A number of micropayments models, particularly in media, have historically failed as a result of three general, and very addressable, issues: a burdensome purchasing process, processing fees, and a poor user experience. Consumers will use—and frequently prefer—micropayments when implemented correctly. The key is making sure the experience benefits both the buyer and the seller.
Here are ways to overcome the challenges surrounding micropayments in media:
Nothing is more frustrating to a reader than finding a piece of content that piques their interest before being interrupted by a paywall that requires a long subscription sign-up process. More often than not, they’ll immediately close the tab. In fact, over 99 percent of users do. If point of payment is where the drop-off happens, it’s time to change the conditions of that process.
Not only does asking a reader to commit to a subscription create purchase friction, but in today’s mobile world, asking people to commit on a mobile device is even more unlikely. While it may be in the publishers’ interest to avoid the 30 percent fee of the App and Play stores in collecting subscriptions, asking a user to register and enter their credit card number on a mobile device is an arduous task that they’re unlikely to bother with while on the go. You’ve lost the customer you never had.
A user wants immediate access to content after a click or two, and publishers need to find a way to accommodate that. Metered walls are one attempt, but they convey the idea that content should be free (an idea that’s not sustainable long-term). Discount trials are offered, but they don’t solve the registration and purchase friction problem. Publishers can earn much more by focusing on a way to allow quick access and facilitate ongoing purchases.
Reduce the burden of processing fees
Charging 25 cents, 50 cents, or even one dollar makes little financial sense for a company once processing fees are factored in. Processing fees range from as low as 10 cents plus a percentage of the charge and increase from there (like PayPal’s rate of 2.9 percent plus 30 cents per transaction). After considering product margins, it’s pretty clear why most businesses don’t offer micropayments: Processing charges cut most of the margin out of any purchase.
Rather than offering micropayments, most media and entertainment companies offer a much larger transaction that is economical for them: the monthly subscription. While this makes the transaction affordable to publishers, it limits the number of readers providing direct revenue and does not meet most reader’s needs.
Publishers can reduce the impact of fees by aggregating small purchases on a larger tab, a common concept used for generations in other areas (think of a bar tab, local transit, etc.) that, when applied here, reduces both the transaction cost for the publisher and the purchase friction for the reader.
Traditionally, a reader can check the headlines or flip through a magazine at the newsstand before deciding whether to buy an issue; they can also read several issues before committing to a subscription offer from an insert. This natural sales funnel was managed by the purchase of a physical object: a newspaper or magazine. The Internet completely disrupted this experience, with social media and apps becoming the front of the funnel. The reader’s connection with the publisher is diminished, and publishers’ direct purchase process for subscriptions is haphazard at best.
However, readers still want that same offline purchase experience. It seems this experience would be easy to recreate online, but a combination of ad monetization, friction of signing up, and processing fees have limited publications’ willingness to offer the traditional single-copy publication online. Instead, publications have generally only offered readers subscriptions.
But readers have many different needs and can be segmented into different interests and purchase preferences. This includes casual readers interested in day passes (single copy), those that prefer the privacy of an ad-free experience, to a more committed subscriber. Whatever the need, providing different purchase options for the reader, such as individual pieces of content, time passes, subscriptions, or any other type of offer structure, increases engagement and revenue for publishers. For example, Salon.com has demonstrated several innovative ways to generate revenue, including contributions, paid content, and an ad-free experience.
Consumers are ready and willing to support quality content; however, they expect a hassle-free experience and to pay only for what they want. A model that uses micropayments gives the user purchasing flexibility, opens a better relationship with the reader, increases revenue, and, ultimately, subscription conversions.