Micropayments probably won’t save small publishers

The online publishing world is currently grappling with (and/or panicking about) the rise of widespread ad-blocking. Ad-blocking software is deeply problematic, because at its core, it’s essentially a classic shakedown scheme: offer your services to readers by vilifying advertisers and hyping paranoia about “tracking” and “malware,” and then turn around and charge advertisers to “whitelist” ads that they find acceptable.

It’s hard to fault readers for not wanting to see ads that are, at a minimum, annoying, and can quickly eat up mobile bandwidth (as beautifully illustrated today by this NYT feature). On the other hand, publishers need a business model to create content people like. Ad blockers have various forms of rebuttals to this argument, most of which amount to shrugging and saying that isn’t their problem.

One alternative that you see often proposed has to do with direct reader micropayments. “Let me pay directly for content,” the argument goes, “so you don’t have to rely on ads for your site!” This is certainly an interesting idea — indeed, it’s one that has been debated, experimented with, and ultimately rejected for a long time. I have one such experience that, I hope, might prove illustrative.

A couple of years ago

I began developing a side project with some friends that, we hoped, would appeal to small online publishers — mainly bloggers — concerned with their site’s sustainability. What we’d noticed was that pretty much all publishers, and particularly small, do-it-yourselfers, hated ads. Yet they put them on their site anyway, because they rarely had a choice. Either your site/blog/whatever was a labor of love — which made it an unsustainable, or at least unattractive, lifestyle choice long-term — or it paid pretty poorly, and in direct proportion to the amount of annoying, irrelevant ad content you allowed on your site. Lots of content creators choose the former, because they are simply too proud of their content and craft to do otherwise.

A lot of DIY blog content is, frankly, kind of crappy. But some of it is really, exceptionally good, too, and those blogs that offer great content — photography, videos, instructions, reviews, advice, and even whole communities — have developed considerable audiences over time. A lot of those content creators have developed income streams from their blogs — affiliate deals, speaking, books, merch. At some point in their audience development, many of them do turn to advertising as well, but often treat it as a necessary evil. In almost all of those cases, display ads are by far their most predictable revenue stream.

Subscriber models simply don’t work for the vast majority, however. In talking with a lot of prominent bloggers (notably, in non-tech areas) for market research, I heard the same things: people just do not sign up. They’ll get the odd donation via a “Donate Now” link, but that’s it. Andrew Sullivan made subscriptions work (sort of — he still wasn’t really profitable), but most bloggers are not Andrew Sullivan. Advertising, albeit obnoxious, is the only viable alternative.

So my friends and I had this idea: how could we enable frictionless micropayments? What if readers could simply click an embedded button — as simple as the ubiquitous Facebook or Twitter share buttons — on a piece of content, and transfer a very small amount of money — ten or twenty-five cents — to the author? Content owners could embed the button where they like — the equivalent of setting out a tip jar.

tipsMore interestingly, once you did that, you could just as easily use the same mechanism to gate certain content, or areas of your site. Want to comment? Tip first. See my video series this week? Required tip threshold. Guest authors? Pay on commission. All completely up to the site owner. The possibilities there are very interesting.

The mechanics, too, are pretty straightforward. Users sign up once. Transfer money to your account — say, twenty bucks. (That would allow a user to tip a quarter for content 80 times — that’s a lot of reading.) You remain logged-in unless you expressly log out, and thus would be able to navigate across multiple sites, contributing on each one from your account. (We thought through a number of options to make that process more secure — requiring confirmation, a password, etc.)

The conventional wisdom, which we heard everywhere, was: micropayments don’t work. “Tip jar” approaches have been tried before — multiple times — and have never worked. All have folded or pivoted. Ever heard of Flattr, for example? I didn’t think so.

We’ll be different

What would make us different, we decided, was both our route to market and our business model.

Business model: publishers would pay nothing to partner with us and embed our button on their site, and they would keep 85% of all payments directed to all of their content. That other 15% would be our take. This would give bloggers a powerful incentive to try it out, and encourage their audiences to participate, while not taking so much as to turn off readers.

Route to market: we would begin by targeting popular blog networks with highly overlapping audiences. After researching, we decided that we would start by pitching to the constellation (and it is seriously an enormous network) of blogs focusing on Arts/Crafts, Food, Cooking, “Mommy blogs,” Fashion, Toy and Appliance Reviews, Cosmetics and Decorating. These blogs tend to have similar audiences, cross-link frequently, and many of the authors even know each other and collaborate. Their audiences also tend to be loyal, check in frequently, and are engaged in commenting and sharing widely.

This, we concluded, would be a win-win for bloggers and audiences alike. Bloggers could offer their audiences an easy, low-cost, one-click option for supporting content they loved, and get a viable alternative to putting ads on their site. Their audiences would gain better content from bloggers’ direct accountability to them, instead of advertisers, and would see a better experience. Best of all, by launching within a thriving community of blogs like these, users would encounter this one payment option in multiple places — increasing the incentive to join (as opposed to a single-site subscription).

To this day, I truly believe all of this. It would be a better model for small online publishers and readers alike.

Actually, wait

Yet the more we examined it, the economics just didn’t work out to a viable business model. Here’s why:

Screen Shot 2015-10-01 at 3.27.35 PM

These are conservative estimates, but could easily be even less favorable: 1% audience participation, weekly contributions of at least a quarter. Basically, to make any meaningful money (not to mention a better return than ads) you need a very large audience, lots of audience engagement, and a split between blogger and service that doesn’t turn people off from contributing.

We figured that we’d need at least ten big, popular blogs to even break $1,500 in monthly revenue. And the highest-end publishers would eventually gravitate towards advertising anyway (more lucrative/scalable). A voluntary payments system would be unlikely to grow beyond small communities of highly-engaged audiences, and the revenue we captured would barely cover our expenses.

But wait! You didn’t think of…

Yes, we (probably) did.

The fundamental problem is that human behavior is extremely difficult to change. The expectation of free, high quality content online is now deeply entrenched, and tons of people just take it for granted — particularly if they’re already used to getting it for free.

Given the difficulty of creating a business around micropayments, I just don’t think it’ll happen. The trends are there — advertising is going to increasingly move into walled gardens like Facebook and Twitter, which paradoxically will harm the so-called “privacy” interests that ad-blockers claim to value. When it’s harder to make any money creating great content online, fewer will. Labors of love can be very expensive that way.

If you create online content that you want to make money from, starting today, I would block users running Ad Block or similar add-ons from viewing your site. They are effectively zero-value traffic — happy to benefit from your hard work, but unwilling to share any value in return. (This blog is just a hobby, which is why I don’t do this.)


Update, 10/2:

News out today that AdBlock, one of the most popular ad-blocking extensions on the market with 40 million users… has sold itself. And they won’t say who to, or for how much. From The Next Web:

TNW contacted Adblock’s remaining staff to ask if they’d disclose the buyer but the company refused, saying that the purchaser had specifically asked not to be named.

The only thing the team would tell us is that the tool’s creator Michael Gundlach will no longer have any relationship with the company — that probably means he’s cashed out.

Shaaaaady.


One Comment

  • Reply Nathan T. Sanford |

    Thanks for a thoughtful look at a side of this issue I hadn’t considered. I just deleted my adblockers.

So, what do you think ?