Micropayments Business Model Vision

Are Micropayments the key to unlocking a new layer of the creator economy and ultimately the New Media model? We explore the Business Model Vision that needs to come together in order to make that happen.

As the transition in the social media model shifts from primarily a corporate, ads-based model towards more payments-based, creator model there will requisite innovations that need to emerge.

Social Apps – Future

Micropayments tops the list. There is much ado about web3/blockchain and where it fits into the future, but in the interim there are potential payments innovations in the current stack that could do the job. The ex-factor is a much lower cost (ie. pennies per transaction).

Below is an example of an illustration from an equity crowdfunding campaign on WeFunder about the nature of the problem:

  • Customers don’t want to have Subscriptions to Everything!
  • Customers don’t want to all-or-nothing Ad Models either
UKey - Micropayments Passport
Ukey

The ‘missing middle of payments’ is probably the vast majority of where the market will center in the future. We dig into what this could look like below.

Micropayments – The Problem

Imagine the following possible models of payment for any media-based site across either social media, or the host platform themselves:

  • customer buys individual articles from creator (ie. cost to read an article is $0.10)
  • platform pays creator per 1,000 video views (ie. creator makes $1.00)
  • customer accesses a platform with a day pass (ie. pay $1.00 to platform for day pass)
  • platform pays creators per article on # of views (ie. creator make $1.50 monthly, per article)
Micropayments example model

In all of these examples, we are talking about micro-payments at scale. There are two major problems from the platform side that come to mind:

  1. Cost per transaction – if the cost of using incumbent payment processors (ie. Stripe, etc.) is $0.30 + tx fee then the model falls apart
  2. Logistics – the headache of managing potentially thousands of payments each and every month is in and of itself prohibitory

Therefore the problem for micropayments is both cost + logistics.

Nevertheless, innovation is like a perpetual torrent in the social media + payments space, so you can bet that if startups like the one shown above on WeFunder are working on it then so are incumbents.

Micropayments – The Solution

Right now, a ‘hack’ to a certain extent would be the use of P2P apps like Venmo or Cash App that have lower transaction costs (ie. $0.10 to free depending on the nature of the transaction).

But these are essentially P2P, debit-card transactions that have to circumvent all types of controls that a normal business will have (ie. accounting), not to mention that credit cards can’t be used. The blockchain does not solve this either because there are small, but not insignificant fees for Bitcoin, Ether, and other digital currency transactions.

As you can see, there are multiple players in each layer of a credit card transaction that need to take a share, which is why micropayments is unlikely to work at scale without some kind of a rethink of the payments stack as we know it today.

The solution needs to be full stack and – in all likelihood – connected to the originating platform that is testing micropayments itself. Major players on the diagram below who want to avoid ‘web3’ have the highest incentives to test these types of models.

Social Web Evolution Diagram

That is because micropayments will likely not be an Advertising killer but an Advertising enhancer!

Micropayments + Ads – Future Vision

Example of Micropayments Model
Micropayments – Example Model

There is good reason to like advertisements for both consumers and businesses. For consumers, the delight of an ad is based on discovery of new products or services that solve particular, acute pain points. For businesses, customer acquisition is essential.

In the current model of advertising on social or new media platforms, consumers see a lot of ads that they don’t want to see. A lot of this has to do with the inherent problems of the current old media model:

  • if we think back to the days of newspaper and TV, we are seeing basically an all-or-nothing Ads/Subscriber model with very little room for the in-between
  • the rise of creators across various categories of media has shifted the value proposition of media towards ‘freemium’ and put a lot of downward pressure on the media business model
  • revenue-wise, neither creators nor media brands perform well, on average; it is the platforms and advertisers who have been able to capture the lion’s share of the value in this equation
  • to compensate, we see either more ads or more paywalls, neither of which solve the core problem

In the future, we expect to see new value propositions and business models emerge that shift the revenue streams back towards creators and media brands, while also creating compelling new opportunities for advertisers as well. The big shift in the Customer Relationship can be unlocked through a combination of creativity and technology.

Micropayments + Ads Business Model Canvas (Mockup)

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Micropayments + Ads Value Proposition

  • Micropayment transaction fees of <$0.05 enables new model
  • Deliver high-quality content that combines best of Ads/Subs model

The Business Model Vision behind Micropayments is a combination of technological innovation and business model innovation (BMi). Incentives matter and in this model there are multiple ‘stakeholders’ to appease in order to create a sustainable shift in the business model. If the innovation benefits only creators and not the platforms themselves then it won’t work, and vice-versa.

The buzzword ‘co-create’ applies here. The answers are unlikely to be known in advance. If the platform(s) have a strong Customer Relationship and can test new models/value propositions with small segments of customers, then they will likely emerge as those who are quickest to find a new model that works.

This is why community is likely to become the next major business model thrust. There is a fine line between what constitutes a customer base and what constitutes a community. But in this case, a community are likely to be the die-hard type of ambassadors who are committed to helping a given brand or entity find the solution(s).

Overall, Micropayments are the probable ‘game changer’ of the future media models that revolve around incentivizing the top creators and creating new, scalable revenue streams. This will require significant innovation in payments, but also collaboration across stakeholder lines in order to experiment with new models in real-time until the winning model is found

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