kottke.org posts about micropayments (kottke.org)

I got an email weeks ago urging me to look at a new micropayment system called IndieKarma. Pretty much every other micropayment scheme I’ve seen is too clunky to actually be useful, but I was pleasantly surprised with IndieKarma when I got around to checking it out. Here’s how it works.

If you’re a blogger or web site owner, you sign up, put a bit of JavaScript code on your site, and whenever a reader who’s signed into IndieKarma visits your site, you get a penny. Seamless and easy.

If you’re a reader, you sign up, put some money into your IndiePass account (with PayPal), and then as long as you’re signed in, whenever you visit a site that’s using the IndieKarma JavaScript, a penny is deducted from your account and into the site owner’s account. Again, fairly seamless and easy.

What I love about this system is that it’s passive and based on actual usage. The reader doesn’t need to decide that they want to support a certain site, just that they want to support the IndieKarma-enabled sites they read often. For a reader who doesn’t necessarily want to support a certain site, if they happen to click through for a visit, it only costs them a penny and then they never come back.

Financially, if a reader visits a site 60 times a month (which is not that unusual for weblogs), that’s $0.60/mo. or $7.20/yr…the price of a couple lattes at Starbucks. If you’ve got 1000 people who read your site that are signed up through IndieKarma, that’s $7200 per year, a sizable chunk of change.

So that’s the good part. Here are some problems with IndieKarma and some suggested features:

The “dock” that’s placed on the site is way too intrusive and inflexible. Ad banners and boxes are well-established as a way of delivering this type of information…why not use that format? When a reader isn’t logged in to IndieKarma, the ad banner/box prompts them to do so and if they’re logged in, they get a “receipt” message for their micropayment (e.g. “thanks for supporting the site). Optionally, as a site owner, I should be able to not have the banner show at all for a truly seamless experience for the reader. The easier you make it to pop into a sidebar for bloggers and site owners, the better.
Lack of variable pricing. As a reader, I might want to give more or less money per visit to certain sites. I may decide to spend ~$20/yr on my Waxy.org habit and so opt to give three cents per visit instead of one. As a site owner, I should be able to set a suggested and/or minimum cost/visit for my site. If I’ve got 1000 people giving 3 cents/visit, they each visit 60 times per month for a whole year, that’s $21,600, a living wage (depending on where you’re living).
Alternate payment methods. Readers could buy “subscriptions” to sites for a “buy now” price determined by the site’s owner. Or an option for “gosh, that post/video/comic was really good today so here’s an extra $5” payments.
You could even incorporate advertising into the mix. An advertiser could come along and say, “I’m going pay for unlimited free visits to this site for IndieKarma members for 60 days” and in exchange, the IndieKarma banner is replaced with an ad for that advertiser.

But the big problem with IndieKarma (which I hope they can overcome somehow) is that it’s one of those things that’s only useful when there’s a lot of people using it. As a reader, if only 1 or 2 sites I read are using IndieKarma to generate revenue, I don’t have much incentive to go through the sign-up process, but if there are 30 or 40 sites I read that are using it, I’d be much more likely to sign up. Same goes for site owners…if 10 of my readers are using IndieKarma, that’s not good, but if 1000 of them are using it, that’s something.

It’s a chicken and egg problem…you need users to get sites to sign up and you need sites to get users to sign up. This would work much better for someone who already has tons of signed-in users and payment systems (Amazon, PayPal, Google, etc.), established networks of sites that have lots of potential users across many similar sites (Gawker, BlogAds, 9Rules, The Deck, etc.), or really big sites that could sign users up in 4+ digit quantities (Slashdot, MySpace, LiveJournal, Drudge, HuffPo, etc.). Like I said, I hope IndieKarma can overcome this problem because I think the basic idea has a lot of promise to provide an alternative to advertising-supported media, both from the standpoint of readers and web site owners.

posted Sep 6 @ 09:28 AM by Jason Kottke

PayPal has changed their fee structure to

PayPal has changed their fee structure to allow easier micropayments. For payments less than $2, the fees with be “at a rate of 5 percent plus 5 cents per transaction” compared with “1.9 to 2.9 percent, plus 30 cents per transaction” on their regular transactions. Smart move by PayPal to harness the Long Tail of ecommerce. (via rw)