April 4, 2017
From the very beginning, content providers and businesses have struggled to figure out how to monetize the internet. With billions of users searching for information and companies working hard to find methods that will turn users into paying customers, it’s no wonder content creators are having trouble figuring it out.
Many of those methods have encountered problems of their own. Users are still reluctant to pay for content hidden behind a pay-wall and the widespread use of ad blocking has made advertising revenue suspect. But now, there is a new idea which could revolutionize the relationship between content makers and consumers: micropayments.
Micropayments are small payments, often less than a cent, that can create a new business model where customers pay a little bit to access content. There are a lot of issues which have still to be worked out with micropayments. But some businesses are using the power of social media to generate income with these payments, in what could be the first wave of a new attempt to monetize the Internet.
Old System Problems
For years, the most popular method of monetization has been through advertisements, forcing users to sit through a 30-second ad before they can watch a funny clip or read an interesting article. Advertisement has been the basis through which companies make money and which investors expect revenue to increase.
However, advertising has plenty of problems. Users have always disliked ads, which can turn them off from websites. As a result, ad blocking software has become more popular. Research firm Juniper Research states that there were almost 200 million global ad blocking users in August 2015, and that ad-blocking software could cost digital publishers over $27 billion by 2020.
Websites that stand to lose a lot due to ad-blocking have experimented with asking users to place them on a whitelist, which would let advertisements get through ad blocking software on that particular page. Sites such as Washington Post as well as Deviant Art have tried this method. But the fact that ad blocking software has become so popular could show that the advertising which has helped monetize the Internet may be unsustainable.
How Things Could Change
If advertising is unsustainable, then micropayments could pick up the slack. This may be particularly useful for content providers like newspapers and social media figures and those companies turning to ebooks to increase their revenue.
You may wonder, how can you use ebooks to make money with micropayments? Simply put, it’s another way to generate revenue by delivering content to a large number of people and is in practice no different than using YouTube to create an audience.
Take YouTube stars, for example, some of whom earn millions of dollars through the power of advertising. But a lot of YouTube celebrities with as few as two hundred thousand followers are actually trapped by their fame and could benefit from taking micropayments instead. Currently they don’t earn enough money to actually survive off of their social media fame. That same fame also prevents them from finding regular work, as obsessive fans end up stalking them once they realize that popular YouTube figure actually works at a nearby restaurant.
One reason why mid-tier YouTube stars struggle is because all their fans assume someone else, whether advertisers or other fans, are giving the social media icon money. But if micropayments became popular, fans would be handing over the cash.
YouTube does have a Fan Funding option, which lets fans make voluntary payments to support their favorite YouTube creators. But there is a catch. Whenever a fan makes a donation, Google takes five percent of the donation as well as a transaction fee. In the United States, this is 21 cents. It may not seem like a lot, b when it comes to micropayments, those 21 cents adds up. If one fan donates $100 to a YouTube star, then the star will get $94.79. But if 100 fans donate $1, then the star gets only $74.
This is not just a social media problem. Banks and all payment processors charge a small fee for donations and payments. But that small fee heavily cuts into the profits which one could get from micropayments, diminishing their utility as an alternative from advertising.
While there are other concerns with micropayments beyond the ever present transaction fee, fixing that problem would go a long ways toward popularizing them. If Bitcoin can be a new avenue through which content consumers can make lots of small donations to content makers, then it would free everyone from intrusive advertising and help struggling content makers earn more money.
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