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How will micro-payments change search?

Friday, 09 July 2010

Micro-payments, according to wikipedia:

...were initially devised as a way of allowing the sale of online content and were envisioned to involve small sums of only a few cents. These transactions would enable people to sell content on the Internet and would be an alternative to advertising revenue. During the late 1990s, there was a movement to create microtransaction standards, and the World Wide Web Consortium (W3C) worked on incorporating micropayments into HTML, even going as far as to suggest the embedding of payment-request information in HTTP error codes. The W3C has since stopped its efforts in this area, and micropayments have not become a widely used method of selling content over the internet.

There are lots of signs today that micro-payments could be commonplace in the next 12 months.

We have a high penetration of smartphones, enough to soon make a viable replacement for the credit card. Facebook (Paypal founder Peter Thiel sits on Facebooks board) has introduced a currency for Facebook games crossing the virtual/real currency divide for the first time to the mainstream public, and whilst the old media companies struggle to survive after income from distribution and advertising drops to zero, two strategies have emerged: the right leaning, capitalist, get rich now, Murdoch Empire raising the drawbridge, denying the majority (and Google) access to news brands such as The Times; whilst left leaning, foundation funded, The Guardian look to syndicate its content as far as possible, relying on increased brand recognition and a large ad network revenue to pay for it all, mainly in Googles hands.

A better way of monetising content

But micro-payments offer a middle way to free-for-all or paywall. Let search engines find your content, but charge visitors a premium - per visit. Subscriptions are too cumbersome to ever get sold on a whim, on getting that emotional flash that something is worth spending upon. With micro-payments, marketing can be more immediate and payoff sooner.

An early pioneer was Amazons One Click Buy (patent awarded 1999), helping the shopping portal reach conversion rates to envy today. Yet even this is still a little too unwieldy for quick casual use, and works only for Amazon, not the web.

Atrulyfunctioning micro-payment system will need to be frictionless - no logins or needing to verify your identity - the only way it can work is if the user gives their personal bank details before payment via an account logged into at the start of a browsing session - the obvious candidates being Facebook and Google Accounts (mostly gmail)

Whoever it is, the on-line brand will also need to gather data on which websites you visit, what your buying preferences are, what time you like to shop, IP address...data which in Googles case would also augment your search history etc; or social circle etc for Facebook. If micro-payments are wanted via the mobile, then add to that your location and movements wherever you take your phone, along with whoever was there with you.

Online Brands - who will be defacto micro-payment portal?

But wait - micro-payments already exist - iTunes. Apple have at their command a well used, location aware, billing system that have already introduced the buying public in sub £1 spending, via apps, mp3s and video. And with the iPad aimed at becoming the best way to experience the web, that system is at the literal fingertips of the public. It has the infrastructure of payment processing, but not the web penetration of Facebook. If Apple ever wanted to step out of its walled garden, say teaming up with Facebook Connect, billions could be made if it became the de-facto online micro-payment system.

Below is a graph outlining how brands are positioned at the moment in becoming the micro-payment popular choice - a position which will demand smooth payment processing combined with high web penetration.

Micro-payment-brand-graph-guava

Fig 1 - Web Integation/Payment Processing for major web brands

The current ideal would be combination of iTunes payment infrastructure with integration of a successful Facebook Connect.

Privacy concerns

Perhaps there will be a revolt against this ever expanding personal database on customer habits - a line that cant be crossed by the public, a private mental block to spite increased convenience!

I doubt it. People used to be cautious of putting their credit card details into an online form, laws were bought in to protect consumers - now online payment is normal, with those fearing online shopping in the minority, and ecommerce is stronger than ever, trending upwards. What seems scary at first, people get used to.

How Micro-payments will affect SEO and PPC

So, if micro-payment for content will emerge soon, how could you as an online marketer prepare for it?

  1. Whichever micro-payment portal wins, theyll carry lots of data on customers, so online marketers should get access to more data to target increasingly tailored audiences - it is in the companies interests to have that data generate income via advertising, since it is a huge investment to store extrobytes worth of data and something needs to keep the ecosystem alive. Along with the usual demographics, "likelihood to buy" could be available, given by hidden metrics from current credit balance and buying history (this user is 45% likely to buy your insurance)
  2. Conversion rates will be critical - if micro-payment x conversion rate > CPC , make hay.
  3. Itll be a lot more competitive than today. What now is just an informational query that rarely generates direct sales, will be transformed - big authority websites competing to get you to look more indepth into a subject, accessible via one click of a pay button.
  4. Getting any search click-through will be a chance to convert - your search listing will be increasingly important to encourage that conversion. The ability to look your best in search ads will be critical, encouraging use of microformats and favourable social signals to help improve visibility - all to catch that penny income.
  5. Conversions will be a lot quicker and more numerous. It should be possible to change websites almost on the fly as fluctuations happen in the traffic - a breaking story that is the first to get an exclusive will enjoy the most revenue. (Think how much £s TMZ could have made with another Micheal Jackson death)
  6. Micro-payments should save journalism. Good journalism with good marketing should mean a steady trusted income - the distribution of news can be profitable once again. Blogging industries will rise (AOL?)

Summary

Micro-payments are inevitable once the technology and social acceptance is there, and should grease the wheels of ecommerce enough to create a whole new way of consuming content on the web, one that should be more self sustaining than ever. The price for that may be further erosion of personal privacy, with internet brands knowing more about you than members of your own family, but for many thatll be a price worth giving - will it be for you?

Comments

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A lot of people in the video game industry are worried that with the advent of cloud server gaming people won't need to buy hardware or software anymore. This will easily adopt a pay-per-play micro payment model. Lots of games, think Farmville and MMO's are developed to be free-to-play and rely on micro transactions. Everything is going to be micropayments!

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The Wall Street Journal Online will reportedly be launching a micropayment model for content this fall. Some other news publications appear to see this is a brilliant move, but asking people to pay for content on the web will draw its share of skepticism.

WSJ Managing Editor Robert Thomson says, "It's a payments system -- once we have your details we will be able to charge you according to what you read, in particular, a high price for specialist material."

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Journal Register deserved what it got and, in fact, held on longer than I could have ever imagined. After its ill-timed, ill-fated Michigan acquisition, it was really all over. One could debate whether the auto industry was already in decline or still standing at the edge of a cliff, but either way the acquisition was criticized heavily, then and now. The decision to build a new production facility will also go down in the books as good money after bad; again, I feel the need to reiterate, this isn’t rear-view managing: We all knew it and said it then. Journal Register did a lot right; It clustered its papers, allowing for better physical-quality papers than towns the size it served typically could justify.

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