Application platforms, broadly defined, are here to stay. Facebook’s platform, first launched in 2007, now has tens of thousands of applications. MySpace, which mostly relies on Google’s OpenSocial platform, has 4,500 apps available to users, and 211 million applications have been installed. The iPhone, which only launched its App Store in July 2008, has more than 10,000 applications, and they’ve been downloaded 300 million times.
These application platforms may even become a significant platform for more mainstream PC usage. Android is now being hacked to work on netbooks, and we believe Apple has plans to release a large form factor iPod Touch running their App Store platform. It’s not inconceivable that Microsoft would build this type of software distribution mechanism directly into Windows in the future.
But there’s a big gaping hole in all existing platforms. None have a direct payments platform to let applications collect micropayments from users.
Today app developers on Facebook and MySpace can create revenue by showing advertisements at very low CPMs. On the iPhone/iPod, developers can also charge for applications at the time of sale.
Both of these are great ways to make some money on software. But the third leg of the stool, micropayments for things like virtual gifts and other things, has been largely ignored to date.
There are Facebook applications that have found a way around the problem by using third party payment services. Spare Change (powered by PayPal), Social Gold, Zong and other services let users move cash into the system, and applications like Mob Wars have gathered as much as $1 million per month from micropayments.
All three services have promised that direct micropayments are coming. Facebook promised the product would be released by September, but it never came and it is clearly on the back burner for now. MySpace announced their product in November 2008, but won’t way when its coming.
My guess is neither MySpace nor Facebook will launch a direct payments platform. There’s just too many headaches to deal with – fraud, chargebacks and security issues bring real costs and real liability. Duplicating PayPal’s infrastructure just isn’t cost effective.
Both will likely partner with a third party or parties to bring an approved service. They do this with other services (both Facebook and MySpace outsource classifieds to Oodle, for example). They don’t have to bother with building anything, and they can try to get a cut of the fees generated.
Apple, though, will almost certainly do it themselves. They’ve already built out the basic payments platform through iTunes. Adding in payments for services won’t be that much additional work.
Fantastic article. You are asking the right questions and someone inspired by you or frustrations in their own businesses or sensitive to the need around them for micropayments being available will do this sooner than later.
You are correct in that merchant processing is a pain in the rear for the reasons that you mentioned.
Saw some blackberry and iphone merchant processing, but the costs are just as high as getting a physical cellular terminal.
211 million downloads on myspace, and 300 million on the iphone. I think this is a nice little hint at the power of the iphone.
Amazon’s Flexible Payments Service (part of its Amazon Web Services initiatives) includes a bunch of micropayments functionality for developers – and brings the millions of existing Amazon.com shoppers to the party with pre-existing payment credentials – solving half of the chicken-and-egg problem.
See: http://aws.amazon.com/fps/
Scott has it right, referring to Amazon payments service as an example. What we don’t want is a plethora of different incompatible systems as we are seeing in the smart card space. That space is being held up by the differences and lack of agreement on standard and methodologies.
BTW My firm has developed such a solution called Znak it! and soon we will have it available on-line as a public beta. We plan to present it AGAIN at the 2009 Web 2.0 Expo in San Francisco. So, please visir us there — booth 330.
I say “again” bcs we were one of the sponsors of the 2008 Web 2.0 Expo and tried to interest the US web community with micropayments as an alternative to ads, pre-paid cards or long-term subscriptions, but apparently we were there too early.
Still, it is good to see that the same people who then seemed to believe only in ads, now re-discover micropayments
Greg, i saw the video demo of your solution on your site. looks really excellent !
Why does amazon do this to highlight the power of its devpay…it would seem like a natural partnership…
FPS does not need DevPay, it has a built in way to pay 2 source at once…
The only bad thing is that we own a “split payments” patent application for the split payments feature in our Retail Zip system.
Anyone even trying to offer a system that takes payment and splitting a side payment to a 3rd party in real-time will have a party with our legal team.
Has this been seriously tested in court yet? It seems that any number of previous financial instruments would count as prior art against your “Take one check and pay two creditors” patent.
Our IP is a real-time split system at the point of sale of more than 2 recipients only:
In paypal for instance, when buyer pay and paypal gets a fee and the seller get the amount is ok.
In FPS, when buyer payers, amazon gets a fee, the developer can get a fee as well as the 3rd party the developer is representing can get a fee also, this is our IP. We are doing business with Amazon so it is not strategic to press a legal action without a blatant example of infringement.t
We was doing this in our beta platform and had this filed with the USPTO way before FPS came out. There is no other system in the world that currently offers this split payment system besides ours: http://www.reta...Retail_Zip.html (look under split payments) I have recieved notes from programmers trying to do it and has congratulated us on actually doing it.
There was no prior art to the split payments system to 3 parties before I invented and filed it in 2006.
-Will
Owner
http://www.retailzip.com
^ Our Split Payments system does it with PayPal who doesn’t offer this feature themselves, and we can split a single payment for up to 249 PayPal accounts at the point-of-sale automatically.
I hate to tell you guys this, but the porn industry’s payment processors have been doing this since AT LEAST 1996. Maybe they license your IP, I don’t know. But if not, that looks like they came first.
No pun intended.
Unless anyone is using an electronic payment system such as PayPal, FPS, Google Checkout or others to split multiple payments to a set of partners at the point-of-sale, there is no one providing this feature anywhere.
I do think the adult industry will become a big fan of our Kredits platform which will be the world’s first and only anonymous digital retail system (another patent filed for this also).
ummmm you can’t sue anyone with a Patent Application?
@ Richard,
Once a patent application is published, you can start the process of collecting royalties for IP and make infringers aware of the IP in general.
This particular patent filing is not our first and judging that no one else in the world has yet to surface a real-time split payment system in a working product, such as we have, I am sure it will serve us well as time moves on.
Yawn.
so far all those sites just dont have any ideas how to make the real bucks. http://groups.im/
No, not inconceivable for MS to build one. In fact, they already have. It’s called XBOX Live Marketplace, and it’s a pretty big hit, with games, movies, etc. Now they just need to port it to that form factor.
I agree, great classic M.A. article..
Micropayments will be important on a lot of levels that things like the established PayPal fee system will not allow to happen.
Amazon Web Services FPS (Amazon Payments API) allows micropayments to accumulate over time but I doubt any of these power companies would go for FPS but try to introduce their own system and try to side swipe PayPal on a FB Connect type situation.
Dealing with people’s money is a hefty task and it will be interesting to see how these companies try to unleash their own systems to handle micropayments.
I am definitely interested in the iPhone (or android) as a micropayment platform given the potential bridge micropayments into the real world.
Good point, this could be the 2009 holy grail. I think that Apple, with its iTunes/iStore marketplace platform, has a huge head start. In a way, iTunes/iStore can already be considered as a micropayment for digital goods (music, video, mobile applications). Now, the question, is would Apple be interested to expand this platform beyond its products and services (probably not). They could/should add payment/micropayment services for iPhone application though.
I think paypal with its huge ‘installed’ payment user base makes them the prime candidate to plug into most services.
how about Android and Google Checkout?
Ummmm… dare I ask…. micropayments for WHAT?
“Before you build a better mousetrap, make sure there are mice.”
Cybersource has a very robust API based feature set providing both gateway and merchant services. imeem currently uses them for their premium service. Ideal for companies with strong engineering who want full control.
thanks for digging in on this subject, more please.
can’t believe how many folks in press have overlooked this to date, w/o any insightful commentary.
you & justin are among the few.
Geez McClure, you’re always after this platform payments stuff, aren’t you? Give it a rest, man!
No Dave, don’t let these guys off the hook. Someone is dropping the ball here big time.
mWorldPay offers through its http://www.Autositebill.com a payment gateway that allows anyone registered with a mobile phone to make payments to merchants online. The big advantage is that the merchants pay less than 1% and a no charge back guarantee is offered to merchants. Customers do not have to provide credit card and or bank account information as the gateway is not tied to either a credit card or a bank account. Customers initiate the transaction authorization using a mobile phone and then completes the payment authorization at the merchants website.
This Autositebill gateway is ideal for micropayments. Online merchants should contact them and the first 100 merchants who sign up from reading this post will be given a waiver for up to six months on the $10 monthly minimum charge.
“The iPhone, which only launched its App Store in July 2008, has more than 3,000 applications…”
As advertised by Apple, the App Store has over 10,000 apps:
http://i.i.com....5/iPhone_ad.jpg
the directory only shows 3,000 and change, odd. I’ll update.
The app store now has well over 12,000 apps. Try doing at least a modicum of research before writing.
Are we all talking *micropayments* acc. to the original meaning of the concept, i.e. unobtrusively-charged $0.00x-size payments for services like reading/accessing webcontent etc? Because, judging from responses above, you are talking anything but. Perhaps Mike ought to clarify which kind of “micropayments” he had in mind.
There are various definitions of micro-payments of which the higher the amounts, the higher the chance of being economically viable.
The obvious winner is the iPhone, but only for people that are stupid enough to already be paying a small fortune to ATT for their service plan. Otherwise, on a larger scale, none of these will win the micropayment race. The winner of the micropayment race will be a third-party that makes the service available thru banks. Whether you bank with City, Wells, or whoever, the service will be available. You’ll never even know the name of the service provider.
I don’t care how may eyeballs you website gets. If you don’t already have credit card details for every one of them, you are not getting people to give them to you for a micropayment service.
By ‘micropayments’ in the contemporary Newspeak they mean an impulsive instant payments for the junk that you wouldn’t ordinarily buy. This is the contemporary meaning of the term.
When I started chatting 20 years ago, I was using the German BTX system – basically a few pennies for every sent and read message. People where able to buy access to sites and providers collected a nice bunch of money. (I think the french minitel system had something similar).
It worked back then and I am sure businesses will be able to provide quality content people wish to pay fore. Most people are not against paying small amounts of money, but they are against paying a huge overhead.
You’re right Nicole : all european incumbent telcos launched micropayment for their videotex (BTX in Germany, Prestel in the UK, Minitel in France) in the late 80s.
The basic idea for the content provider is to charge the user through the phone bill, issued by the telco.
A system based on this model is operated in France by “Internet Plus”, a business alliance of major ISPs : http://www.internetplus.fr/
The advantage of this solution is to reduce the payment costs (overhead) for the merchant, where the merchant is a content provider selling dematerailized contens for less than $2. Indeed, Paypal is still too expensive for very low fees…
already in asia, for years, many profitable companies from micropayments ..
usa is way behind the world …
Carriers are still the only ones who have a legitimate micro payment platform and I belive have the most to gain from social apps. We do the virtual gifts thing for Virgin Mobile USA who as a pre-paid carrier act as a bank for teenagers. Users purchase gifts directly from their device and they don’t have to pull out a credit card to initiate a $1 purchase. It’s an automatic debit from their cash account. This is frictionless social commerce where traditional social apps will still have barriers to monetization in 2009.
You may mention embeded payment solutions in the application like “billing revolution” or “mogees”.
http://insiden....ch?q=revolution
Great article, but… a bit late. Or, perhaps, better late than never… As someone already mentioned here, a new generation of micropayment solutions is a fact and doing well in Asia, Europe, and even in Africa (see the excellent Ditital Money Forum blog by David Birch for examples of the best practices) Only the US seems to sleep, as if hipnotized by the (false, IMHO) theories of “free” or “ad-supported” Internet as the best business model.
@Josh Barkin: “Carriers are still the only ones who have a legitimate micro payment platform [...]”
Whatever carriers may have, these are *NOT* micropayments platforms (”micropayments” one word), but walled-off e-commerce gardens for captive, almost indentured, audience.
Arrington should have known better than to (apparently) abuse a well-established term that was once all the rage. Here’s a brace of authoritative definitions for “micropayments” from Authoritative Defintionserver for your Illuminative Moment-enjoyment:
http://en.wikip...ki/Micropayment
http://www.usei...box/980125.html
as we’ve all seen, the growth in incentivized advertisements shows promise as the next generation payment platform.
This is not just a problem of micropayments. Payment systems on the web in general need an overhaul.
PayPal is a good entry product, but as audiences of social applications grow and as these apps provide more value that they can demand money in return for, this problem just becomes more evident.
At Zoosk we have been dealing with this problem for a while now and through a patch work of providers we have been able to provide a decent set of options to almost half of our audience by accepting payments in 20+ countries and in 10+ currencies. But we would have happily paid higher transaction fees if somebody solved this problem through a flexible, secure, and globally available web service. Where is SaaS for payment systems?
Like I said, PayPal is limited in its international support, Google checkout is useless if you want to do business outside of US and other providers just fall short in understanding what a merchant cares about. These is a huge opportunities for somebody to solve this problem both for micro and non-micro transactions and make LOTS of money on every transaction done through social apps.
But it seems like making money is not a particularly exciting business to be in for today’s web entrepreneurs
sigh…
The issue with the web as it is today, the social networks and other Internet-based services is not micropayment, but nanopayment
Micropayments sounds like it could be something big like per-per-click. If money can be made on games, such as Mob Wars social networks can find a way to make a great deal of money outside of paid advertisements. I am going to look into micropayments for my company BidMyCleaning.com. http://www.bidmycleaning.com
PlaySpan-PayByCash provides a complete micropayment system that has 10 years of operational experience and millions of virtual goods transactions
This will be very interesting, I wish we are this advanced already in South Africa where we could have a easy payment system even if it just like Pay Pal. Nice post
There’s always Paypal.
Another company I’ve come across is Mogees. Their system looks pretty good and has everything a developer needs and wants.
It is right as big social networking sites want to have its independence
Great article.
While not impossible – taking on micropayments is not a small task. Fraud and chargebacks are a huge part of the equation, but there is also customer service, integration, and just making it work seemlessly.
When it comes to money, consumers are very demanding (as we should be) – and it doesn’t matter if it’s a $1 transaction or a $100 transaction.
Like many things it’s very east to conceptualize, and really hard to execute.
The great thing is that micropayments are finally becoming of age. If we had a nickel for all the nay sayers when we started Spare Change a year ago – well that would have been a good funding source.
Mark Rose
Co-Founder Spare Change
I think the iPhone is paving the way for micropayments, simply because so many of its apps are $0.99. At that level, they’re an impulse buy, and Apple neatly handles the billing and fulfilment.
Apple’s training its users to accept the concept of micropayments as a matter of course
For micropayments, OneTouch Online Purchasing seems to be leading the way. They allow merchants to avoid the traditional paypal and CC payments by allowing customers to pay for purchases directly from a cellphone or cable bill or from a pre-paid card. Their model says that most of the world as of now can’t buy online due to international limitations, their system is designed to by pass that and allow anyone, anywhere to purchase.
http://www.onet...hpurchasing.com
If anyone’s interested in buying the domain name nanotransactions.com, e-mail esskess at yahoo.com.
I’ll buy it for 1/2 cent!
I can definitely see micopayments for phone applications, but social networking applications do not provide enough value to convince users to fork over real $$$.
What do you mean, Alex?
I bet I’m not the only one who would say that Facebook has proven so helpful (and yeah, entertaining) to my life in general, I’d gladly pay a small monthly fee. It just doesn’t make sense that something I use so often (and which has real value to me) has no economic model, whereas I pay big bucks for magazine subscriptions/books/movies that I use for about one-zillionth of the time I do FB.
Or am I wrong? What’s your definition of “value”?
I agree 100%
Many initiatives and solutions are mentioned, but none seems to be related to VISA or MasterCard.
Payments is their main business, so one should expect the market development from them.
There are two different payment systems:
- P2P like Paypal in the beginning
- C2B the retail customer paying the business
The problem with micro- or nano-payments is that the system that will succeed needs to be adopted by many: both sellers and buyers over a short amount of time.
Ariasystems.com
Micro, subscription, one time.
They’re the only company big enough to handle the activity facebook, myspace, etc. would generate.
PayByCash provides about 80 global alternative payment systems integrated into one platform (SMS, bank transfer, ewallets, etc). We work with many top payment systems and payment ecommerce platforms (like Aria Systems). Our parent company, PlaySpan (www.playspan.com) also has an innovative micropayments solution that offers not only B2C transactions, but C2C.
Our fraud prevention service is outstanding, and we handle all customer service, FX processing and risks, absorb chargeback fees, and allow you to focus on your business. Feel free to contact me for more info at awhitener@paybycash.com
WE have developed something like this for donations, http://www.ammado.com, accepting 33 currencies and nearly every payment method around the world. Took us many months, dollars and lots of engineering talent to build, but for donations it’s working really well now, no reason why it shouldn’t be applied to applications at some stage. “Micro” meaning in our case at least US$5 or the equivalent in 32 other currencies, but these $5 can be divided amongst as many as 100 different beneficiaries.
Microtronic out of Switzerland has a phone payment system in place called “NFC” Near Field Communication. It is being widely used in Japan and other European markets. It is hard to understand why American manufacturers of Cell phones are not jumping on this. It is the most secure payment system out today and all that is necessary is an NFC chip embedded in Cell phones. The customer attaches their phone to a bank account or credit card and uses an access code to pay for anything! It is awesome! American needs to catch up – no one leaves home without their Cell phone.
http://www.PaymentPin.com has been offering micro-payment options for over four years
solving this problem a long time ago. The infrastructure is completely secure. Payments are charged against home or cell phones.
This article is refreshing insofar as it shows that those who initially rejected micro-payments based on an assumption that the revenues were not significant enough are starting to see what they have been missing out on.
Payment processing has long been perceived as a problem — well excepting the early adopters and innovators who have been making gobs of money from it over the past few years.
Here’s to seeing some widespread, and overdue, acceptance of the simplest revenue generation tool yet to exist on the web.
Just surfing the website, it seems to me that its a bit of a hassle to use the paymentpin system and the bit where it says you have to pay 5 USD to see how the demo works is simply ridiculous. On the other hand http://www.onet...hpurchasing.com is more streamlined and a demo showing how the system works for the pupose of purchasing digital media for your cellphone is completely free.