How many microtransactions are there in a gigamarket?

The latest Online Publishers’ Association paid content report has some interesting information about non-subscription payments under $5. [They call them micropayments, I’d call them minipayments and reserve “micropayments” for any payment too small to be economically handled by credit card.]

According to the OPA, payments under $5 are 8% of non-subscription payments, which are 11.5% of the $1.5 billion/yr paid content market. That works out to less than $15 million/yr. Clearly, a large part of that market is owned by the WSJ and NYT, leaving probably less than $10 million to be shared by newspaper archive operations and a few other sites such as Hoover’s and Consumer Reports.

It gets even worse. According to Peter Krasilovsky at Borrell Associates, database vendors keep about half the revenue from newspaper archives.

Both Clay Shirky and Andrew Odlyzko make a persuasive case that micropayments are an economic dead end. I won’t try to summarize either of these essays. Read them for yourself and draw your own conclusions.

Consumers are currently spending less than $40 million on (non-business) news and information on the Net, including both subscriptions and minipayments. By comparison, online advertising adds up to more than $6 billion/year.

Even assuming a nearly frictionless and profitable micropayment mechanism, and optimal pricing by publishers, how much larger could the Internet market for news and information be? Can you describe a scenario where it would add up to a billion dollars?

I can’t.

One thought on “How many microtransactions are there in a gigamarket?

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