News organizations that have struggled financially may find that less money could actually equal more.
As content moved online and companies adopted a digital advertising model that’s free to consumers, these companies have been subject to falling prices, shrinking budgets, and lowering quality.
A business model that relies on micropayment transactions -- offering the reader very low payments of cents or even fractions of a cent to read an article -- could be the solution for news organizations now. Thanks to advances in technology and consumer behavior in the past two decades, several of the main challenges for adopting this new revenue model have been eliminated.
As a result, publishing companies could better monetize their content at a price point that seems fractional to the user, but is actually more profitable than an advertising model. In fact, charging just 5 cents for an article could bring in 10 times the revenue, and without needing ads at all, according to a 2019 report by the nonprofit Lenfest Institute.
How micropayments work
The concept of micropayments has been around for a while. The idea is simple: Charge very low amounts, cents or fractions of cents, for access to digital content that has zero marginal cost. An article read by one user or a billion users still costs the same in the digital world. Examples of digital goods that are ripe for micropayments include journalistic content, music, video, software, and digital services - any content that has no per copy cost (selling a million copies are one cost the same to produce).
For the user, a micropayment might seem very small and inexpensive, like paying 5 cents to read this article. Compared with advertising, however, it has the potential to generate a lot more revenue.
For example, consider the advertising model in which this same article is monetized for a $5 CPM (Click Per Mille) -- the cost of 1,000 views of the ad or impressions, which translates to $0.005, or half a cent per impression. By charging users a micropayment in lieu of relying on advertising, publishers could generate 10 times the revenue for the same level of readership.
Why now is the right time for micropayments
As a result of technological advancements in the past 20 years and changing consumer behavior, adopting a micropayment model for news organizations is more viable now. As a result, experts have said now could be “the prime time” for this new business model.
Compared with just 10 years ago, when it was socially acceptable to “steal” video and music off of peer-to-peer networks, consumers are much more comfortable paying for digital content now. That’s thanks largely to the proliferation of paid music (Spotify, Apple, Google, and Pandora) and video streaming services (Netflix, HBOMax, and Hulu).
So long as the price is right, the experience is frictionless, and the option exists, consumers have proven they will pay for digital content.
What’s more, the way consumers pay for goods and services has changed with the rise of services like Apple Pay, Google Pay, Stripe, Paypal, Amazon Pay, Venmo, and more. These payment methods are low friction, or easy to use, and consumers already are habituated to making online payments with them on a daily occurrence.
The final barrier has been financial: credit card fees. These high per-transaction fees are expensive, as much as 30 or 40 cents per transaction, making transactions of a matter of cents a losing proposition, in theory. Even so, there has already been innovation to overcome high transaction fees associated with credit card charges.
Much like Starbucks, Paygo Media has implemented a prepaid balance which lets users charge their account once, pre-loading it with several dollars that they can then spend down across Paygo-enabled sites over time.
Thanks to these types of innovations, publishers will be empowered to shake up their business models and adopt a more profitable way to monetize their content. And that’s why, reading this article in the future may cost you just 5 cents, but will provide a longer-term path for publishers to monetize -- and continue producing -- quality content.