Archive for the ‘Economics’ Category

Pay without the wall

January 4, 2013 Leave a comment

The big problem with paying for content is that there is no good mechanism for doing so.

Paywalls are a horrible.  They are awkward and as a global solution do not scale.  Users are not going to have 100+ accounts so that they can access content on the internet.

Paywalls also attempt to change the payment paradigm from metered to subscription.  (When users view an ad they are making a metered payment of sorts.)  Metered systems are most desirable for a consumer, among other things they provide a better feedback loop, avoid lock-in, and prevent content providers from trying to extract rents from the popularity of their paywall.

Finally paywalls are to the advantage of incumbents.  Small fry content producers looking to make just a little money to pay hosting costs will not be able to do so though a paywall.

The solution is micro payments made through a wallet managed by a web browser plugin.

Each time you go to a website that demands payment for it’s content you would be charged a very small fee, something like a penny.  Throughout a month an active user may rack up $20-40, the price of a few site subscriptions.  My intuition is that people would end up paying about the same for content but end up with content more tailored to their tastes, and a few less ads.

This system is complementary to the site subscription and advertisement model.  For some consumers a site subscription or two will be the best choice; for large high quality providers like FT, The Economist, and The New York Times subscriptions may be the best solution.

Advertisements will not go away.  Consumers like “free”.  There is though an appetite for paying for ad free sites.  Perhaps in the future if you make a micropayment you get to view a site without ads, where you can view an article on one page instead of five.

Usage example:
I read 10 articles from MR. While reading those articles I visit FT, NYT, The Atlantic, Bryan Caplan, and Cato.

MR charges me .001 for each article I read. I pay this because I have already approved any payments to MR of .001 or less.

FT charges me .02. I am prompted to pay this. I accept the payment request.

NYT attempts to charge me .01. I am prompted but decline to pay. The link is not loaded.

The Atlantic asks me to pay .01. My wallet auto declines. They show me a page with the article split over five pages with ads.

Bryan Caplan asks for no payment. He wants his ideas read.

Cato asks for no payment. The people who pay Cato want Cato’s ideas read.

In this example I am prompted twice and only in situations where I would have encountered a paywall. If I regularly use FT and am fine with paying .02 I could make this an auto approved.

Common questions:
I don’t want to turn this into an article about how a browser micro wallet would be implemented but I will answer a few common questions I see asked.

“I don’t want to be prompted to pay each time I go to a site.”
You could configure the wallet to only prompt the first time you visit a site.

“I am uncomfortable having money automatically deducted.”
First the wallet should/would be tied to an account with very little money.

Second a well implemented wallet should by default deny large or repeated requests for money.  This wallets payment criteria should also be highly configurable by the user.

For instance when approving a FT charge a user would have the opportunity to set it to auto and modify the auto deduct thresholds.  The default threshold may be one penny.  If FT regularly charges two pennies, and the user does not want to be prompted each time, they would need to set the auto deduct threshold to two pennies.

“This sounds like a lot of work for me.”
It will get more and more easy over time.  Different wallets will compete for use.  They will try to make the experience easy and seamless.  Innovation will occur. Also it replaces some of the work of dealing with multiple paywalls, ads, and articles split over multiple pages.

Browsers plugins could be real smart.  Hyperlinks could be colored by cost, ect, ect.  Different plugins can be made to provide different but equally valid user experiences.  One user may want colored links and rollovers notifying them of costs while another wants no notification.  I am confident that competition will provide solutions for each type of user.

How does this wallet pay the content provider?
Visa, Mastercard, and Paypal, already have micropayment systems of a sort.  They just need to bring them to the masses though easy integration and lower transaction costs.  There also is Bitcoin and the idea of mintChip.

If transactions costs cannot be lowered enough to make paying for individual bits of content feasible another big player Google has already come up with a solution, AdWords. Every time a consumer views a page with AdWords on it a payment is made to the content provider; the actual cash payment is just cached for a month. If consumers had AdWords wallet, AdWords could simply deduct money from the consumer wallet instead of showing them adds. Nothing would change for the content producer. They would still be paid the same.

I think that there’s money to be made in this area.  17 billion in ad revenue over the first half of 2012 is not chump change.  The companies capturing this revenue have some serious IT.  I believe, if redirected those same IT resources could produce an impressive micropayments system.  As ad revenue becomes larger and larger I see credit card companies as having more and more incentive to try to capture a cut by redirecting content providers away from ads to micropayments.

Categories: Economics, Infovore, Technology

In defense of gift giving, the gift of information.

December 11, 2012 Leave a comment

Every year Joel Waldfogel, and his book scroogenomics or some variant gets rehashed.  I mostly agree, deadweight loss, etc is a problem.  What I find mostly glossed over is the gift information.  Thoughtful gifts, that hit the mark, are not at best break-evens; they are surpluses.

For example buying a person a CD, and exposing them to an artist they do not know about, but will love is very valuable; far more valuable than cost of the CD.  The gift is not only the CD but the service of having someone find you a new artist you will like.  How much would you pay for this service; that is your consumer surplus.  Such surpluses must be weighed against deadweight losses.

This surplus is missing from the discussion.  It is assumed that when giving gifts we only can lose, that good gifts simply break even.  People who know each other well and exchange thoughtful gifts profit from each others comparative advantage arising from situational knowledge.

If a pal and I exchange equally priced gifts and spend the same time picking them out.  We benefit from from each others comparative advantages.  I might pick for my friend a popular economics book while they pick for me the popular book on basketball.  If we know each other, the subject, and to be safe, pick one of the best books in the genre; we will probably have produced a surplus.

In closing, though poorly picked gifts may create deadweight losses, thoughtful ones potentially create huge surpluses.

Categories: Economics

Fannie-Mae History and the Financial Apocalypse Explained

December 23, 2011 Leave a comment
Categories: Economics, Imported Posts