Why I dislike news micropayments, and a better idea

By Steve Outing

My latest column is up at EditorandPublisher.com, and I suspect it will cause some debate:

Forget Micropayments — Here’s a Far Better Idea for Monetizing Content

If you follow the media biz, you’ve surely seen the brouhaha over new calls from prominent journalists like Walter Isaacson and Steven Brill for news publishers to start charging for content on their websites. The argument — which I find to be seriously flawed — is that everyone who produces serious news content needs to own up to the media industry’s “original sin” of giving content away free online and institute a system of micropayments for news. In other words, but up barriers and “take ownership” of your valuable content again, so the industry can afford to pay journalists.

I learned about an alternative idea recently, and I think it can work without the MANY problems that micropayment systems for news content present. The soon-to-launch Kachingle puts the user in control of paying a voluntary regular fee for all content online (primarily blogs and media websites) and sharing the money based on users’ preference of favorite blogs and sites, and their measured visits to those sites.

It’s a contrarian idea that I think has great merit. Imagine it on a scale of Google (or if Google acquired Kachingle) with a serious marketing campaign; it could mean real money for popular websites and blogs, supplementing advertising.

Best of all, it avoids putting barriers and walls around content, which is the antithesis of the right way to leverage the nature and culture of the Internet.

Good idea? Lame? Might work? Please discuss…

Author: Steve Outing Steve Outing is a Boulder, Colorado-based media futurist, digital-news innovator, consultant, journalist, and educator. ... Need assistance with media-company future strategy? Get in touch with Steve!

40 Responses to "Why I dislike news micropayments, and a better idea"

  1. Alan Jacobson
    Alan Jacobson 8 years ago .Reply

    Steve,

    After reading graf after graf of your epic tome at E&P which lured me with the promise of a funding model for journalism, you delivered this:

    “Only the last fee is voluntary, and it will be up to publishers to educate the public on the importance of paying for content online.”

    Are you kidding me? Charity? Is that the big idea you’re all excited about?

    I don’t know which is more lame: micropayments or handouts.

    Newspapers and their sites need to make money the old-fashioned way – by earning it from paid advertising.

    Read how here: http://www.brasstacksdesign.com/bell_tolls_for_time_too.htm

    And here: http://www.brasstacksdesign.com/monetize_online.htm

  2. Steve Outing
    Steve Outing 8 years ago .Reply

    Alan: OF COURSE newspapers and their websites need to make money from paid advertising. I did not suggest that this idea is a replacement. It’s another revenue stream, and if Google were to do it (or acquire Kachingle) it could mean a lot of money to bloggers and media sites. This model changes nothing else about a newspaper website. The lame idea of micropayments will reduce audience and turn away some (many?) advertisers, and I really doubt that the micropayment money will come close to making up for those lost ad dollars. The Kachingle concept isn’t a silver bullet (well, possibly if my Google theory holds), but I’ve yet to hear any silver-bullet ideas.

    Of course we’re all continuing to work on the better ad model, but that’s not going to do it alone.

    Also, did you note that Bill Keller’s people favored the “NPR model” during their discussions on how to get money for content? They were thinking about it for themselves; this is the larger picture view.

    I think its time to try something new, not something old that’s failed multiple times.

  3. donn friedman
    donn friedman 8 years ago .Reply

    Newspapers have to charge for local, bylined content. It’s clear we ate our own by giving away our news:
    Directly from the Newsosaur — http://newsosaur.blogspot.com/2009/02/newspaper-site-traffic-weaker-than-it.html
    Two-thirds of the visitors to newspaper sites say they visited the site because they are readers of the print newspaper.

    Content Wants to Be Free, But Content Is Expensive.

  4. Steve Outing
    Steve Outing 8 years ago .Reply

    Donn: Ignore the true nature of the Internet at your peril. That’s what the music industry did and it’s damned near killed them. Think different. The newspaper industry’s old guard is not thinking outside the box. Look where it’s got them so far.

  5. Tom Baker
    Tom Baker 8 years ago .Reply

    Steve,

    I like this idea a lot, but I’m wondering why everything has to be “voluntary” – why couldn’t participating publishers designate some content as “only” for Kachingle passholders? Frankly, this might encourage wider adoption of the service more quickly. It’ll be interesting to see what research with actual users Kachingle has (or soon does) on what model will get them to scale the fastest.

  6. Digidave
    Digidave 8 years ago .Reply

    I’m pretty sure something like this got tried in 2004. Perhaps it was too early back then for something like this to work.

    I think there may be other sites like Kachingle right now. Good luck to them all.

  7. Mathew Ingram
    Mathew Ingram 8 years ago .Reply

    I’ve gotta say, Steve, it sounds a lot like Flooz and Beenz and a bunch of other payment schemes that have been attempted and failed miserably. It’s not so much that it’s a bad idea — the way you describe it actually makes a lot of sense — it’s that it requires a huge amount of scale in order for it to really succeed, and if history is any judge it is unlikely to get there.

  8. Steve Outing
    Steve Outing 8 years ago .Reply

    Matthew: Flooz and Beenz were both Internet currencies. I don’t see the similarity.

    Digidave: Are you thinking of Flooz and Beenz? I’ve been involved and covering this space for a long time and can’t think of anything like this model.

    Tom: I think the founders want to start out simple, and the voluntary nature is what makes this model work where mandatory ones won’t because they’ll always turn some people away. But I like your idea of Kachinglers when they visit your site getting some little extra goodie or access; good incentive for them to sign up and pay for a Kachingle account. Not sure what Kachingle’s founders would think of the idea, but I’m sure it’ll morph over time.

  9. JD Lasica
    JD Lasica 8 years ago .Reply

    Steve, I don’t have an answer to the newspaper industry’s financial woes, but I’ll suggest that a site like EditorandPublisher.com that doesn’t allow comments at this late date doesn’t deserve to survive.

  10. Steve Outing
    Steve Outing 8 years ago .Reply

    JD: E&P will have to answer for that. I am but a lowly freelance columnist for them and have no influence on such matters. For me to say more might not be wise. 8^)

    I do believe, though, that it’s a corporate issue affecting Nielsen publications other than just E&P.

  11. Norbert Specker
    Norbert Specker 8 years ago .Reply

    Steve, this reminds me on the “content access fee”, an old discussion, which should be handed over to the content industry from the service providers Because without content the still immense revenues for service providers would not be possible. The model as it stands now is not balanced in the sense IMHO that the money made with “access to content” is disproportional to the money made with “content”. I do not know what the solution here is but maybe Kachingle points in a right direction and should be forced on service providers for say part of their monthly fee as it would solve the distribution of revenues problem.
    Knowing my publishers I would caution however that a charge of 20% as service fee as proposed by Kachingle is also disproportional – and will turn off many traditional publishers. It would be much better – and will be necessary – to be able to introduce the Kachingle model for free or nearly free. In this time and age it can not be that the overhead for what is basically a royalties model takes away 20% of revenues. Either the financing model or the software concept has to improve massively.

  12. […] aufgeteilt wird. Mehr ins Detail will ich hier nicht gehen; wenn es tiefer interessiert kann es auf Steve’s Blog oder in seiner Editor&Publisher-Kolumne […]

  13. Mark
    Mark 8 years ago .Reply

    I agree with Norbert. User pay for internet access, websites pay for traffic. Kickback for the contentproviders: null. I think here is the fundamental problem.

    Imho most of the panic talk about newspapers is journalists afraid to loose their jobs. They say they play an important role checking the power and defending democracy. True. But we have other tools for that now. What role can journalists/newspapers play in that field? They can be the hub when doing research on a subject, mobilize people, crowdsource the tasks. And collect the money needed to do the research. If enough people/companies(?) want to sponsor the project, you’re on.

  14. Tim Windsor
    Tim Windsor 8 years ago .Reply

    I was just about to post what JD says above. It’s crazy that you need to — and that E&P doesn’t care that you do — move comments to a personal blog on your column. Crazy.

    Anyway, interesting piece. I’ve been agitatin’ for years to get newspapers to consider the donation model as an adjunct revenue stream. The answer was always a variant of “that would hurt our ability to sell ads,” which made no sense at all.

    As always, crisis clears the deck for good ideas and bad. This strikes me as one that’s good, though I wonder if the company you cite is up to the challenge. The name alone has the stink of dog sock-puppets and the DotBoom crash….

  15. Steve Outing
    Steve Outing 8 years ago .Reply

    Tim: I’m hearing lots of complaints about name, though majority seem to like or be intrigued by the model. … Maybe we need to crowdsource a better name for them!

  16. […] *** Update – There happens to be a lively discussion of this same topic on NYTimes.com today. Some agree that payments could work, some not. […]

  17. Perry
    Perry 8 years ago .Reply

    Slightly tangential, and more to the heart of the ad business, I wrote about an off-the-wall idea of combining newspapers and yellow pages into one local media business. Both are hurting badly. YP has a much better lock on a scaled local ad model, without a secure position in consumer traffic; Newspapers have a better local traffic foundation, and an ad model that is failing.

    Desperate times?
    http://www.evansink.com/2009/02/hail-marriage/

  18. TechTownNC
    TechTownNC 8 years ago .Reply

    One minor point about the NPR vs. Kachingle idea. NPR is a non-profit, so donations to NPR are tax deductible. Most people feel more comfortable donating to non-profits than for-profit businesses, and they get a tax benefit. Do you think this idea would lead more papers down the non-profit path?

    Also, I think Kachingle would only work if acquired by someone with scale, like Amazon or Google. Too hard to build those relationships from scratch.

  19. Martin Langeveld
    Martin Langeveld 8 years ago .Reply

    I was on the webcast with Steve for the demo, and I think it’s an idea that could work. At least, it is a very simple, very clean trial for the proposition: Will some significant percentage of blog visitors opt in to a $5-per-month voluntary contribution plan?

    Voluntary pay by about 10 percent of listeners works for NPR stations, but those are contributions averaging maybe $100 to specific stations. The individual blog’s share of those $5 contributions might turn out to be pretty minimal.

    BUT: if this idea gets even a little traction (50,000 contributing participants, let’s say), that could make it interesting as a potential plug-in to various other things — for example, can it be integrated with RSS readers through which readers access blogs?

  20. Deb
    Deb 8 years ago .Reply

    Interesting, column, Steve. Lots to discuss, and great to see new ideas out there. I have two specific questions.

    1.) Because they’ve grown up with free content on the Internet, and not had the experience of paying for subscriptions, per se, because they don’t read print, the “focus groups” I’ve talked to (my 20-something-year-old cousins) feel it’s their right to get news for nothing. (Of course when I ask them whether they like getting paid for their work, the conversation shifts immediately.) How do we get kids like them to understand the concept of paying, even voluntarily? If they won’t do it, how can it succeed?

    2.) As a service like this becomes more popular, how can the dispersement of funds not become diluted? If my $10 is shared with 5 participating sites, then 10 more sites I want to contribute to join, they’re getting a smaller piece of a small pie. Wouldn’t the administrative costs soon become more than they’re receiving?

  21. Stacey Singer
    Stacey Singer 8 years ago .Reply

    I like the concept, but not the voluntary part. If good sites require a Kachingle or whatever subscription, and enough sites that people want to visit do participate, folks will pay.

    Or better yet, go with a similar concept – but managed by Internet Service Providers. Maybe Internet Service Providers would add a surcharge to their monthly ISP bill that would finance premium news content, and providers would be paid based on page views and time on site. I’d certainly pay an extra $5 to my ISP to get AP, Washington Post, NY Times, CNN, MSNBC and my local newspapers. Hey, why don’t media companies buy up and BECOME internet service providers to implement this?

    Or yet another idea, why aren’t media companies banding together to demand a better advertising revenue sharing model from Google? Look at how unions organized during the industrial revolution for the model. In collective action there is power….

    But continuing to give our content away for free is suicide.

  22. Annette Schulte
    Annette Schulte 8 years ago .Reply

    Perhaps the donation model would work best for individual reporters who go entrepreneur/free agent. I suspect the donation model works for music bands b/c consumers feel empowered — Stick it to the music industry! — by paying their favorite band directly. An entrepreneurial reporter might appeal to human emotion that way as well. People distrust companies in general, and “the media” has been vilified effectively in recent years. Asking people to subsidize the news industry with donations may not sit well.

  23. Vance
    Vance 8 years ago .Reply

    Steve –

    “Forget micropayments” is a provocative hed, but of course what’s being proposed is, exactly, a micropayment system. The two main differences between this and previous systems are the group-payment model that removes individual payment barriers, as I’ve advocated for a decade now – and most recently here:
    http://www.poynter.org/article_feedback/article_feedback_list.asp?user=&id=158051#27183
    – and the “voluntary” aspect. I suppose this latter addresses the previous “no cartel” objections to the former. But what this seems to be is a refining and improving of the concept of micropayments rather than some utterly new system in contradistinction to micropayments.

    At any rate, it sounds intriguing enough to try. The key is, as it’s always been, achieving that critical mass of participation that will make it a general internet phenomenon rather than a boutique add-on.

  24. Rick Levine
    Rick Levine 8 years ago .Reply

    Nice article! However, I was nagged by the public broadcasting mentions.

    Using public radio as supporting argument for the Kachingle model seems to
    have a little bit of a hole in it. Public radio funding runs head on into a
    “tragedy of the commons” problem, as the overwhelming majority of listeners
    don’t pay to support it. The cost of corralling those who do support it is
    fairly high, albeit hidden. A large percentage of donations comes from
    strident fund drives, not from spontaneous charity, and the fund drives
    depress audience numbers while they’re underway. Much of the labor cost of
    running a fund drive, beyond the normal air-time expenses, is borne by
    volunteers donating their time.

    Also, public radio is heavily funded by corporate sponsors and large private
    donors, as is almost any non-profit. Until this recession, corporate donors
    have been holding up almost a third of the public radio budget. (Corporate
    donations are in the toilet right now.) The other hidden math is that large
    private donations often get recorded under “membership dues” even though I
    suspect a large share of the total till is from the large-ticket private
    donors. (Again, just like almost every other non-profit out there.) Public
    broadcasting has a vested interest in pitching broad, small-ticket citizen
    participation as the story of their success, even if the contribution
    pyramid is actually inverted from that. If they don’t keep pitching that
    story, the percentage from small donors will get even worse.

    Let’s not lose sight of the reality, even if the myth is very appealing.

    $.02.

    rick

  25. Steve Outing
    Steve Outing 8 years ago .Reply

    Lots of questions for me to answer from your comments this morning. I’m busy all afternoon so don’t be surprised if I’m a bit slow responding today. Thanks!

  26. […] Steveouting.com has a good idea. Well, he blogs about Kachingle, which seems like a good idea, so see his post for all the details. Basically it would be a micropayments solution to how to make some income off web writing which is free for everyone to view. KISS — keep it simple, stupid. Online publishers, including newspaper Web sites, are more likely to convince people to pay a monthly “Internet content fee” if everyone is in it together and there’s one ubiquitous medallion on every content site that an individual visits (which always remembers you). The publishers who make the most money will be those that produce the best content, and thus get the most people to support them via the Kachingle system. That should be to the advantage of newspaper Web sites’ quality content, right? […]

  27. […] Outing is arguing that it does, and the vehicle is Kachingle. He’s arguing in comments on his blog that this is a different model than internet currencies like Flooz and Beenz. To me, though, it […]

  28. Jeff Nelson
    Jeff Nelson 8 years ago .Reply

    I applaud anyone willing to think outside the box. That said, I can’t imagine voluntary circ payments to for-profit companies working.
    Lost circ revenue is not the problem. Circ revenue covered circ expense and not much more. Its benefit was in defining the value of the ad hole- you’ll be on X breakfast tables today. That’s already measurable online.
    What’s missing from newspaper websites is the valuable content that was in the advertising pages. We use every page of the paper- including the ugly double-truck on A14-15 that determines Monday’s dinner because it lets us know chuck is on special.
    The demand for that content didn’t disappear online- newspapers gave it up to other sites. The Internet doesn’t need 500 similar recounts of the president’s press conference. Three or four papers survive a fight purely on those terms. I do need an easy to use site with that info, community news, supermarket specials, what’s on the car dealer’s lot and what time the movie plays. 500 of those will survive.

  29. Kathlin
    Kathlin 8 years ago .Reply

    Steve, I just skimmed through your E&P column which I got to from Romenesko today. And I like this whole idea a lot!

    I’m not ‘in’ the industry; but I’m ‘from’ it — grew up around a small daily; once worked for a weekly, then a metro daily. I’ve been heartsick about the downward arc of newspaper journalism throughout my adult life. But I sure do love the Internet; when you say “ignore the true nature of the Internet at your peril” that resonates! I agree with you completely about micro-payments. Someone above called this Kachingle concept ‘charity’; what ‘charity’ and other campaigns (political, e.g.) have discovered in the Internet is a powerful fund raising tool. This sounds like a way for the news business to discover it too.

    Finally, to Deb, who asked above, how to deal with those “who feel its their right to get news for nothing,” let’s just keep reminding them that it isn’t!

  30. Mathew Ingram
    Mathew Ingram 8 years ago .Reply

    Steve, I know that Flooz or Beenz were Internet currencies, and this involves “real” money — my point is that any micro-payment scheme like that requires scale in order to succeed or grow.

    In other words, it has to be adopted by not just a few sites, but hundreds or thousands, and then it needs tens of thousands of people to make use of the service, in order to defray the cost of handling all of those micro-transactions.

    That is a non-trivial problem, as engineers like to say.

  31. Steve Outing
    Steve Outing 8 years ago .Reply

    Norbert: Re “content access fee” forced on Internet providers. That would be peachy-keen and solve many of our problems. I just think it’s impossible that the ISPs could all agree to implement. Would take what, a government mandate to force them to do it? And it’d be an expensive thing for them to manage distributions to publishers, so they’d fight it unless they could take a big enough slice to cover their costs and some profit.

  32. Steve Outing
    Steve Outing 8 years ago .Reply

    TechTownNC: We all happily pay our Internet access fees and our cable bills. I *think* enough people will consider a monthly content fee (set at what amount they choose) to be reasonable to result in serious money.

    I agree that Kachingle needs to get acquired by a Google to scale enough to actually solve some of our revenue-for-content problems. OTOH, if the idea takes off like wildwire in the way of Twitter, then it could start to work even before Google inevitably acquires it.

  33. Steve Outing
    Steve Outing 8 years ago .Reply

    Deb: 1. I foresee the need for a marketing and education campaign, on the part of Kachingle itself as well as individual sites that use it. Just as with music today, probably a minority will opt to pay with a voluntary monthly Kachingle account. So many people, especially teens, get free music, but a small percentage buys it legit on iTunes, et al. As they get older, they’re more likely to pay. Yeah, it kinda sucks, but it’s the reality so deal with it; don’t punish your audience the way the music industry did. If 20% of a website’s audience — even 10% — could be persuaded to pay a monthly fee that they set the fee themselves, and Kachingle reached massive scale, that would be a huge pool of money to support all sorts of online publishers, supplementing their ad revenues.

    2. The key is that each Kachingle account holder “supports” a limited number of sites. I had one person tell me he liked the concept and would be willing to pay $5 a month, then he’d support just two of his favorites sites — viewing everything else on the web for free. I suspect we’ll see that kind of behavior rather than a user supporting 100 sites and his $5/month getting split over that many.

  34. Steve Outing
    Steve Outing 8 years ago .Reply

    Matthew: I agree on the scale problem. That will be tough for a start-up like Kachingle. Personally, I hope Google quickly acquires it and pushes the program out on a massive scale. Google CEO Eric Schmidt has said he’d like to help save newspapers and the news business’ decline, which is in part due to Google having a smart ad model that’s moved billions of dollars away from traditional news companies. A Google-run Kachingle would give Schmidt his wish, as well as allow him to fund the efforts of all sorts of online content, including bloggers. Google needs good content online to be successful; here’s a way that it could promote good content from all sorts of sources (including newspapers) by helping fund them — and of course taking a cut to cover administrative fees and a profit. I wish Kachingle well, and perhaps it can be the next Twitter in terms of hyper-growth. But I’d rather see Google use its power to do good and help the Kachingle model grow fast enough that it would genuinely help lots of online publishers, small and big.

  35. Mirek Kowalski
    Mirek Kowalski 8 years ago .Reply

    Steve, I fully agree that it would be a wise step from Google side to acquire Kachingle, because it will be a killing argument in their discussions with the angry publishers, and in fact it will be indirect form of public ownership takeover of news publishers… if it will work, but at least I believe in it:-)

  36. […] Why I dislike news micropayments, and a better idea […]

  37. Sash
    Sash 8 years ago .Reply

    Kaching is interesting. Also found http://www.znak-it.com recently. They’re launching in april and we plan to use them. We’re interested in more discussion around micropayments : @sashsavic or @alensa

  38. […] aufgeteilt wird. Mehr ins Detail will ich hier nicht gehen; wenn es tiefer interessiert kann es auf Steve’s Blog oder in seiner Editor&Publisher-Kolumne […]

  39. […] first learned about Kachingle last year from Steve Outing. I thought Kachingle was a cool idea, waited for it to launch, and then promptly forgot about it. […]

  40. […] to pay for online content they appreciate.” I first learned about Kachingle last year from Steve Outing. I thought Kachingle was a cool idea, waited for it to launch, and then promptly forgot about it. […]

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