (a set amount of electronic cash at a user's disposal) might also be set up to automatically pay for anything under a set price.

There are no widely implemented standards for micropayments, so pay-per-page systems (selling wine by the sip, as it were) are confined to sites where users are willing to install new softare in order to access a site. Services like the Amazon Honor System enable webmasters to charge users before allowing them to see a page, but transaction charges render prices under $2 unprofitable.

The reasons that mandatory micropayments haven't caught on yet probably have to do with the lack of incentive for users to adopt a widespread standard in "wallet" software. In addition, there are numerous technical hurtles, including giving access to search engines, keeping transactions secure, and preventing sites from using javascript pop-ups or frames to make users pay for a large number of pages which they didn't intend to visit. Yet another challenge is the tendency to prefer flat-rate pricing over metered usage, i.e. people find being charged for every web site they visit similar to the nagging awareness that one is being charged by the minute on a long distance call, no matter how low the rate. As a result, the tendency is to prefer flat-rate pricing.

Technical barriers aside, any mandatory micropayment scheme needs to have a compelling reason for users to download and install new software, much less trust it with their money. Given the difficulty of this task alone, it would seem that sites are better off charging a flat-rate subscription fees using conventional credit card transactions (or perhaps PayPal payments) instead. If and when wallet software becomes installed widely, more interesting applications such as one-click payments and automatic charges can be experimented with.

further reading:

The Storyteller's Bowl & The Street Performer Protocol

With the Storyteller's Bowl, an author sets a price for a piece of writing (or other content), and asks a potential audience to pay for it. Each party interested in eventually reading the work makes a donation towards the payment of the value of the work as set by the author. When the price is met, the work is made freely available online.

The Storyteller's Bowl preempts issues with unauthorized distribution ("piracy") by getting payment up front. The incentives for creating illegal copies -- both avoiding payment and because downloading is often more more convenient -- is greatly reduced, since it is easier to simply visit the author's web site. The access problems of the pay-per-view model are also diminished, since (assuming the initial price is met) the work becomes freely accessible, and thus easy to link to.

In theory, the Storyteller's Bowl payment model encourages a system of patronage that better reflects the incongruous financial capacities within a given audience (e.g. one rich patron could support an author with a very small proportion of their income, or whereas a student could contribute a much smaller -- but still proportional -- amount).

There is a flat cost to distribution of text over the internet, rather than a per-unit cost for production and distribution (as with books, newspapers, and other print media). It makes sense, then, to take the economic focus off of the tangible product and draw attention to the fact that payment goes to support the writer. The reader isn't buying a product, but directly supporting the practice of a craft.

Somewhat problematically, paying for writing, music or art has become product-oriented enough that the only metaphor we have for supporting artists through voluntary contributions is the street performer, who gets a small donations from some listeners. In the interests of building an online social environment friendly to artists, the metaphor of the patron could be partially resurrected, albeit in a distributed (many people support an artist's work) and less dependence-creating fashion.

The Storyteller's Bowl model will likely work better for authors with established reputations or a loyal audience already in place, since it is easier to get people to pay for something up front if they know what they are getting. However, an author could start by asking for $5, and slowly raise the price on subsequent works as their audience grows. On the other hand, the Storyteller's Bowl also has curiosity working in its favour (e.g., the potential reader/patron has not yet seen the work, and might begin wondering about its contents, creating a potential for large donations to speed the publication).

A possible variation on the Storyteller's Bowl might be to sell pay-per-view access to a work until a set number of views are purchased, at which point the story is released into the public domain. Such a scheme would likely work to reverse the emphasis on the writer as economic focus, and proportional donations (outlined above).

The minimal technology required for such a system is presently available in various online payment systems, such as PayPal. However, such a system is clearly not ideal, for reasons of trust. Minimally, a reputation management system similar to that of eBay could be created for customers to trade accounts of whether authors or publishers held up their side of the deal. Ideally, there would be public escrow system, where a certifified third party would verify the delivery of the article, which would be automatically made available to the public upon donations reaching the pre-set amount; if the desired amount was not reached in a set period of time, the reader/patrons would get their money back.

The ease of payment would likely come into play heavily with large audiences, as people are much more likely to chip in 50 cents if it doesn't take any time. Until the technology improves, the Storyteller's Bowl would seem to be better suited to smaller, more focused audiences who are willing to give larger amounts ($2-10).

further reading:

Tipping & Pledge Drives

Enabling voluntary transmission of small amounts of money from readers to a writer is easy to set up, using services such as PayPal or Amazon Honor System, among others: all it takes is a link to a relatively easy to set up page on such a service, where a reader can transfer a few dollars to a writer.

Getting people to follow through with payment is trickier. Even on sites with a loyal and appreciative audience, a request for donations that leaves it up to the reader whether to donate or not, and why, is not likely to yield a substantial response; at best, such a scheme would pay for hosting costs. There are, however, a few different ways to compel readers to contribute to a site without the standard method of payment-for-access.

Most easily, one can make it clear that donations are needed for a site's continued life, perhaps by placing a short message at the bottom of each page:

"Did you enjoy this article? Please help us continue to provide quality writing by donating a small sum to help defray our hosting costs and compensate our huge time commitment to this public, ad-free site."

This and other ways of identifying exactly how the money will be used can increase the reader's confidence that her money will benefit her directly by giving the people who create the work more time to do what they do, not just line their pockets.

In this vein, providing details about a future project that needs funding could result in a large number of donations, if visitors are interested in seeing what comes of the given project. A message on the front page reading:

"We here at the starving writer's collective would like to work on project X for the next week, but to do that, we need $500 for groceries and rent. Once we have it, whether from donations or from working overtime at our day jobs, we'll start work on project X. Click here to donate, and to see how much we have raised so far."
could concievably bring in funds in a short period of time, given an interested and large audience. This model essentially amounts to an informal version of the Storyteller's Bowl, with the chief difference being that the Storyteller's Bowl model is better suited to a previously completed, specific end result (e.g. an e-book, an issue of a magazine, a long article, a song etc.), whereas goal-based soliciting of donations is geared towards sites that update regularly, but need funds to keep updates coming.

A successful request for popular funding can be found in the Blogger Server Fund. Blogger, a free service for updating web sites, needed $10,000 to buy server hardware in order to keep up with the flood of new users. They requested that users contribute a few dollars to the Server Fund with PayPal. In the space of a week, donations from blogger users had accumulated over $11,000.

Though Blogger.com only asked for donations for server hardware, there is no reason that an organization providing a free service could not attempt to pay their staff a salary through donations as well. If $10,000 can be raised in a week for a service that people value, why couldn't $30,000 be raised over a year to pay someone to write and research for an interesting content site full time?

More along those lines, the Freenet Project raised $3500, with which they plan to buy a new server, and pay for the living expenses of one of their developers for a summer.

Equipment and sundry supplies can be put on a "wishlist" (a service provided by many online retailers), which lets reader/patrons purchase specific items that will benefit an organization. For example, office supplies, more ram, or a new digital camera for quality independent coverage of an event.

Getting readers involved financially can be facilitated by providing a degree of transparency. For example, putting the budget for a site online (example: freenet) and keeping it updated, while recognizing any major contributions. Providing specific goals towards which funds can be contributed, and demonstrating how funds make a difference is extra work, but can be worthwhile if one wants to raise funds, and has a large or dedicated audience.

When asking for funds, especially substantial amounts, trust is always an important element. For this reason, asking for "tips", or fundraising is done most effectively on sites that update regularly, and less so on isolated pages or resources. Additionally, sites with a consistant group of repeat visitors (rather than a large amount of traffic from one-time visitors) who value the site, or (better yet) rely on it will have an easier time soliciting financial contributions.

The technology required for voluntary payments is easy to set up; the challenges lie in integrating donations into the daily operation of the site such that donating funds becomes a part of visiting the site; this has more to do with customized design, encouragement, justification, and frequent updating than with technological infrastructure.

Voluntary payments of flexible size directed towards specific, illustrated goals portend some exciting possibilities for sustaining independent websites of a small but substantial constitution. In other words, such a model could support sites, services, or organizations that are too small to have a full-time staff, but too labour or equipment intensive to be completely free of financial burden.

further reading:

Serialization

Serialization refers to sequential release of a work in parts. For example, releasing one song per week until a full album was available, or releasing one chapter of a book at a time are examples of serial publication.

First of all, serialization can be adapted as a variant of the Storyteller's Bowl, in that one could ask readers to pay for a given part before the next part is released. The most prominant example of this model is Stephen King's exercise in internet publishing: the release of an e-book, The Plant in six installments. Downloads of the text were free, with the caveat that if 75% of the downloaders didn't pay, the next installment would not be released. $600,000 in payments were collected from the first six installments.

Writers or artists who lack King's popularity could also benefit from such a system, though perhaps with lower expectations. For example, one could ask that 15% of readers pay for a work, or set a specific dollar amount that had to be paid, either by many small donations, or one big one, before the next part is released. Or both: one could specify that either a flat rate or a percentage must be fulfilled, either by putting a cap on what needed to be paid for the work, or setting a minimum price.

Of the payment models described here, serialization has the most significant potential to change the structure of the work itself. For example, many television serials start a new theme at the end of each episode in order to spark interest in the coming episode. It is in the financial interest of anyone using the serial format to maximize the reader/viewer's curiosity towards the next coming part. If not kept in check, this can create an incentive towards choppy, content-free episodes, possibly degrading the content.

Serialization is more appropriate for content that is easily chopped into multiple individually compelling parts, such as episodic storytelling. Serialization can be a compelling way for lesser-known artists and writers to use the Storyteller's Bowl model to get paid for their work, provided an audience gets "sucked in" by the first episodes. By contrast, writers with established audiences or reputations might be better served by the Storyteller's Bowl.

Subscriptions & Shareware

Subscriptions can be voluntary or required, and are well suited to sites that provide relatively frequent updates, and have a solid number of repeat visitors. Subscribing can be encouraged by noting, in the manner of shareware programs, that "if you visit this site more than twice weekly, please consider contributing a suggested donation of $24/year, or $2/month". Additionally, one can offer extra features to paid subscribers, such as access to a discussion group where artists or writers participate, selected "premium" content, or offer them knickknacks, in the form of stickers, t-shirts, a site archive on CD, or a printed version of the site.

Getting people to pay for subscriptions has some useful parallels with getting people to pay for software. Shareware programs almost universally remind the user who hasn't paid that they should. In addition, some shareware programs "cripple" themselves by not enabling all features or creating annoying pop-up windows that make the user wait before doing any work until a registration fee is paid. In the same sense, web sites can cripple themselves by providing access to certain articles exclusively to those who pay the subscription fee, and offer benefits to subscribers as outlined above though.

A model that requires a reader to subscribe prior to accessing the site is also possible; however, restricting the ability to link to individual articles depresses the word-of-mouth sharing of links, and encourages the illicit distribution of content (as opposed to linking to it). A shareware model as applied to an online magazine might provide access to the first half of every story on the site, but keep the second half of each article hidden for non-subscribers. This enables readers to direct others to the work, and gives new visitors a look at the content that is substantial enough to help them decide if they want to pay, but incomplete enough that they are compelled to pay to read it completely. (example: salon.com

A similar model could work for individual works. The first 3/4 of a book could be distributed freely, with the last few chapters provided to those who send in the requested sum. Those who make a larger donation could get a special printed, hand-bound edition (for example). The first 2/3 of every song on an album could be made freely available, with full versions available for a fee, and a CD and cover art for those who send large donations.

Subscription models, especially if subscription is voluntary, favour sites with loyal audiences who frequently return. Thus, sites who facilitate this by building a relationship with their readers will quite possibly be rewarded. Examples of involving readers include offering facilitated discussion forums or events, mailing lists (for reminders and discussion), and solicitation of story ideas, polls, etc.

As with the other models, it is worthwhile to clearly illustrate how the money is being used, and more importantly, how it is making a difference.

further reading:

Sponsorship

Sponsorship is a potentially lucrative possibility for sites with well-defined audiences, and possibly an alternative to advertising. Sponsorship could consist of placing a line of text at the top of an article or section saying "sponsored by..".

However, instead of having set prices and soliciting sponsorships directly, a number of independent sites or newsletters could collectively put together a page that pointed to auctions for various sections of their sites, where potential advertisers could bid for having their name linked from the top of a site or section for the next year, for example.

Pricing

The issue of pricing is important to keep in mind. Since distribution happens directly, it makes little sense to charge $16.95 for an album, or $26.99 for a book. If anything, using the world of tangible products as an analogue will only result in fewer readers paying. Since cost of distribution (except perhaps in the cases of streaming video or digital music) is very small for the most part, one needs to focus on what exactly is being paid for.

Since a significantly larger portion of the cost of intellectual property distributed and paid for online goes to the creator, parts and labour (so to speak) become the major considerations. If distribution costs become negligible, then the audience can also be taken into consideration. A subscription to a web magazine, for example, could charge $5/year for students, $30 for people with money, and $100 for employees of large corporations.

As payments get smaller, the amount of effort required to complete them becomes a more worthy consideration. In principle, the more time it takes to complete a payment, the less often it should have to be completed. When one considers the amount of time it takes to transfer money over the web (a few minutes, not counting signing up for the service), this means that subscription models are (for now) the most appealing, since one could concievably only have to pay once per year, or with a credit card, just once. In any case, the time required to pay makes charging for access on a per-article basis essentially ineffective, if not actively discouraging to potential readers/viewers.

further reading:

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Poll
Getting paid for content is...
o impossible 4%
o dependent on the reader's conception of the artist as a person 27%
o impossible without micropayments 12%
o good! 22%
o Information wants to be free! 16%
o Information wants to be expensive! 4%
o essential to internet culture 8%
o bad. It's more efficient to have a few highly paid stars who make all the art. 4%

Votes: 48
Results | Other Polls

Related Links
o PayPal
o pt. 1
o pt. 2
o The Case for Micropayments
o The Case Against Micropayments
o The Siren Song of Internet Micropayments
o Why the internet won't be metered
o Micropayme nts are stupid!
o The Mental Accounting Barrier to Micropayments
o The Street Performer Protocol
o The Storyteller's Bowl
o A long discussion about paying for content
o Blogger Server Fund
o Server Fund
o raised $3500
o freenet
o On why "tipping" online isn't a necesarily a gratuity
o Rethinking Micropayments
o Thoughts on the Amazon Honor System
o exercise
o salon.com
o Why Do People Register, Does Crippling Work, Does Anybody Really Know?
o On getting paid for shareware
o Persuasive Technology and Shareware
o Pricing Matters
o Also by dru


Display: Sort:
Getting Paid for Content: from micropayments to shareware models | 62 comments (58 topical, 4 editorial, 0 hidden)
Few examples of 'tipping' (4.09 / 11) (#3)
by ajschu on Tue Jul 03, 2001 at 01:24:01 PM EST

Two of my favorite comics, Sluggy Freelance and Goats, institute this system. Both use PayPal and the Amazon Honor System, but they go about donations slightly differently.

Sluggy has a system where a donation of any amount is welcomed, but a $10 donation will allow ad-free access for a year. That is, you get an account that eliminates banner ads on all pages. Interestingly, this operates on the honor system; no checking is done to be sure that those who register for an account and use the ad-free feature have paid.

Goats takes a slightly different approach. Readers are requested to donate $1 or more every month. For every $750 collected, Jon writes a full-color Sunday strip. June actually brought in enough money to cover the month's bandwidth bills. Even despite this support, Jon doesn't seem to think much of the future of this system.

AJS



Nit: Goats allows ad-free too (4.00 / 2) (#20)
by Glurfle on Tue Jul 03, 2001 at 11:25:12 PM EST

Goats also allows registered users to turn off banner ads on the honor system. Personally, banner ads don't really bother me, so I donate and leave banners on.

[ Parent ]
My Shareware Experiences... (4.63 / 11) (#5)
by Speare on Tue Jul 03, 2001 at 01:35:24 PM EST

I've had several years experience with the "shareware" model, and as time goes on, the picture looks more and more bleak. There are several factors at work here.

  • Distribution by Internet

    The early days of shareware was marked by home-printed floppy disks in sleeves, sometimes with a xeroxed instruction sheet. The consumer saw the effort the author went through, and figured that a few bucks was a reasonable cost for that distribution method.

    Now, however, the distribution is world-wide for virtually no cost or effort. I can host a multimegabyte zip file within the regular monthly ISP fee, and the consumer knows it.

  • Breadth of Audience

    The only consumers of shareware "in the day" were computer enthusiasts who went to Radio Shack for fun. There were even a few brick-and-mortar shareware storefronts, which of course only attracted the most narrow and loyal of customers. You'd think that a wider potential audience on the web would be a boon to shareware authors, but all it's done is put this puny market penetration into sharp relief.

  • Napster and Open Source

    The chant is, "information wants to be free." Open Source folks purport to mean this as a freedom or right to access information. That seems noble enough. Napster-like audiences for the most part just want it free of cost. The combination of these two mindsets have come down on anything with a price tag.

If price can no longer be tied to the effort to produce, and price can no longer be tied to the effort to distribute, and price can no longer be tied to the loyalty of a specific audience, what DO you hang price on? Software may be a labor of love, but families and rent and electricity can't be fed with love, as they say.

My most popular application, Dragnifier, is a draggable on-screen magnifier. I thought it would be useful for GUI artists, but it has been a big hit in communities of users with limited vision.

Out of a nearly ONE MILLION downloads (not just page hits), plus the shareware CDROMs that collect everything they can find, I've received a total of about US$100 in three years.

Marketing doesn't improve the shareware conversion rate, it just improves the visibility. So I can expect that with the rightmarketing, I can make FIVE MILLION downloads and US$500 in the next three years.

So I've decided to make Dragnifier a donateware program instead, to see how that goes. It's for old people to see their screens, so it gives me a good feeling to make it available to people. It's back to a labor of love.
 
[ e d @ h a l l e y . c c ] spare time? know java? earn cash

My experience was different... (4.66 / 3) (#13)
by Surial on Tue Jul 03, 2001 at 07:06:08 PM EST

Well, a looong time ago I programmed a rediculously simple 'screensaver' in QuickBasic. By just printing out the full path with a greater than sign I emulated a DOS prompt. all input was captured and SHELLed. A simple timer ran while the faked DOS prompt was active, and after a set (unchangable) amount of time, the screensaver (a moving bar or something, can't remember) would kick in. The only nag thing I put it was a shareware message. I offered to have that changed to their own name for 6 dollars. I put it up on AOL someplace, and lo and behold I got 4 orders in the first week. Nothing after that, but for this total and utter crap piece of software, I got 4 orders. Mucking about with Floppy disks and shipping the money was moot, but I always thought that if I got orders for *THAT*, the shareware model could work.

Maybe I'm just underestimating the gullibility of AOL users?

NB: I haven't released any other shareware since then. Most things I've just released as public domain.
--
"is a signature" is a signature.

[ Parent ]
marketing (5.00 / 3) (#18)
by dru on Tue Jul 03, 2001 at 10:27:22 PM EST

Out of a nearly ONE MILLION downloads (not just page hits), plus the shareware CDROMs that collect everything they can find, I've received a total of about US$100 in three years.

Surely there are ways of squeezing more (reasonable sums) out of the users using any one of the above methods. For example, post a message at a community site frequented by visually limited folks and say you've got a brand new, neato version of Dragnifier, but you need $500 first. Whether that means 1000 x 50c or some other combination, doesn't matter. After that price (or some reasonable price) was met, you could accept whatever donations people wanted to make.

I think one of the most important points is not that it's possible to pay, but that there are also good reasons to pay.

[ Parent ]

What about ID software? (4.00 / 2) (#28)
by magullo on Wed Jul 04, 2001 at 08:40:02 AM EST

Granted, these guys are top-of-class, but they've created a profitable company based on the shareware model (and selling their 3d engine later on). They are still around, they are still profitable. If it's good enough, people will be willing to pay for it. I just hope that not everybody sees the internet exclusively as a way to make money. Some things, no matter how good, simple canot be charged for.

[ Parent ]
Shareware, demoware, and crippleware (4.66 / 3) (#29)
by RadiantMatrix on Wed Jul 04, 2001 at 09:25:57 AM EST

Shareware is such a broad term. I like to put specifiers on it -- sharware is traditionally a full-featured program which you are supposed to try free, then pay for if you find it useful/fun/etc.

Two other *wares that have arisen (and are often called shareware) are demoware and crippleware. Demoware is what Id Software uses (a side note, it is Id, one syllable, as in id/ego/superego; see the docs with any sufficiently old Id game). Id produces a game, then distributes a demo of it: originally one "episode", but as with Q3A it is now only a few levels. This whets the appetite of the user and makes them want the full game. Demoware also takes the form of time-limited, fully featured demos. We all know how well those work :P

Crippleware is similar -- functionality is removed to make a somewhat useful tool, but more features can be had with a purchase.

--
never put off until tomorrow what can be done the day after.
Express Yourself

[ Parent ]

demoware (4.50 / 6) (#32)
by Delirium on Wed Jul 04, 2001 at 03:16:58 PM EST

I agree that what id does is demoware, but what they used to do was a form much closer to shareware. With Doom and Quake, for example, you could play fully 1/3 of the game, minus two weapons. I played those, and the free part of the game was so large that I never even managed to finish it, so of course I never purchased the full version. What they're doing with Q3A is a lot closer to what I conceive of "demoware" to be - a free section just long enough to give a taste of the game, but not to allow full-fledged play that can take weeks to get through.

[ Parent ]
Demoware (4.50 / 2) (#35)
by IntlHarvester on Wed Jul 04, 2001 at 10:49:34 PM EST

One of the interesting things that Netscape did back in the mid-90s was to make their 'enterprise' server software available under the same freely downloadable evaluation licence as the browser. This was a big shift from the previous model where you pretty much had to pay (or be vetted by a salesman) to evaluate any software.

This has become commonplace now, and you can download and try pretty much every $Ks package you might be interested. Even BEA is now spamming WebLogic CDs where as late as last year you still had to go the salesman route.

[ Parent ]
Downloads, etc (3.66 / 3) (#41)
by topham on Thu Jul 05, 2001 at 11:47:35 AM EST

You are falling into the Trap.

The number of users who have downloaded your software and continue to use it enough to justify it is SIGNIFICANTLY less than the number of people who have a copy of it.

Posessing a copy doesn't give you any rights, or expectation to profit. [As a shareware author].

If your program is in constant use by the Million people who downloaded it you might have a right to complain.

With Shareware I will often download a dozen programs which do the same thing, I might continue to use 1 of them. Then again, I might only need it once and not care about it after that. Not about to pay $50 to use a program once.

(Or 25, or 10... now, if it was $0.10 maybe...)

But if I pay a Dime (or more) for it I expect it will work, and, I expect support if it doesn't.



[ Parent ]

Aarrgh. +1 (1.25 / 12) (#7)
by MonkyBoy on Tue Jul 03, 2001 at 02:07:05 PM EST

Must not read....eyes hurting...

I'm curious... (3.50 / 6) (#8)
by ipinkus on Tue Jul 03, 2001 at 03:18:55 PM EST

... Exactly who are the people that will be employing these micropayments? Furthermore, who's actually going to actually pay?

While there might be a novelty aspect to paying a micropayment or two, who's really going to keep it up? (Paying that is) I'm sorry to say this, but if my favorite sites start requiring subscriptions I'll just go find myself a normal offline life.

I'll find a free newspaper somewhere. They have comics, classifieds, some things which are newsworthy.

Humbug... Best of luck making money on the web folks...



I do! (5.00 / 1) (#44)
by andrewmuck on Fri Jul 06, 2001 at 02:09:00 AM EST

I make micro payments where content deserves it.
I find that giving a couple of cents (or dollars depending on how good something was) provides a valuable feedback. Makes it more likely that I'll get to see some more quality instead of dribble.
http://two-cents-worth.com/?188428

[ Parent ]
SomethingAwful as a case study (4.50 / 8) (#9)
by Delirium on Tue Jul 03, 2001 at 05:03:43 PM EST

Somethingawful.com has been trying to be user-supported with no ads for a while now, and have tried a few approaches. The first thing Lowtax tried was asking for donations, offering to list anyone who donated on the sponsors page, and allowing anyone who donated over $100 to place a link on the right of the mainpage (due to a server crash those aren't actually there right now). Since there are 18 people listed in the "greater than $100" category, and many more listed for lower amounts, I'd surmise that this donation drive brought in at least $2500-$3000. That's certainly enough to pay bandwidth for a bit, but the main problem is that it's a one-time donation drive; the people who would donate a lot are the loyal fans, and you'll get them all the first time. A subsequent donation drive will get donations from new visitors, and a few repeat donations from the really hardcore fans, but it'll be hard to match the first one, so it's not a very easy way to pay for recurring expenses (like bandwidth). Perhaps asking for $100/year or something to get a link on the frontpage would fix that; it remains to be seen if that would work.

The other money-maker that lowtax tried was asking people for money to play around with stuff in the forums. For $10 you can change your "title" to whatever you want, for $20 you can do that and change someone else's title, and for $30 you can do all that and insulate your title against future name-changes by others. It's like forum insurance! You can read his announcement here. I'm not sure how many people actually paid, but judging from the people posting in the forums, at least a hundred people paid $10, which is $1000 right there just from forums.

So does all this mean that it's possible to support a site entirely through user donations, with no required payment to view the site ("micro" or otherwise), and no ad banners? Possibly, but it's certainly not very easy. From what I understand SomethingAwful is certainly not turning any profit, and is currently just barely paying for its server bills. As all the money-makers so far are things that draw in $10-$100 from the loyal (and quite large) userbase, how to continue to support it now that that resource has already been tapped (twice) is not as clear.

oh yeah (4.00 / 3) (#10)
by Delirium on Tue Jul 03, 2001 at 05:12:54 PM EST

They also sold SomethingAwful.com tshirts that said "I'M L33T. LIEK JEFF K!!!!" on the front in small letters near where the pocket would be on a polo shirt and had the big SomethingAwful grenade logo on the back. I have no idea how many they sold or how much profit this brought in, but it's the sort of thing that strikes me as a good idea for sites that produce fans like that. Maybe not for sites like kuro5hin, but for sites that produce creative content, like of course SomethingAwful, slitfinger.com, User Friendly (despite the fact that I think it sucks), Sinfest, etc., selling merchandise might be a good idea. People who wouldn't donate might nonetheless be willing to pay $15 to get a shirt with their favorite online comic character on it.

[ Parent ]
It works to some extent (4.00 / 2) (#19)
by ramses0 on Tue Jul 03, 2001 at 11:15:42 PM EST

I've got my K5 T-Shirt ... I don't know about you.

I've also been debating on whether to by the secret mousepad or not. The secret shirt is well worth it, and since I just deposited my paycheck the other day, I might as well go on a buying spree. CafePress, here I come!!! (We get Signal11!!! Moderation queue on!)

--Robert
[ rate all comments , for great ju
[
Parent ]

A problem with micropayments (3.40 / 5) (#11)
by localroger on Tue Jul 03, 2001 at 05:44:28 PM EST

Micropayments do not work unless, however micro they are and however seamlessly they are collected, they add up to a macropayment for the content producer. That's the whole point of the idea.

But of course, most people have multiple favorite sites. Some sites will have rich content requiring multiple micropayments for loyal fans. And people who use these sites a lot are going to get a macrobill from whatever service is doing the collections at the end of the month.

Ultimately, it's the same as paying by the bit or by the minute. And we know how popular that model has become...

I can haz blog!

Lower incomes vs. Higher incomes (2.83 / 6) (#12)
by typo on Tue Jul 03, 2001 at 06:20:51 PM EST

A subscription to a web magazine, for example, could charge $5/year for students, $30 for people with money, and $100 for employees of large corporations.

Why is it a general opinion than people that earn more income should instantly be charged more for the same services than people with lower incomes?

This is the kind of opinion that barely stands when talking about basic services guaranteed to everyone, and is beyond my comprehension in services or goods that are non-essential, like information.
(Non-essential here means "not essential for basic survival")

Money vs. value (4.83 / 6) (#15)
by analog on Tue Jul 03, 2001 at 07:57:12 PM EST

Why is it a general opinion than people that earn more income should instantly be charged more for the same services than people with lower incomes?

It's not. I can't speak for the poster to whom you replied, but in general when you see a tiered pricing structure of this nature, the idea isn't to extract more money from those who have a lot, but to involve certain types of people who may not.

The student discount is a good example of this. Let's say I'm a hard working graphic arts student slogging my way through college. Adobe is willing to sell me their software at a steep discount so that I may purchase it when I otherwise might not be able to, on the theory that I'll keep using it when I enter the professional world, where they can keep selling it to me for full price; they receive a little less money now, but get the value of a long term customer.

Besides, I'm sure you consider yourself a good little capitalist, and that means getting people to pay the maximum you can for your product. Since those with money are usually willing to pay more for a given product, it's just good business to charge them more, right?

[ Parent ]

non essential (4.00 / 4) (#17)
by dru on Tue Jul 03, 2001 at 10:14:09 PM EST

Why is it a general opinion than people that earn more income should instantly be charged more for the same services than people with lower incomes?

Because we're talking about supporting an artist, not buying a commodity. Unless the artist makes enough money to survive on art alone, which is unlikely in most cases, then it makes sense to contribute as a proportion of income, rather than flat rate. If you think art is a commodity, then make your own extrapolations.

This is the kind of opinion that barely stands when talking about basic services guaranteed to everyone, and is beyond my comprehension in services or goods that are non-essential, like information. (Non-essential here means "not essential for basic survival")

Having hundreds of thousands of dollars in the bank is also not essential for basic survival. Indeed, one can live quite comfortably on much less. Additionally, it is often the case that people who subscribe to publications at work do so because the information helps them make a bigger profit.

So why not encourage them to pay more?

dru.ca

[ Parent ]

Basic capitalism (5.00 / 1) (#46)
by error 404 on Fri Jul 06, 2001 at 06:15:13 PM EST

You charge what you can get. You sell to students, you are damned lucky to get the $5. You sell to regular people, maybe you can get the price of a dead-tree magazine subscription. Corporations are used to paying big bucks per seat, my guess is because the person making the purchase decision isn't using his or her own money.

Airlines do that all the time. Most fares are much lower if the trip includes a Saturday or Sunday. Why is that? I'm not completely up on my air-labor stats, but most industries have to pay extra for weekend labor, so that low fare is for a flight that costs the airline more. The answer is that employees resist weekend business travel, so the airlines can use the low weekend fare to grab those "my own money" bucks and still get the higher fares from people flying on the company tab.

Not some commie conspiracy, basic money grabbing.


..................................
Electrical banana is bound to be the very next phase
- Donovan

[ Parent ]

Slashdot Needs Micropayments to ... (3.50 / 4) (#14)
by KidSock on Tue Jul 03, 2001 at 07:27:06 PM EST

to buy new Cisco routers as quickly as they melt down :~) Their either broken again or someone tripped over the power cord for that part of the Internet. I think K5 will benifit from this quite a bit with or without Micropayments.

the power cord for that part of the Internet (4.50 / 2) (#25)
by ryancooley on Wed Jul 04, 2001 at 05:19:45 AM EST

someone tripped over the power cord for that part of the Internet

As bad as that statement may be, my favorite was on some rather recent linux/bsd howto:
"Now you must configure the internet for your computer."

I can see why Unix would get a reputation as a difficult OS with poorly worded statements such as that.
If you ask Linus, I'm sure he'll say it is entirely possible to configure the internet for your Linux box. After-all, it can do infinite loops in 5 seconds...

[ Parent ]

The answer is obvious (4.28 / 7) (#16)
by analog on Tue Jul 03, 2001 at 08:15:58 PM EST

It's just that nobody wants to admit it yet. You're going to have to get that evil bastard 'The Middleman' involved.

The question is really how to make the payments high enough to be worth the transaction costs and at the same time give enough value for those payments that people are willing to make them. Would it be worth five dollars a year to read your favorite weblog ad free? How about ten? Okay, now what if you could make a single payment but get all of your favorite weblogs ad free?

Imagine if you will that a group of the more popular weblogs and comic sites got together and formed a consortium from which you could purchase an annual subscription. Holders of these subscriptions could view all the sites ad free, and the resulting revenues could be disbursed in whatever way the member sites thought fair (this being the web, one would think site traffic would enter into it).

Would it generate enough revenue to make it worth the while of all the sites involved? Who knows? However, I think it would certainly generate more revenue than any of the other payment schemes currently being discussed.

Not quite... (4.66 / 3) (#33)
by Phyrkrakr on Wed Jul 04, 2001 at 03:31:08 PM EST

The problem with this plan is that, yes, you would get your favorite weblogs ad free. But then, you might ignore blogs that you haven't heard of simply because they aren't a part of this consortium. You would instead focus on the blogs you paid money to, since you would want to make your investment have value. So, yes, this benefits the blogs that already have a large readership, but hurts the ones just starting out. Note, also, that this doesn't just apply to blogs, of course. This could be anything, e-zines, comics, discussion sites, whatever.

Smith & Wesson: The Original Point and Click
[ Parent ]
Orson Scott Card does this well (4.25 / 4) (#21)
by PurpleBob on Wed Jul 04, 2001 at 12:44:26 AM EST

Orson Scott Card does something which is mostly like the "restriction" model they give - he makes the first 4 or 5 chapters of a book available on his web site, then presents you with a link to buy the book. He doesn't do 3/4 like they suggest - I see two reasons for this. First, a whole lot of the action in a typical Card book happens around the middle. Also, letting people read 3/4 of a book would be somewhat cruel, and it would make it seem like the book they bought (if they eventually bought it) wasn't worth getting anyway, since all they care about is the last quarter of it.

link. (4.00 / 2) (#22)
by dru on Wed Jul 04, 2001 at 01:06:24 AM EST

Here's the link to OSC's site. The books that I glanced at only had one chapter available, which seems a bit less than is needed to really suck the reader in (without giving too much). That probably has to do with the publishers more than anything.

[ Parent ]
There are more chapters there. (4.00 / 2) (#23)
by PurpleBob on Wed Jul 04, 2001 at 01:21:11 AM EST

The link says "Read Chapter One", but at the end of Chapter One there's a link that says "Next Chapter", and so on. His most recently-released book, Shadow of the Hegemon, has five chapters available on the web site.

[ Parent ]
Just like book stores (4.33 / 3) (#37)
by ToastyKen on Wed Jul 04, 2001 at 11:48:27 PM EST

I've on occasion read the first few chapters of a book in the bookstore before deciding to buy the book.. It's a system that does seem to work pretty well.. Unfortunately, this only applies when it's more trouble to get an illegal copy of the rest of the work than to buy it.. I mean, a lot of places let you listen to 30 seconds of a song or even the whole song in RealAudio.. but MP3s are easy enough to find that systems using that 30 seconds or couple of songs to lure you into buying the album don't work too well.

[ Parent ]
Another method not mentioned (4.85 / 7) (#24)
by RadiantMatrix on Wed Jul 04, 2001 at 04:27:06 AM EST

There is a method of payment for content that has already been proven by (drumroll) the porn industry -- network membership.

Beginning a network is the difficult part. However, having sites belonging to a network or guild for which patrons pay a flat membership fee works quite well. Envision the following:

The Technology Weblog Guild is formed to promote and support technology-related discussion sites (like this one). The TWG approaches K5 and Slashdot, offering to pay them in a use-proportion fashion. In order to partake in discussions on either of these sites, users join the TWG for, say, $10/month. TWG provides authentication services for member sites, for which it claims $2 of each membership. The remaining $8 is distributed between member sites based on the percentage of use for that user. For example, a user who only reads K5 will have that entire $8 sent to K5 by the TWG.

The excellent part of this (for consumers) is that as site membership in TWG increases, they will have access to more sites for the same fee. Of course, past a certain point TWG may need to offer graduated rate plans (K5/Slash for $10, all sites for $30), or simply hike rates to continue to benefit all member sites.

Perhaps this is too simplistic -- what does everyone else think?

--
never put off until tomorrow what can be done the day after.
Express Yourself

but would anyone pay? (4.85 / 7) (#31)
by Delirium on Wed Jul 04, 2001 at 03:13:48 PM EST

I think the problem is getting people to pay for it. People will pay for porn; they will rarely pay for anything else, which is why porn websites have been the only consistently money-making class of web-sites for five or six years now.

If someone were to institute a scheme like that, I think a free alternative (or perhaps several) would quickly spring up and gain in popularity. If it cost $10/month to read/participate in k5/slashdot, somebody would start Yet Another Geek-Oriented Discussion Site with no membership fees. And it would be very popular, especially since it could just run scoop and thus, if it gained a significant percentage of the old k5's users, would be very similar to k5 in everything but name.

[ Parent ]

Hm, a valid point. (4.33 / 3) (#34)
by RadiantMatrix on Wed Jul 04, 2001 at 09:34:28 PM EST

Hrm. Hadn't thought of that. I guess what would be needed is a good "hook" for both the consumer and the site.

A breif (and probably flawed) example would be something like having network member sites be ad-free. There are also other little advantages: one login per person means people have to pay for throw-away spam accounts, and it is possible to administer your username/password for all sites in one place (I'm not sure if that's an advantage or a risk).

With a site like slashdot, I doubt the "loyal" readers would abandon the original site for a copy just because it started to cost some small amount of money: particularly if it meant ditching the ads and a number of the more annoying trolls.

--
never put off until tomorrow what can be done the day after.
Express Yourself

[ Parent ]

Yes, people would pay. (5.00 / 3) (#48)
by Keslin on Fri Jul 06, 2001 at 08:58:51 PM EST

As you have already pointed out, you can learn a lot about Internet commerce by taking a long look at the porn industry. One of the things that we have learned in the porn industry is that people will happily pay for good content even if competing content can be had for free.

One false assumption that crops up a lot is that pricing is the only factor in a customer's decision. It isn't, not for all customers anyway. If you are offering content that interests your audience enough, then they will pay for it even if there is free competing content out there.

There are enormous volumes of examples of profit-generating adult web sites, even though you can hop on Usenet at any time and download hundreds of thousands of free images (generally illegal, but free). If price were the only concern of any given customer, then the original content producers would not be able to make a profit. In reality though, it is the original content producers that are making the most profit in the adult industry. We're not talking about small amounts of profit, either.

Looking at Kuro5hin, if this place suddenly switched revenue models to a direct-gratuity system instead of advertising, then you probably would see a few competitors pop up. This place has a very special feel though, which isn't easy to reproduce. I think that a substantial number of people would happily continue to participate even if they were forced to pay for the privilege. Readership might drop by some non-trivial percentage, but I very much doubt that the site would die entirely. Not if the price were reasonable.

-Keslin, the naked nerd girl.

[ Parent ]

The internet cannot be fee-based (3.66 / 6) (#26)
by ryancooley on Wed Jul 04, 2001 at 05:47:06 AM EST

The greatest thing about the internet is the mass of information <i>freely</i> available. This is why internet access is in libraries. Once the world accepts a payment-based net, you will essentially be choking the net... You will be turning the great free net into a mini-satelite dish system, where you pay for each channel.
   If this method is the standard, you might as well kill off every site but the monopolies. Who's going to pay some money up front to see some site called Google.com when you don't know what they offer... it could be anything from the worlds largest collection of free books, or it might be a blank page and the owners are just scamming millions of people out of 5 cents a piece.

Plain and simple, if any site's contents are off-limits without a payment, the site will die, the internet will turn into nothing more than the next cable TV system, where you pay a few dollars a month and recieve the lowest-common-denominator sites.

The fact is, ads work fine... Yahoo started out the right way... Instead of one huge ad at the top of the page, they put little logos throughout the page that said 'powered by compaq' or a text link to 'xena'. The reaon so many can't make enough on the ads is poor design. Most people think that you just stick a banner on your page from doubleclick.net and people will click on it because it's there. If most sites had their ads integrated with the themes of the site (article on Compaq Alpha comes with a sponsored link to shop.compaq.com) similar to Google's system, we'd all be happy to investigate a link much more often.

Another side effect of the monolithic banner approach is that people don't stick around the site, rather just viewing the main page and leaving. If the ad went with the theme of the site, the people that want to know more, can follow sponsored links that will give them just that.

That latest report on overclocking your system should have a sponsored link to the seller of super-fans or motherboards, CPUs, etc, but instead they have free links to the site people are going to visit, and sponsed links to sites people at the site will have no interest in.

One final point though... a site that uses little bandwidth, has few hits, and has a generally low TCO can break better than even by having the evil monolithic ads, as only a few dollars are needed to support the site.
For the big sites, target your advertising, not on the individual's general interests, but based on the subject of the site they're looking at. When I'm reading about Apache I'm not going to follow a link to buy a Dell PC, but I might follow a link to buy an Apache book, alternative commerical products, and other sites with similiar information on-topic.

Compaq article sponsored by Compaq Shop (4.33 / 3) (#27)
by magullo on Wed Jul 04, 2001 at 08:26:22 AM EST

Now that would sound suspicious, wouldn't it?

[ Parent ]
You're thinking of special cases (4.25 / 4) (#30)
by jacob on Wed Jul 04, 2001 at 10:07:02 AM EST

You bring up an excellent point about public libraries specifically with respect to micropayments, though many of the other strategies the article describes wouldn't be affected. I think your alternate strategy is highly suspect, though. It works in the special case of a search engine -- Google's adwords, for example -- but who in their right mind would trust technical reviews off a website that has a vested interest in making their advertisers' products look better than the competition? What can an online comic advertise? Are they supposed to have their characters talk about how great Diet Pepsi is?

--
"it's not rocket science" right right insofar as rocket science is boring

--Iced_Up

[ Parent ]
Good question, but accounted for (4.50 / 4) (#38)
by ryancooley on Thu Jul 05, 2001 at 04:27:46 AM EST

I did not mean for tomshardware.com to make an advertising deal with intel, but to make advertising deals with Intel, AMD, VIA, and so forth. In fact, the best way would be for each corp. to have a flat rate per click-through, with no questions or individual deals need be involved, and I certainly don't want a site like tomshardware to get into a position were they only get paid each time a clickthrough purchaces something.

I don't think search engines are special cases... only that they contain millions and millions of typical cases rolled into one site. Every site on the internet has a common theme, and they should base their advertising on that theme rather than whatever is in the que at ads.doubleclick.net.

Slashdot has links to thinkgeek.com, valinux.com, davecentral.com, even kiro5hin.org. Now at least one of those is a sponsored link, and none is really out of place, nor would it take huge ammounts of bandwidth and annoying ads to convince large numbers of people to click through, and possibly buy anything from a hat to a SGI Irix server.

[ Parent ]
The internet cannot be fee-based (4.66 / 3) (#36)
by rocur on Wed Jul 04, 2001 at 11:03:34 PM EST

The greatest thing about the internet is the mass of information freely available.
Yes, this is the greatest thing about the Internet if you are a user. It is also the worst thing if you are a producer of information trying to put food on the table (this includes both megacorps and individuals).

Plain and simple, if any site's contents are off-limits without a payment, the site will die, the internet will turn into nothing more than the next cable TV system, where you pay a few dollars a month and recieve the lowest-common-denominator sites.
This is just plain wrong. There seems to be a common misconception that if a viable pay model is created, every site will have to use it. Very few people look at my home page, if I charged for it I'm sure no one would (well maybe my mother, but I'm not even sure about her). On the other hand, if a site offers unique, valuable information that can't be obtained elsewhere, people will pay for it. The Wall Street Journal's site is one of the most obvious example, it offers some headlines and generic data for free, to get the rest you must pay. The information it contains can't be obtained anywhere else so large numbers of people are willing to shell out $59/year. Lexis/Nexis is another example. Much of the data is available for free from other sources, but being able to search across all of that data at once is worth thousands of dollars to a lot of people.

The fact is, ads work fine
I'm in the business so I can state with some authority that the fact is, except in rare cases, ads don't work. When was the last time you clicked on an ad here at K5? Clicked on an ad anywhere? No one gets paid unless you click that ad (and sometimes not unless you click further into their site). You hit on part of the problem, ads are rarely targeted toward the viewer. Unfortunately, every time someone comes up with a system to attempt to target ads, everyone starts screaming about privacy.Sorry, but you can't have it both ways.

You go on to mention "themed" ads. Great idea in principal, in practice it has at least two major problems. The first is that while it might work for narrowly focused sites such as computer hardware sites you posit, what about general sites like the Denver Post? NFL merchandise for football stories? Moturary ads with car crash stories? (obviously been watching too much Six Feet Under.) The second issue is how does a web site get the ads in the first place? Before K5 puts up a story on Intel, do they have their sales department call Intel's ad agency and spend several weeks (or months) negotiating an ad deal? Does K5 even have a sales department? Large enough to negotiate ads for each story? Sites use doubleclick because they can make one deal and get an unlimited (well sort of unlimited) number of ads.

Micropayment systems don't portend the end of the free Internet, there will always be plenty of free sites as long as there are people will to create them. Metered service, AOL/Time Warner, and bad patents on the other hand... but that's a rant for another day.

[ Parent ]

Not the case at all (4.50 / 4) (#39)
by ryancooley on Thu Jul 05, 2001 at 04:41:30 AM EST

You hit on part of the problem, ads are rarely targeted toward the viewer. Unfortunately, every time someone comes up with a system to attempt to target ads, everyone starts screaming about privacy.Sorry, but you can't have it both ways.

So many errors, so little time... I mentioned that you should target the ads torwards the site rather than the individual... Now I don't think sites are worried if you are capturing data deciding what kind of ads their readers would like.

As far as sites not switching over to the same system, I disagree on the basis of human behavior... That's like saying, 'Just because two competing companies merged into one monopoly, doesn't mean others will'. People will use whatever method they think will make money for them... If no one subscribes, then the site will be deleted, not given away... Just look at all the failed software products which spiraled into oblivion rather than becoming freeware/shareware/etc.

Also read my other reply on the same level as it addresses some of your objections, and I despise redundancy. To keep my position clear, I'm not opposed to a link that says "Click here to send me 20cents if you like this site" but I despise the idea of being charged for every damn piece of information on the net.

People will go to the sites that don't charge, unless everyone starts charging at the same time, in which case ISPs, Broadband providers, and PC sales will all drop off the charts. Even if the system doesn't fail, there will be hundreds of people who will subscribe to everything, automatically fetch every piece of content, and mirror it on Gnutella for free...

The single bigest problem with your arguement is that it doesn't benefit consumers in any way at all... They get less content for astronomical increases in cost. No system such as that has ever suceeded.

[ Parent ]

Re: Not the case at all (4.50 / 2) (#42)
by rocur on Thu Jul 05, 2001 at 12:11:23 PM EST

Now I don't think sites are worried if you are capturing data deciding what kind of ads their readers would like.
It is not sites but consumers that get up in arms when they find out that doubleclick is collecting cross-site information to profile them. Sites would love to be able to offer targeted ads.

If no one subscribes, then the site will be deleted, not given away... Just look at all the failed software products which spiraled into oblivion rather than becoming freeware/shareware/etc.
And your point is??? Why should companies give away their data/software if they can't make money on it. Because you (or Stallman) want them to? Companies are in the business of making money. If they can't, they go out of business, taking their data with them. To expect otherwise is simply wrong.

The single bigest problem with your arguement is that it doesn't benefit consumers in any way at all...
Again, your point is? The web as we know it is free only by a fluke of birth. Businesses own the pipes and the access points which you already pay for. Businesses own the web servers and the content, why shouldn't they be able to make money on them. The move to a pay model will likely have a lot of misteps along the way, but will ultimately look like the phone system. You pay a monthly charge for some fixed set of services and then pay for extras as you use them. Companies will offer "800" number sites where appropriate and you can always put up your own free site. As for Gnutella, way too many technical problems, too hard to use, and will violate way too many laws.

They get less content for astronomical increases in cost. No system such as that has ever suceeded.
Two words: Cable TV. The same movies over and over for $9.95/month. Contrary to all the screaming, cable tv has yet to destroy over the air tv even though cable tv's revenue model is based on consumers directly paying for content. Instead, free tv provide broad based (lowest common demonitor?) shows and cable networks like HBO, Animal Planet, History Channel, et al offer shows that appeal to a more narrow demograhic. The Web can work the same way, general purpose information on "free" sites (ad based or just labors of love) and more targetted information on pay sites.

[ Parent ]

More false logic. (5.00 / 1) (#49)
by ryancooley on Fri Jul 06, 2001 at 10:05:50 PM EST

It is not sites but consumers that get up in arms when they find out that doubleclick is collecting cross-site information to profile them. Sites would love to be able to offer targeted ads.

That was EXACTLY my point. Nice to see your skills of deduction are so sharp...

The web as we know it is free only by a fluke of birth.

You could say the same of broadcast TV. The truth is, the system is in place because it works.

As for Gnutella, I spend plenty of time downloading entire movies like The Matix, and have about 20 episodes of Futurama that I've downloaded in the past month. Gnutella works great, and as other uses for it come up (serving web page content) more features will be added by the people that develop the clients.

Cable TV. The same movies over and over for $9.95/month.

That doesn't remotely compare. The reason Cable TV caught on was because they offered dozens more channels than people were receiving. Besides, Cable TV service is nothing like the web... There is no cable service with billions upon billions of channels. I am willing to say that the model will fail miserably. It is the freeness of the internet that makes it a draw to people... Once it's not free, it's not even slightly enticing. Who in their right mind would pay for a computer, an ISP, and then again pay for every single web site they visit. Despite what companies may want, the consumers won't accept it, ever.

[ Parent ]

The most common mistake. (4.80 / 5) (#40)
by tekk on Thu Jul 05, 2001 at 04:42:16 AM EST

I'm in the business so I can state with some authority that the fact is, except in rare cases, ads don't work. When was the last time you clicked on an ad here at K5? Clicked on an ad anywhere?

This is the most common missunderstanding of them all. Who the hell told who, that ads don't work if people don't click on them. It's been said over and over, but when was the last time you clicked on an TV ad? When was the last time you've pointed your mouse over the ad page in an magazine?

The problem is, people don't rush out the door when they see some Pepsi commercial. No standard commercial has that kind of power. For me, the sole fact, that people click on banner ads means, that either a) people browsing the 'net are even more bored than those watching TV, or b) web ads work better than those in regular media.

And if you disagree, just go click the next commercial message on the radio.
No one gets paid unless you click that ad (and sometimes not unless you click further into their site)

And this is bad. Do television stations get paid only if the viewer buys something at 7-11? Does Ronald McDonald shell out the bucks when you grab your Quaterpounder/Royal? No, because this is only an ad, not direct-marketing.

And another thing: it is said, that an average person experiences thousands of regular ads a day. Thousands. If you were to get more info about every product you see an ad for, you'd be broke in no-time. And it's not like you don't see the same ad couple of times a day. And if you see the same ad 20 times and click on it once, you'd still be down to 5% click-through, which everybody says is too low. What the hell are you expecting, miracles?

Generic ads are good for brand-recognition or product-recognition. Targeted ads (i.e. soap ad in the cosmetic deparment in the shop) are to make sure you buy this specific kind of soap, but that's when you want to buy the goddamn soap, not when you're about to get an razor.

Advertisers need to get a grip on the reality.

-- [tek.] a brand new way to peel an orange.
[ Parent ]

Re: The most common mistake (4.50 / 4) (#43)
by rocur on Thu Jul 05, 2001 at 01:16:40 PM EST

Let me restate my point: Banner ads as they currently exist do not work for site owners. You can argue that only paying for clickthrus is wrong (and I'd tend to agree with you), but that is the current model. My point was that almost no one clicks on these banners, and therefore the site operators don't get much (if anything) in the way of revenues. Top of page banners, mid-page banners, popups, popunders, and intersitials all have the same problem. If the site only gets paid on click-thrus, ads don't work.

A big part of the reason that click-thrus have become norm, is that there is no (easy) way to measure an ad's effectiveness. Simply hearing/viewing radio and TV ads are known to work because there is a direct, provable relationship between running ads in a given market and a sales spike in the same market (note that I'm talking generalities here, obviously a beef ad in India won't work). Ads are thus priced on a frequency/reach basis for a given area. Easy to explain and ad people "know" it to be true. The actual results for web ads are not so easy to quantify partly because there is no viewer location known and there is little belief that web users even "see" the ads in the clutter of other content (the exception being intersitials). Click-thrus are the "proof" that they are looking for. You are right that part of this is a problem with the advertisers not understanding how the web works, but part of it is that no one has found a way to show the advertisers any "proof" that consumers simply vieing web ads sells product.

[ Parent ]

Google Adwords (5.00 / 1) (#45)
by the trinidad kid on Fri Jul 06, 2001 at 04:36:36 AM EST

Google Adwords are "pay for impression" not "pay for click through"

[ Parent ]
It's not that the need to gr0k the web... (5.00 / 1) (#51)
by tekk on Sat Jul 07, 2001 at 08:40:02 AM EST

As to viewer location -- this may be different for US, but in most countries TV ads are mainly broadcasted on the national basis (because there are few/none local TV stations) -- so there's no difference from the web ads (which also can be targeted for users from specific countries).

Even more, the web gives you much better information about the ad impact -- you can count unique viewers (cookies), exact number of views (hit logs), you can even get the information about how many of those unique viewers actually went to your website (but this is relevant only if your campaign is web-only and for-web-only).

With TV, fetching data is far more difficult and expensive -- you take data TV stations give you (which could be biased) and conduct research (which is expensive as it requires professional assistance).

And my guess is, that this is the problem -- with the regular ad campaigns it's very difficult to estimate the results, so the error margin is huge (10-15% for example -- which is very important when you report that i.e. brand recognition rised by 20%). With the web, everything is in the range of some 1-4% error.

Ads don't work nearly as good, as the advertisers would like to think they do, but with the web it's much more visible.

-- [tek.] a brand new way to peel an orange.
[ Parent ]

Free crappy content versus better content for-pay (5.00 / 1) (#47)
by Keslin on Fri Jul 06, 2001 at 08:48:50 PM EST

The greatest thing about the internet is the mass of information freely available. This is why internet access is in libraries. Once the world accepts a payment-based net, you will essentially be choking the net...
There are terabytes of free content out there online, but how much of it is worth consuming? One of the fundamental concepts behind pay-for-content business models is that people are willing to spend money for content that is more useful to them than anything that they can find for free. This business model works very well, trust me on that one.
You will be turning the great free net into a mini-satelite dish system, where you pay for each channel.
That's sort of the point, people with satellite televisions are willing to pay extra money for better content. I would rather pay a few dollars extra per month to get things like "Sex & The City" and the Spice Channel, than just grab NBC out of the air with bunny ears.

A concept that a lot of people miss, is that not all of the net needs to follow the same business model. There will always be sites that are 100% free, and there will always be for-pay sites, the two different revenue models can happily co-exist. A lot of people seem to be afraid that a functioning micropayment system will completely eliminate free sites entirely. I just don't see that happening.

There will always be audience demographics that will refuse to visit sites that cost any amount of money. Sites that target college students, for example, will probably never cost a lot of money. Product and PR oriented web sites run by corporations don't benefit from micropayments. Sites where content production is very inexpensive or where revenue generation is not the goal, those don't benefit from micropayments.

The sites that really benefit from micropayment systems are sites that are spending good money on trying to produce original content. Aren't those sites the ones that you want to encourage and support?

-Keslin, the naked nerd girl.

[ Parent ]

addressing purchasing power differences (none / 0) (#50)
by brshashanka on Sat Jul 07, 2001 at 02:10:47 AM EST

Whatever payment system is setup, it will have to take into account the disparity in purchasing power in diff countries. For eg, 20c might be a *micropayment* in the USA, but is worth two square meals in my country. Therefore, multiple pricing techniques are highly essential. This would mean different rates for people in different countries. This brings up multple problems:
1) Determination of country [ie applicable rate] without infringing on privacy
2) Elimination of fraud through people masquerading as people of a poorer country.

Content pricing for the poor (5.00 / 1) (#52)
by Keslin on Sat Jul 07, 2001 at 10:50:42 AM EST

Whether a content producer even cares about the relative purchasing power of people in weaker economies is the big issue there. A lot of content producers simply won't care about people that can't afford the asking price. Those content producers will set a single price for their content, and if you can afford it then great, if you can't then it isn't their problem. Content producers have production overhead to cover, and there is always going to be a bare minimum at which they can afford to publish their material.

The only reason that a content producer might be interested in offering their content to poorer customers at a reduced price is if they are considering their overall marketing plan, or other goals besides simple immediate profit. If they see value in publishing their content to the widest possible audience, then they might see some benefit to selling content at below cost. Microsoft wanted us all to use IE, so they gave it to us for a price that was below their cost in order to get us to use it. In cases like this though, micropayments are usually irrelevant since your business model doesn't put a high priority on making any money at all from that specific content.

In most cases, there are simply not enough benefits of offering content at a lowered price to poor customers. Offering a tiered pricing structure introduces the risk of fraud and it also costs more to implement. Both of these factors subtract profit from the content producer's profit & loss sheet. Anything that lowers profit has to have a clear benefit in order to be implemented, and so most content producers will simply ignore the issue entirely.

Another issue is that the culture that has emerged online has a specific slant toward content theft. This culture does absolutely nothing to assist in the plight of poor content consumers. In a world of content theft via Usenet postings, Napster, pirate IRC bots and FTP sites, etc, a content producer is motivated to distribute content to as small a paying audience as possible. The more broadly and cheaply you distribute your content, the more likely it is to be pirated, and the less likely you are to make money off of it in the future. This consideration actually motivates content producers to not offer price discounts to poor customers, since it is the poor customers specifically that are prone to engaging in content theft. If you run a candy store, are you going to hand out boxes of candy for free to a little kid that can't afford to buy it if you know that he's just going to go and sit in front of your store and hand out free candy to everybody that walks up? Nobody would go into your store and buy your candy. You're a lot better off ignoring the kid and selling to the people that can afford it.

I personally run a content sales business on the net, and I have investigated micropayments extensively as a gratuity option. I am prepared to use a micropayment system the moment that a working system emerges, but I have put absolutely no thought at all into price discounts for developing countries. My content costs me a certain amount of overhead to produce, I need to recoup those expenses and hopefully eventually profit from the material, and the relative spending power of any given customer doesn't really change that fact from my point of view. If somebody can't afford my content then they are completely irrelevant as far as my business model is concerned.

What that means for people in poorer countries, unfortunately, is that content in the Information Age will not be all that much different than the products of any other time. People in poor countries don't go around driving Porsches, because they can't afford them. Just the same, people in poor countries won't be running around perusing the content on expensive premium Internet web sites, because they can't afford to.

-Keslin, the naked nerd girl.

[ Parent ]

Never heard of elasticity management? (5.00 / 1) (#53)
by the trinidad kid on Mon Jul 09, 2001 at 05:44:33 AM EST

The key issue is fixed versus variable costs - if you break out your costs correctly you will find that the real marginal cost of serving extra pages may be little or nothing and you would be best to harvest demand at very low price levels. Consider a web server dealing with a 'high' paying US audience and a 'low' paying Indian one:
1 you buy bulk connectivity (fixed costs)
2 co-lo (fixed costs)
3 have an existing web server (fixed/sunk costs)

Serving to India is effectively at zero marginal costs providing:
a the Indians use the site at different times to the US folk
b the total bandwidth to serve the Indian market is less that that required for the US market

Point a is a winner due to the shape of the earth.
Point b can be made to happen by raising the price to Indian consumers until their traffic drops off to less than the US

The net result is that you increase your income at no increase in your costs... If the elastic price for India to equalise traffic is only a fifth of that for America then you have boosted your income by 20% - and if you are already in US profit that is 200 basis points on the bottom line...

Elasticity Management is why I flew from Scotland to London for 50p (ie 35 cents) before tax in February - the plane was flying better to get 1.50 from my family (each way) and a jump at my spending in the airport than to get nothing.

[ Parent ]
Not so simple for all content (4.50 / 2) (#55)
by Keslin on Mon Jul 09, 2001 at 05:39:59 PM EST

That might work in a lot of cases, but certainly not for the case of all content. The big reason is piracy. Content theft is the factor that throws a wrench in standard business school profit projections.

Your basic assumption is that increased sales equals increased profits. That's generally true as long as you manage to keep your overall revenues above your overhead. In the world of content sales, though, every single one of your customers is a potential competitor. Each time a customer transfers some content from you, they make the decision as to whether they are going to share that content with somebody else for free, post it to a web site, post it to Usenet, burn CD's and hand them out at concerts, whatever. An unfortunate percentage of your customers will have absolutely no ethical problem with treating your content as if it were public domain. In poorer countries that sit a little lower on Maslow's hierarchy of needs, concepts like "Intellectual Property" are very abstract and unimportant.

Given that, a new factor is necessary in your formula. Increased sales to a demographic with little respect for your intellectual property results in increased piracy rates. Normally "shrinkage" is a factor that affects your overhead but not your revenues, since thieves are not likely to purchase your product anyway so they are irrelevant in your revenue projections. In the market of Internet content sales though, thieves do directly impact revenues. Everybody likes to hate RIAA, but they do have a point: if you can just go out and download all of the songs from an album for free, then some percentage of the market will simply do that instead of purchasing a CD legally. Certainly CD sales will continue, but some dent has been taken out. For some types of content the effect may be more or less pronounced, depending on how easy it is to pirate information. There are adult web sites that are popular enough that new content posted to those sites is immediately pirated to Usenet moments after it is initially published, since transferring image files is so much simpler than transferring digital audio.

Your new formula, then, would have to take into account how easy the content can be pirated, and how much of a dent in revenue the piracy will have. Only then can you decide whether or not it is in your bottom line's best interest to sell at a reduced price to a poorer market. As I mentioned before, other factors may also include any marketing benefit that you might get from selling your content at a loss. Thanks for pointing out the elasticity angle though, it works pretty well in most cases other than content sales.

-Keslin, the naked nerd girl.

[ Parent ]

Dynamic versus static content (5.00 / 2) (#57)
by the trinidad kid on Tue Jul 10, 2001 at 03:49:21 AM EST

The problem with your argument is that if any subscribers you get have probability X of ripping you off then (in theory) the impact of piracy on you is directly proportional to your subscription base - you are measuring an opportunity cost against a real income which is a mugs game.

In the case of ripping off pictures and posting them on Usenet - it is hard to see how that piracy impacts your bottom line unless it is clear that the people who go to the Usenet archive to look at picture Y would otherwise go to your site to look at that particular picture Y - in most cases that is not true - stopping your pictures being ripped off wont affect your bottom line.

The reality is that in the digital world you are not selling an item of content with zero marginal cost - you are selling:
* a flow of content
* reliability of content
* selection of content
* reputation of content

All these things are subject to elasticity management (in theory if not in practice).

The author (and political reactionary) Evelyn Waugh once said (and I paraphrase) "the problem with the Tories is that they never turn back the clock a single minute" - the clock can never be turned back on copyright and the RIAA are only King Canute's advisors telling him he can hold back the sea...

[ Parent ]
Copyright violations do directly dent revenues (5.00 / 1) (#58)
by Keslin on Tue Jul 10, 2001 at 03:40:08 PM EST

The problem with your elasticity angle is that it doesn't account for the fact that pirate communities also provide value in the ways that you mention. Pirate communities provide:
  • a flow of content
  • reliability of content
  • selection of content
  • reputation of content
Look at a music piracy community like Napster. They certainly keep the content flowing, they are a large enough community that they are very reliable, selection is automated via search software, and content integrity and reputation is preserved since the community is trading exact digital copies of the original work. Not only do they satisfy those roles, they even satisfy roles that the original content producers can't. How many times have you found a rare live recording from your favorite artist on Napster that you can't buy in stores anywhere?

This all really boils down to the classic question of whether or not copyright violations directly hurt revenues. Content producers generally think that the answer is "yes", people that use Napster like to tell themselves that the answer is "no". When copyright violators organize themselves into communites, it's much more difficult to argue that they have no effect on revenues.

Here's a pretty clear-cut example. As a preemptory disclaimer, I have absolutely nothing to do with the site that I'm about to mention, and I benefit in no way from people visiting it.

Take a look at the web site Foxes.com. (Warning: adult web site) The reason why Foxes is interesting in this debate is because they have a unique sales model. They do not sell subscriptions, rather they sell content using something that might be considered "micropayments". Each photo set on the web site is licensed to customers individually, for a few bucks a pop, pun intended. The payments aren't as small as most people would expect, but the point is that each photo series is sold individually, meaning that Foxes.com depends very heavily on their content not being available anywhere else. If you know that you can go and find any given photo set somewhere online for free, then you're not going to buy a photo set from the source.

Foxes.com has some pretty good content, and their stuff is very popular. It's popular enough that an entire culture that has formed around trading pirated images from the Foxes web site. If you look right now in newsgroups like alt.binaries.fitness.centerfolds or alt.binaries.pictures.cori-nadine, you will see literally hundreds of stolen Foxes.com pictures posted per day. Each photo set at Foxes costs about $10, so a few hundred dollars worth of content is posted to each group every day.

The catch here is that this culture that trades Foxes.com material has a place to meet, they have a mechanism for transferring content, and they have a method of making special requests for specific content from each other. This illegal community serves all of the roles of a content provider that you mention: flow, reliability, selection, reputation, etc. The community has basically become a direct competitor of the original content producer.

To make matters worse, not only does this community compete directly with the original content producer, they are also a very difficult competitor. They provide content for free, there are enough of them that they are very responsive to requests, and they are also very difficult to shut down. This exact same cycle happened recently with another site, ALSScan (Warning: again, and adult site. I also have no affiliation at all with this site) ALS was finally able to use legal action to shut down the Usenet community that traded in their content, but that community simply relocated to IRC bots and other mechanisms that are more transient and more difficult to shut down.

It's impossible to tell exactly how many active members of any given pirate community there are, or how many lurkers are out there passively benefiting from the illegal activity. It would be very difficult to try to argue that this community is not making a serious dent in revenue for Foxes.com though.

If you still don't believe that these underground communities directly dent revenues, take a look at a post that I happened to find today on alt.binaries.fitness.centerfolds:

From: bigmike@hishome.com (BigMike)
Newsgroups: alt.binaries.fitness.centerfolds
Subject: Re: Angela Devi! God Damn!!
Date: Tue, 10 Jul 2001 04:05:31 GMT

...

Actually, I am game for getting a group of people together who would each be willing to purchase a new Angela series as they come out and distribute them among member so we all get the series and only have to pay for one. I have noticed that most new series over the past couple months have not been posted. This wouldn't just have to be for Angela either. I am a VIP Foxes member and get 4 series every month (signed up for Angela and then she got her own site). Anyone interested or have any ideas about this?


-Keslin, the naked nerd girl.

[ Parent ]
Your cutting your own throat with this argument (4.50 / 2) (#59)
by the trinidad kid on Wed Jul 11, 2001 at 03:45:47 AM EST

I stand by my two original points (under a painful and determined cross examination):

* Reducing your potential subscription base will not alter the prevalence to "piracy"- the web sites you mention will be subject to it almost inelastically with respect to the subscription price - sell the Foxes photos at $20 0r $30 or $40 and the "legitimate" trade is the side that is hit.

* There is no evidence that if "piracy" from the Foxes site is stopped that particular site will see a significant increase in revenue (that's not actually true in the short term if the "pirate" site has been doing a lot of surreptitious marketing of the "piratee").

The adult industry is also a bad place to generalise about digital business - not least because the "product" (photographs) are considerably more "atomic" than normal digital content (and the fact that it makes money, mais oui!). Like McDuff their photos can be "ripped untimely from the womb" and still perform their intended function. The same could not be said of a site like Kuro5hin, where an orphaned story or comment doesn't compare to the holistic experience.

The key point is that in most web businesses (except porn) the publisher/subscriber model is flawed and person-to-person interaction (ie Kuro5hin) supported by third parties is the way to go, but that's a slightly longer story...

[ Parent ]
Reluctant agreement (5.00 / 1) (#60)
by Keslin on Wed Jul 11, 2001 at 09:17:23 PM EST

I reluctantly agree with pretty much everything that you say, especially the last paragraph. This little thread has been pretty interesting, I appreciate you spending your time trying to set me straight with your very informed expert opinion. Sorry if I seem to be stubborn, I'm just like that...
Reducing your potential subscription base will not alter the prevalence to "piracy"- the web sites you mention will be subject to it almost inelastically with respect to the subscription price - sell the Foxes photos at $20 0r $30 or $40 and the "legitimate" trade is the side that is hit.
One of the reasons why content providers are so attracted to the idea of micropayments systems, is that we tend to think that if you make it simple and cheap for customers to legitimately pay for content, then the incentive to pirate content is reduced. If Foxes.com could securely distribute photo sets for a dollar, or even less, then maybe there wouldn't be much of a pirate community and everybody would just go straight to the source and license the content legally.
There is no evidence that if "piracy" from the Foxes site is stopped that particular site will see a significant increase in revenue (that's not actually true in the short term if the "pirate" site has been doing a lot of surreptitious marketing of the "piratee").
I understand what you're saying, but as a content publisher, I still have to say that it will always be very difficult for me to agree with the idea that piracy does not affect the bottom line. It's very difficult to adopt a calm, passive, Zen-like attitude when people are ripping you off. That's just human nature, and no amount of economics education will change that.

I do really appreciate your input on the matter though, you approach the problem from a very different angle than I ever have, and you have helped me to see the problem in a very different way. That's one of the reasons why I like K5 so much. Thanks!

-Keslin, the naked nerd girl.

[ Parent ]

Maybe Jerry Lewis had it right (4.00 / 1) (#54)
by jbp4444 on Mon Jul 09, 2001 at 04:05:31 PM EST

One other option I've always thought might work is the "Jerry Lewis Telethon" approach where you give out the content free for most of the year, then essentially withold content for a while until some donations creep in. This can be a bit of a pain in the a** for viewers, but you could also provide the same information (ie. no loss of content) during "telethon week", just with more advertising or more reminders to donate.

It has the advantage that those users who are more able to pay will do so while those who are unable to pay simply have to wait it out.

Similarly, those who value the content more highly will be more likely to pay.

PBS and NPR use this to augment their finances (they also get big $ from the gov't) so I don't know how viable it is on the larger scale. But it could certainly be used to "coerce" your regular viewers to donate... whether that's a good thing or not remains to be seen.

Works for PBS, but... (none / 0) (#56)
by Keslin on Tue Jul 10, 2001 at 12:17:07 AM EST

This idea works great, but it only works if you can satisfy two conditions:
  1. Your audience has a very long attention span and a fierce brand-loyalty to you as a content outlet, and
  2. You have a pretty firm lock on a stable distribution channel.
Back when there were 12 channels on television and one of them was PBS, the telethons worked great because PBS knew that they wouldn't lose much of their audience if they sucked during an entire telethon weekend. In the days of Internet content distribution, competition is much more widespread and audiences are very fickle. If a web site tried to do something like that today, they would wake up tomorrow to find their entire audience off on some other web site.

-Keslin, the naked nerd girl.

[ Parent ]
NPR does *not* get much money from the gov't (5.00 / 1) (#61)
by bluebomber on Thu Jul 12, 2001 at 10:26:20 AM EST

NPR (don't know much about PBS) does not get much of their funding from the government (see http://www.npr.org/about/place/corpsupport/contributedsupport.jpg). As you can see, the bulk of their financial support comes from corporate underwriters, with foundations coming in a distant second. Individual contributions are only about half the amount of govt contributions.

If you want to base a funding model on the way NPR and PBS operate, you ought to take a look at how NPR and PBS actually operate: corporate backing ("underwriting"). So, for every story on k5 (just for-example), you might find something like: "This story was made possible by generous support from the Archer-Daniels-Midland Company. ADM: Supermarket to the World".
-bluebomber
[ Parent ]

Tiering (none / 0) (#62)
by Okushnir on Thu Jul 19, 2001 at 10:05:20 PM EST

Every content provider will define which tier he/she belongs to. The lowest tier would be covered by basic internet, then there will be standard, then special packages and finally pay per view. Payments will be cleared with the ISPs. Does this remind you of something?

Getting Paid for Content: from micropayments to shareware models | 62 comments (58 topical, 4 editorial, 0 hidden)
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