Valleywag has an essay today pitching hard for a future of micropayments. Would the madness stop. As many, many, many folks have discussed many, many, many times micropayments are doomed to failure. Having a lot of experience in consumer marketing online, I can confirm the theory that the biggest drop in sales is when you go from free to 1 cent. That hit on users that imposing even a 1 cent price or tax creates has doomed every micropayment service to ever hit the startup landscape (there should be an entire section for these companies in the proverbial startup graveyard).
The good news is in all of this is that there already is a $17 billion dollar micropayments business online. What didn’t I just say that micropayments are DOA? Yep, but there is an alternative – advertising. Advertising is by FAR the best solution for monetizing micropayment level transactions. Advertising can easily cover a penny for something price. That’s why the web 2.0 universe is free. It’s not free – it’s just being paid for by advertisers who are more then willing to pay you way. Is this a new model? Nope, broadcast TV has been using the same model for 60 years.