Micropayments work in this very specific situation

Some Twitch streamers generate millions of dollars a year through "tips."

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Micropayments work in this very specific situation

As a journalist who covers the media industry, I get pitched on a new micropayments startup roughly every six months. The founders of said startup always position themselves as the cure to the ailing news industry, and they paint for me a futuristic utopia in which internet users, upon completing a web article, toss its publication a few coins from a digital purse. In aggregate, these payments will generate billions of dollars and return journalism to its pre-internet, halcyon days. But despite hearing this pitch dozens of times over the past decade, this utopia never materialized.

Of course, it’s not just the founders of micropayments startups who think that such a system could work. Occasionally I see a tweet from someone who expresses frustration that they’ve hit a paywall and aren’t able to throw the publication a dollar in order to bypass it. In these scenarios, the person is usually trying to access a local news site that covers a city they don’t live in, hence why they’re unwilling to pay for a subscription; they literally just want access to that one article.

But think about the economics of such a system; I very much doubt that a local news outlet could sell more than 1,000 individual articles on any particular month, especially if it’s also trying to convert readers into ongoing subscribers. Is the outlet really going to upend its entire business model and marketing just so it could generate an additional $12,000 a year? It wouldn’t be worth the headache.

But are there any scenarios where micropayments could actually work? In a piece titled “The micropayments mirage,” Axios’s Scott Rosenberg argues that the answer is no. “The theory behind micropayments promises the creation of a robust middle class of creators online,” he wrote. “But there isn't a single field test that shows such a scenario playing out.”

Really? Not a single field test? I can think of at least one glaring example: video livestreaming.

That’s why virtually every single livestreaming platform has some kind of tipping feature, and some top Twitch streamers make millions of dollars a year from audience tips. Here’s how they usually work: while the creator is streaming, tips will either flow across the screen or appear within the live chatbox. The streamer will then often acknowledge the tip in real time, either with some sort of thank you or by responding to the comment attached to it. Often, the tips are just a few dollars, although occasionally they can clock in at thousands of dollars.

Why do micropayments seem to work in this very specific scenario? Because the tips become incorporated into the very content itself; not only do tens of thousands of people see the tip in real time, but the creator themselves acknowledge it. It’s a way for the donor to become a part of the entertainment.

What’s more, I think there’s something gratifying about the act of supporting a live performer — a feeling similar to the one you get when you toss a few dollars into the cup of a talented street musician.

But this dynamic doesn’t translate well outside of livestreaming video. You don’t get a feeling of gratification when you pay a dollar to access an article. There’s no journalist on the other end there to thank you. It’s just a cold transaction, one that’s usually more trouble than it’s actually worth.

Speaking of rewarding creators for their hard work…

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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on TwitterFacebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.