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[P]
Amazon.com Allowing Almost-Micro Payments

By ramses0 in News
Thu Feb 08, 2001 at 08:24:26 PM EST
Tags: Internet (all tags)
Internet

In further attempts to take over the web world, Amazon has debuted what they call "Amazon Honor System". From the same company that brought you (and promptly patented) one click shopping, you can now give/pay amounts as small as $1 in a voluntary, secure manner.


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This is a boon, especially to people selling intellectual property (think local band w/MP3's) over the internet. If you have already bought something from Amazon, making a donation, or paying for something should be pretty easy since it uses the same 1-click backend as the rest of Amazon's site. From reading the FAQ, I'm not quite certain how the details of Amazon's system differ from PayPal.

Interestingly, in addition to the "Pay" button, you can also go into your Amazon account and "UnPay", with no questions asked. It makes sense that in a voluntary system you can change your mind, and was a welcome surprise while reading their FAQ.

The processing fees which Amazon charges are quite high- a flat $0.15 fee in addition to 15% of the total donation. For $1, that works out to 30%, and for the maximum $50 transaction, it's just a little over 15%. When handling credit cards for business transactions, the standard fee works out to be ~3-6% (this is the same rate what grocery stores and computer stores pay when customers use credit cards), so Amazon's 15% processing fee leaves plenty of room for profit.

Contrast this fee to setting up your own secure web payment system (with account management, logins, etc...) and the extra 10% in processing fees is definitely acceptable for small websites. Plus, for most small websites, Amazon's number of registered users with credit card dwarfs the small website's userbase, making the probability that a user can pay under this system

With tip jars, Amazon's new honor system, and even Stephen King's online book released under the honor system, it seems like the people are trying to use the web to voluntarily collect money for their work.

However, fluffy's tip jar is empty, Stephen King has made a paltry $0.5M from his online book, and the featured site for Amazon's Honor System (icebox.com) is closing.

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Poll
How often do you put your change into tip-jars?
o All the time 15%
o When I don't get any dollar bills back 3%
o Put money in? I thought you were supposed to take it out 11%
o If the person behind the counter is cute 26%
o If it's for a good cause 8%
o If I'm having a good day 21%
o Never 13%

Votes: 80
Results | Other Polls

Related Links
o "Amazon Honor System"
o PayPal
o tip jars
o honor system
o online book
o fluffy's
o icebox.com
o closing
o Also by ramses0


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Amazon.com Allowing Almost-Micro Payments | 18 comments (18 topical, editorial, 0 hidden)
Is this really a good deal? (4.60 / 5) (#1)
by Anonymous 242 on Thu Feb 08, 2001 at 12:44:54 PM EST

Contrast this fee to setting up your own secure web payment system (with account management, logins, etc...) and the extra 10% in processing fees is definitely acceptable for small websites.

Contrast this to PayPal, which is free unless one wants to take more than US $100 in credit card payments per month in which case the premium account which has only has a percentage transaction fee (.022 for credit cards .018 for cash).

Amazon's system doesn't look quite so inviting anymore, does it?

It never ceases to amaze me what a cash strapped corporation will do to try to raise money.



Not a good deal, but.... (2.00 / 1) (#2)
by tetrad on Thu Feb 08, 2001 at 12:58:02 PM EST

There's no question that Amazon charges an order of magnitude more than other, similar services. But they have a huge user base, much of it hooked into their proprietary (cough) one-click ordering mechanism. Convenience is very important when it comes to donating a buck or two... personally, I'd be more likely to give if I knew I wasn't going to have to fill out form after form of credit card and address information. It's sort of like not wanting to write a check for a 50 cent tip at the coffeeshop. Why bother?

PayPal is probably the best alternative so far, but they don't have the user base or brand that Amazon has. Yet. Give it time. The more successful Amazon is, the more people will give. The more people give, the more familiar they will become with giving mechanisms, and alternative, cheaper services will grow. Amazon will have to lower its rates eventually.

tetrad

[ Parent ]

amazon's lack of success (4.00 / 1) (#4)
by Anonymous 242 on Thu Feb 08, 2001 at 01:12:03 PM EST

PayPal is probably the best alternative so far, but they don't have the user base or brand that Amazon has. Yet. Give it time. The more successful Amazon is, the more people will give. The more people give, the more familiar they will become with giving mechanisms, and alternative, cheaper services will grow. Amazon will have to lower its rates eventually.

Another distinction between PayPal and Amazon is that PayPal appears to be able to make money. Unless things change quickly, I wouldn't count on Amazon being around for any long span of time. Now if a bricks and mortar place did this, like Barnes and Noble, and had a kiosk where one could look up numbers and at the check out the customer could say something like, "Oh, and tack on fifty cents for charity #A45239785," there might be something to get excited about.

Aside from that, PayPal is just as convenient (if not more convenient) than Amazon.



[ Parent ]
Trust (none / 0) (#5)
by Beorn on Thu Feb 08, 2001 at 01:47:02 PM EST

Contrast this to PayPal, which is free unless one wants to take more than US $100 in credit card payments per month in which case the premium account which has only has a percentage transaction fee (.022 for credit cards .018 for cash).

I've never heard of PayPal. They may have a good service, but I would think twice before giving an unknown dot-com my credit card details. Amazon, on the other hand, has had my credit card for years. They're huge, evil, and possibly dead in a year, but I trust them to handle my money.

This isn't a weakness of PayPal, but it shows the challenges new micropayment businesses must face, and why Amazon may be needed to break some new ground.

- Beorn

[ Threepwood '01 ]
[ Parent ]

trust (none / 0) (#6)
by Anonymous 242 on Thu Feb 08, 2001 at 02:08:47 PM EST

I've never heard of PayPal. They may have a good service, but I would think twice before giving an unknown dot-com my credit card details.

I have had Amazon screw up on my credit card, which is why they no longer have it. PayPal on the other hand has yet to mess up my account. PayPal has been around for at least a year and does a fantastic number of transactions. They have one of the few dot com business models I've seen that makes sense.

They might not be as big as Amazon, but since when is size and fame an indicator of a good security model?



[ Parent ]
PayPal (none / 0) (#13)
by Beorn on Fri Feb 09, 2001 at 07:41:22 AM EST

PayPal has been around for at least a year and does a fantastic number of transactions. They have one of the few dot com business models I've seen that makes sense.

Seems like they have a good service, and unlike Amazon they let you send money outside the US. Do you know of anyone who's using it for micropayments?

- Beorn

[ Threepwood '01 ]
[ Parent ]

Not sure what you mean by micro-payments (none / 0) (#15)
by Anonymous 242 on Fri Feb 09, 2001 at 08:30:43 AM EST

I use PayPal all the time for small transactions on ebay. I have tons of auctions that end up selling for seventy-five cents or a dollar. My wife's brother has also used PayPal to send my wife cash for a birthday present. I've also seen online merchants use PayPal as their sole source of taking money.

It works and works pretty well. As always though, YMMV.



[ Parent ]
"How much do you want this new feature?" (4.66 / 3) (#3)
by slaytanic killer on Thu Feb 08, 2001 at 12:59:14 PM EST

For some reason, I imagine more *ahem*'s when asking Rusty for feature requests. The thought suddenly came to mind while reading this article.

As for the exorbitant toll by Amazon, it's probably just a matter of competition. There seems to be none in this niche at the moment, and so they've had to shoulder the R&D and infrastructure costs. When serious competition arrives (by people who had lower R&D after learning from Amazon's mistakes), no doubt the charge will be discounted.

None in this niche? (4.50 / 2) (#7)
by cbatt on Thu Feb 08, 2001 at 02:23:53 PM EST

PayPal!

They've been around for some time now and their service works extremely well. Set up an account, and go nuts. It's a fantastic service.

What's really strange is that Amazon is late to the game and is demanding exhorbitant transaction fees.

Sucks to be them.

-----------
Before you can understand recursion
you must understand recursion.

[ Parent ]

Think different. (5.00 / 1) (#8)
by slaytanic killer on Thu Feb 08, 2001 at 08:34:03 PM EST

Amazon and Apple are closely linked. The thing the two companies have in common are marketing and designing things towards some utopic vision. Other companies have infrastructure, such as PayPal (which I learned a bit about from this article). However, Amazon is not directly making a transaction infrastructure; they are attempting to create social change and become the beneficiaries. Marketing. The 1984 Superbowl commercial all over again.

I was curious how long it would take people to create systems in response to this speech by Courtney Love. She argued in favor of a gift economy for artists, removing the demanding gatekeeper and tolls. It seems to me that if Amazon is successful in getting through its initial hurdles, it will not be competing with PayPal. It will be competing with Napster.

Of course, we'll have to see about that. Amazon may have large problems staying afloat because of other issues. If PayPal is quick, it may emulate Amazon in this respect and launch its own tipjar program, reducing the whole micropayment market to a commodity business. But PayPal does have the disadvantage of thinking in terms of finance, while Amazon thinks in terms of brands. Sort of the eternal technology vs. superior marketing war...

[ Parent ]
Ted Nelson's vision is coming true... (none / 0) (#9)
by ism on Thu Feb 08, 2001 at 09:52:45 PM EST

He envisioned a docuverse where micropayments are automated. Micropayments would occur for all sorts of content access, such as an end-user reading an article or reading the full text of a transclusion (a quote or soundbyte, for example). I find it somewhat amusing that Amazon is the first big-name company to offer this service. After all, they have a patent for one-click shopping. Add one-click to this micropayment system and you've almost got an automated micropayment system.

The Internet isn't quite the same as the docuverse (from what I understand Nelson's docuverse to mean), but these developments are leading up to it. Pretty eerie, considering these visions came from over thirty years ago.

Right now it's voluntary, but as more content providers realise that the ad model (in its current state) and subscription model don't work as well as they'd like, we may see involuntary micrpayments very soon.

Would you be opposed to such a system? Personally, I believe some information should be free, but content providers need to be compensated. They are currently being compensated through ads, and I would prefer giving micropayments rather than see a one-page article spread unneccesarily over ten pages just so more ads could reach eyes.

Amazon Taking Over the Web World, eh? (none / 0) (#10)
by rajivvarma on Thu Feb 08, 2001 at 10:27:07 PM EST

Hello:

Quoted from the poster [ramses0]: "In further attempts to take over the web world..."

I really don't see how Amazon.com is trying to take over the web world. That sentence seems a little out of place. Also, with respect to the micro-payments, I think they are giving PayPal and other micro-payment companies competition, which I think is a good idea. My opinion, though.
Rajiv Varma
Mirror of DeCSS.

Sorry for the language... (o/t) (none / 0) (#11)
by ramses0 on Fri Feb 09, 2001 at 01:42:02 AM EST

...It was just a bland attempt at humour. I was referring to Amazon's goal of becoming "the Wal-Mart of the internet" (or at least that seems like it's been their strategy so far).

As far as actually taking over the web, I've got to lay my money on Yahoo though. Amazon may have retail, but Yahoo is working towards convergence (free email, good calendering, news, chat, games, personals, auctions, etc...) and is quite an adequate source for much information.

--Robert
[ rate all comments , for great justice | sell.com ]
[ Parent ]

I doubt this will work... (4.00 / 2) (#12)
by skim123 on Fri Feb 09, 2001 at 04:37:00 AM EST

I've heard a lot of people (here and at other sites) claiming micropayments are the wave of the future, that they will help many small folks make running a site their business. I say that's hogwash. First of all, let me ask you this: have you ever donated money to a Web site? I run a decent sized site (~25k unique visitors / ~150k page views per day), and, in the two and a half years I've been running it I've had only one person once offer any sort of charity payment. Granted, I don't ask for money on the site (and I turned down the guy who offerred) and I do run advertisements, but still... you would think if this is the "Next Great Thing" one would see more interest.

Secondly, let me ask you this: many here say that they would make a micropayment to k5 or other sites, but would you really? I mean, how many people do you think would put money in the offerring plate at a Church if it weren't for the fact that the entire Congragation is watching them? With the anonymity of the Web, I seriously doubt any substantial number would donate any sort of money. People are used to a "free Internet" and I don't see many ready to make an exception to that rule.

Would I make any micropayments? No. I love k5, I've been a member for quite some time, and I enjoy the discussions. I am all for the ads, if Rusty and crew are wanting some income. Of course, I am pretty miserly. And, if I were to make a micropayment to any site (if someone twisted my arm) it would be k5. There's no other site that I enjoy quite so much. Yet still, the concept of a micropayment would be beyond me. I've given money to street performers, but that's different, I think - it's a quick reach into the pocket and throw out a buck. Not the same as pulling out the wallet, entering credit card information, etc.

Money is in some respects like fire; it is a very excellent servant but a terrible master.
PT Barnum


OTOH... (none / 0) (#16)
by micco on Fri Feb 09, 2001 at 10:26:59 AM EST

I've heard a lot of people (here and at other sites) claiming micropayments are the wave of the future, that they will help many small folks make running a site their business. I say that's hogwash. First of all, let me ask you this: have you ever donated money to a Web site?
Some sites ask and get donations. For example, check out the benefactors to the TBTF mailing list.

TBTF started as an email newsletter. It has evolved into a blog/archive, but when it was mainly distributed by email, a lot of site-related revenue streams were unavailable. Rather than embed ads in the content of the emails, Dawson decided to ask for donations to help meet expenses. I have no idea whether the donations have been substantial enough to keep him in the black, but his list of benefactors grows.

Personally, I pay $20-$40 per year each for several hard-copy periodicals that I enjoy reading. I'd be more than willing to make similar payments to the sites I read on a regular basis. This isn't charity; it's payment for services rendered which just happens to be optional.

Of course, I also contribute to my local public radio station, so maybe I'm an idealist.

[ Parent ]

OTOH... (none / 0) (#18)
by skim123 on Sun Feb 11, 2001 at 05:40:30 AM EST

Personally, I pay $20-$40 per year each for several hard-copy periodicals that I enjoy reading. I'd be more than willing to make similar payments to the sites I read on a regular basis. This isn't charity; it's payment for services rendered which just happens to be optional

I pay $20-$40 for various dead tree periodocals too, but I guess that I feel that I get something for that (not just the content, but the physical pieces of paper that make up the periodical). Plus it's handier. I can take it on the plane, into my bathroom, over to a friend's, in a car ride. Anyway, I woulnd't pay $25 a year to, say, Newsweek, if Time would send me issues for free. Therefore, I'd find it hard to bring myself to paying money for a site when I feel/know I could go find a very similar site out on the Net for free.

I did admit that I was miserly in my previous post, no? If not, let me take a moment to say so here: "I am miserly. Very much so." (If it's not already blatantly obvious...)

Money is in some respects like fire; it is a very excellent servant but a terrible master.
PT Barnum


[ Parent ]
It's all about a shift in focus (4.00 / 1) (#14)
by loaf on Fri Feb 09, 2001 at 08:03:06 AM EST

Why is it that people will happily pay <insert suitable amount of local currency unit here> for a daily newspaper, but not for the web version?

The culture of the web is for freedom of information, but metaphorically as well as financially. But this will change. Advertisers are no longer seeing the web as a viable means of exposure - but this doesn't mean that the end is nigh, merely that the end of the beginning is over.

We've proven that existing methods do not work - let's look at changing them.

The $1 minimum is too high - for micropayments to work, they truly need to be micro. But, as others have pointed at elsewhere, part of the problem is that you need a decent hitrate to make any money from this. I run a site which delivers around 1000 pages a day. It's nothing spectacular, but it's more than many. But even one US cent per page would be 10USD per day - which isn't a bad return - especially as it is only a little bit of extra pocket money.

The culture is that the web is (completely) free - but in some areas, business information for example, it is no longer free. If you want the newest news, you pay for it. The culture there is that if you want quality and speed, you pay for it.

Micro-payments. It is the future. It might not be the present, though.


Emotion plays a part (2.00 / 1) (#17)
by owillis on Fri Feb 09, 2001 at 04:26:09 PM EST

I think if people have an emotional attachment to the site, something they look forward to and want to encourage - micropayments can work.

Communtiy weblog Metafilter put out a tipjar and received over $600 in three days from the community built around it. Nothng to call home about, but I bet that could sufficiently cover the webmaster's connectivity bills and time for some while...


-- Oliver Willis
An Operative with an Agenda

Amazon.com Allowing Almost-Micro Payments | 18 comments (18 topical, 0 editorial, 0 hidden)
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