Nice Blog Essay on Macropayments vs MicroPayments

[mouser]

Writer Cory Doctorow has an important blog essay up today about the downsides of writers trying to solicit payments directly from readers to support their work.

The essay touches on many of the issues I raised in my article on the first year of DonationCoder and our attempt to set up a donation-funded website here.

To concretize the metaphor: I don’t care about making sure that everyone who gets a copy of my books pays me for them — what I care about is ensuring that the everyone who would pay me decent money for a book has the opportunity to do so. I don’t want to hold 13-year-olds by the ankles and shake them until their allowance falls out of their pockets, but I do want to be sure that when their parents are thinking about a gift for them, the first thing that springs to mind is my latest $20-$25 hardcover.

This is a marked departure from the traditional wisdom of selling creative works online, which is generally about "micropayments," a hoary science-fictional notion that captured the imaginations of dotcom marketers in the 1990s: the idea is that one can sell goods to even the flintiest of customers just by dropping the cost low enough — charging a tenth of a cent to read a single blog-post or to look at three photos.
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Micros have not had much success in the wild. Sure, there are the tiny pay-per-click markets of Google’s AdWords program, but the real action in AdWords is in the popular terms ("asbestos," or "travel" or even "sex") where the auction market for AdWords drives the cost per click up into the macropayment realm — for example, ambulance chasers have been known to bid up the price-per-click on "asbestos" to $100..

More well thought out stuff worth excerpting about how the relationship changes when you ask for money, and not always in a good way:

What’s more, collecting payments directly from your audience confers a cost on creators as well, one that’s a little harder to pin down, but goes a little something like this: When you take money directly from someone, they become your customer, a relationship that’s fundamentally different from the "writer-reader" relationship that you get when the reader is the publisher’s customer..
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It’s not that reporters get to ignore the needs of circulation and advertising — but they’re not beholden advertisers and subscribers; their first duty is to make the best news they can, not to please advertisers or subscribers.
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so if a reader takes it home and is disappointed with what he gets out of it, his beef is with the publisher, who has failed to adequately convey the nature of the material between the covers. The writer didn’t write the wrong book — the publisher sold it wrong.

And then about the theory behind asking different people to pay different amounts and not worrying about making everyone pay for digital media:

In an ideal world, people without a lot of discretionary income are given the electronic edition (which costs [nearly] nothing to distribute) for free. They act like the breezes that loft the dandelion seeds — they go around, telling people about the book and its merits. In this regard, they’re better than random breezes, for they undertake a directed distribution of the book, seeking to bring it to the attention of people who are likely to have a positive response to it.

Once the book lands in the hands of someone who does have discretionary income, that person is given a multitude of opportunities to engage in a commercial transaction with the writer and her publisher. These range from buying the book (which has many positive externalities, such as improving the book’s sales record and hence increasing the writer’s next advance and other stores’ orders of her books) to buying limited editions, memorabilia, tickets to a lecture or reading, etc.

http://www.locusmag....w-macropayments.html

I guess my main point of divergence with Cory is not in his laying out of the problems, but in what it sounds like he is saying is a viable solution: give away the digital media and hope the publisher can convince the rich fans people to buy tshirts and gold leaf leatherbound hardcopies.

The essay, at least from my standpoint, feels like it's only half complete.. it lays out well some of the serious problems with collecting micropayments (or microdonations), but doesn't really try to come up with a working framework -- other than to suggest that a writer can make their real money when the fans with lots of money buy the extras (special editions, tshirts, etc.).

To me, that is a problematic solution to the problem, with it's own negative repercussions.  It puts much more pressure onto the role of marketing and hype and advertising to sell all this garbage like tshirts and stuff unrelated to the actual content of what's being produced.  What happens when the actual writing by the author becomes merely the way to sell action figures?

I just think we would be a healthier society if we could figure out a way to make it possible and easy and fun and a rewarding experience to be able to contribute directly to the authors of the work we like.

Many of the worries Cory has about what happens when an author "convinces" someone to pay for their material but then the "customer" gets home and decides they don't like it, disappear if you let people donate AFTER they decide they like the work -- so it's not like their aren't alternatives.

To me, the fundamental impediments to artists/writers making enough money to survive on donations is a combination of the difficulty in users making such donations (without worrying about security), and the mindset that has developed that everything should be either expensive or free (and supported by ads).

from http://www.boingboing.net/

[zridling]

Without donations, you kill the golden goose.

mouser, you've talked about paypal charges and how that virtually cancels out small donations. Interesting to see Doctorow note the same frustration. I also see his frustration over how to establish value for 'bits' that do not accompany a physical object, such as a digital book in his case. But how many rich fans are there out there for him, or for anyone, except for nationally or international artists? We're thrown back to the old truism: it takes money to make money.

Much of the same has long been argued about open source models. One of the biggest misperceptions is that open source is about cost, freedom, etc. That's part of it, though not all open source software is free under the GNU GPL. But open source is about distribution, not cost. And we know the story after that: either sell services for the software and its management and/or, make your software (or service) vital to others.

The latter is indeed rare.

Better to find a problem and intensify it.
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I'm surprised by the number of people who, on a download forum like FileForum, fail to grasp the concept of donationware. They persistently mistake it for freeware, or worse, nagware, even though you offer an easy way to get DC software free of any donation if you want!

I've switched to Linux, but there are still a half dozen Windows apps I donate to on impulse throughout the year. I even set an annual goal for such donations -- $50 for A; $25 for B; $100 for C, etc. When I get some extra money (which is growing rarer in this economy), I look up my last donation dates and projects and send it around. DC is one such project, of course.

Perhaps it's a matter of retraining an entire generation. Whenever I work with contractors and consultants, I have one saying: We both have to go to the bank. In other words, you don't get all the money, nor do I. We both have to win (make money), or no deal [Win-Win]. Can't afford to. If I make money and you don't, you won't come back [Win-Lose]. For "money" insert whatever -- satisfaction, happiness, utility, and so on. If you make money and I don't, I won't bother working with you again. Can't afford to. [Lose-Win].

So to finish where I started: Without donations, you kill the golden goose.

[mouser]

I actually don't think there is much of a problem with payment companies taking money from tiny donations.

I talked about this in the summary of my article, and i think it is a really important point for me to make clearly:

Much of the current and recent thinking on how to make "micro" donations work has been based on the idea of trying to figure out a way to make it possible to accumulate 5 or 10 cent donations and make that an economically viable mechanism.

I think the experience on DonationCoder has shown that this focus may be misplaced.

The problem is not figuring out a way to collect 5 or 10 cent donations.  I think its unlikely to think twice, care, or want to donate for something whose perceived value if 5 or 10 cents.

The real problem i think is that when someone is worth contributing 5, 10, 25, 50 dollars to support - they do not follow through with the donation, for reasons OTHER than financial reasons.

My conclusion is that it's security concerns and the effort involved that keeps people from supporting sites like DC, rather than a financial resistance.  So I think the best thing that would help sites like ours is to establish a trusted mechanism that would let people donate to a site like ours in a trivially easy way without any effort or concern about their privacy and security.

[zridling]

I had no idea. Thanks for the follow up. Here's a new article on this old idea: Old Web idea of micropayments finally finds a home by Barbara Ortutay:

Instead of charging for each virtual item separately, companies sell chunks of credits — through PayPal, credit card transactions or physical game cards bought in stores like Target — usually for $5 to $25 at a time. Users then spend the credits in small installments, which often amount to just a few cents.... Now when people buy virtual credits in larger increments and spend them over time, companies don't have to worry about the cost of using credit cards or other payment methods for the individual transactions.

DC's been doing this from the start internally, but attaching the idea to its member software would be new.