The Washington Post’s subscription and advertising models are no longer profitable. They’re investigating a pay-as-you-go model. However micropayments have been tried in the news media industry before and they’ve always failed. Nobody as large as the WaPo have tried it though so will they be able to make it work with Bezos funded runway?
Before we answer that, let’s discuss why micropayments have never worked for media. There are two hurdles that have yet to be overcome, one exists on the demand side and the other on the supply side.
For the former there are numerous frictions that stop customers from purchasing single articles. Firstly, most people don’t like taking out their credit card to make a $1 purchase. Yes some internet users have set up password managers that have their card details stored and also some payment providers like Stripe and Shopify also store card details rendering payments, however there’s still authentication procedures that involve friction. This problem is compounded as the pay-as-you-go model has always envisaged that the consumer pays before reading the article. News platforms are therefore asking customers to bet on the article being a worthwhile read. No other product vendors on the internet operate like this. There is readily available information regarding features, specifications, product reviews, user reviews, etc available to consumers before they buy a product. So when it comes to micropayments for media articles, most consumers suffer “nickel and dime fatigue” and choose not to pay given the friction and uncertainty
On the supply side, micropayments are actually very hard to achieve. Since nobody has created demand for them as of yet, the coordination that is required to make them economical has yet to be incentivised. Until payment providers get together to build a real-time payment aggregation systems that removes fixed fees for each individual transaction, there will always be a relatively high floor for what is the economically viable minimum payment. Those offering micropayments have therefore been unable to offer ones that are very low. Stripe, for example, has a minimum payment of 50 cents. However this comes with a fixed fee of 25 cents plus 1.5% per transaction so the vendor is getting slightly less than 25 cents. It’s a huge haircut. The other way platforms have tried to circumvent this limit is by allowing customers to block purchase tips in advance before offering them to content creators. However for all intents and purposes that’s pretty much a (more flexible) subscription.
So long story short there are powerful reasons as to why micropayments for the news have yet to take off and I’m not particularly confident WaPo’s foray is going to be any different as those reasons are likely to persist. They’d have to reimagine what pay-as-you-go looks like (think tips instead of pay to access) and somehow create enough demand that payment providers put micropayments infrastructure in place. I find it very hard to see either of those things happening.
If Blendle, a Dutch platform, is any indication, you’re probably right that micropayments won’t solve much.
But I’m curious though, since the current subscription model has its flaws, and as you pointed out, micropayments haven’t really worked either, is there another model that could solve this issue? It feels like there has to be a better way.
Or are we just doomed to keep seeing these same problems play out?
The friction for users and the cost inefficiencies for providers have been difficult to overcome. While it’s interesting that a major players are testing the waters, I agree that unless they radically rethink the model, they’re likely to face the same challenges. The concept of tips instead of pay-to-access is an intriguing one, as it shifts the burden of decision-making after the content has been consumed.
But do you think it’s possible that with growing user familiarity with frictionless payments, like through Apple Pay or Google Pay, the demand-side issue could ease over time? Or will it still be a matter of convincing people that the content is worth the upfront investment?
Can someone explain why is this so problematic? Payment processes are very streamlined nowadays, many people have their data automatically saved, which provides faster imput. After reading all of this I still don’t understand the drawbacks of a micropayment model. Why wouldn’t someone want to curate and customize their reading experience, opposed to being bombarded with articles not to your liking?
Subscription fatigue is very real, too. At least choosing what to pay for on-the-spot makes the user somewhat more in control where their money is going.
Not so sure. Maybe they’re setting a new standard. WaPo is a big player and maybe others will follow.
Is it possible that the business/financial aspect of this conversation is not taking into consideration the effects the Pay-As-You-Go might have on journalism and the incentives structure within this profession?
Could a pay-as-you-go model influence the quality of journalism? Might it lead to more sensationalism to drive clicks, or could it foster more in-depth reporting by setting the journalists in an equal playing ground under the corporate umbrella of WaPo while delivering individual revenue as an informal scoring from the readers?
From a consumer perspective, I think the key issue is value. If I’m going to pay for an article, it better be worth it. The post makes a great point about the risk of ‘nickel and dime fatigue.’ If news organizations could offer more transparency on article quality – maybe through reviews or summaries – I’d feel more confident paying. But without that, I’d hesitate to spend even a dollar on something that might not deliver.
No I actually think micropayments will eventually work on blockchains because I think the incentives to to create a network that seemlessly interoperates are powerful.
Of course right now micropayments are already possible on some L1s and all L2s but the ecosystems are highly fragmented meaning in reality dApp developers face the same problems web 2 apps do.
However there are already moves to resolve this in many directions. First of all Ethereum L2s, while in competition with eachother, also have a strong interest for Ethereum to dominate. For it to dominate, its L2s will have to be seemlessly composable. So they’re already making moves to make this happen.
Then there are also chain abstraction wallets that although will involve a fee, should remain a fraction of the costs of web 2 payments.
Finally, I expect a stablecoin issuers to allow users to send cross chain for free by simply debiting their account on one chain and crediting it on another. Again it’s in their interests to do this to maintain and grow market share.
So many reasons to believe that in a few years micropayments for ordinary internet users will be possible.
The demand issue can’t be fixed for micropayments in the web 2 context until massive infrastructural changes are put in place. This involves coordination and costs that many institutions that are in competition with eachother haven’t seen as worth incurring up until now. Good chance that’ll change with competition from web 3 though.
Last I checked it’s still under 20% of internet users. It could be more now but I’d say it’s still definitely a minority even if changing.
I totally agree. That’s what we’re trying to offer consumers. However it’s impossible to build your own newspaper when you can’t access each article until after your pay.
I think it does if you have to pay before reading yeah. The journalist has to hook the reader with the headline and a short snippet to convince them to pay.
You’re right about the problems with micropayments for news. Paying for single articles is a hassle for most people, and the fees make it hard for publishers to make money. Even with Bezos’s money, WaPo will have a tough time unless they find a new way to make it work, like tipping or a different payment system. If traditional models like subscriptions and micropayments both have their flaws, what other approaches might effectively support quality journalism in the digital age?