The question has launched dozens of companies, most now buried: How do you create a system to make "micropayments" for Web content that is economically feasible? Is there a technology or business model that allows a poet to receive fifteen cents for a poem when the transaction cost may be more than that amount? Is there enough consumer support to buy content, even for pennies, on a medium where the expectation is free?
This current look at the micropayment industry by CNET reporter Matt Hines analyzes what suddenly looks to be a growing market. Strategies to crack this market since the later 1980s have varied, and results hit and miss—mostly miss. Payment vendors including DigiCash, Beenz and Flooz, cashed in their microchips early. But micropayment momentum is starting to build, says market researcher TowerGroup. In a recent report, the firm predicts micropayments (the company defines them as five dollars and under) will be an $11.5 billion market in the U.S. by 2009, with a 23 percent compound annual growth rate (CAGR). Micropayment revenues in 2003 were estimated at $2 billion.
What's driving the acceleration? For one thing, consumers are now given quality content for their pennies, happily downloading millions of songs at ninety-nine cents a pop, and cell phone ringtones for anywhere from a few dimes to a few dollars. Also, a new generation of vendors including Peppercoin, BitPass, and PayPal have moved in with intriguing products.
For contrasting viewpoints on the future of micropayments, check out these opinion pieces.