MappingTheWeb //

In my mind, a trend that we will continue to see in the evolution of the web is micropayments. Wikipedia defines a micropayment as a “means for transferring very small amounts of money, in situations where collecting such small amounts of money with the usual payment systems is impractical, or very expensive, in terms of the amount of money being collected”. Now let’s delve deeper.

Who are some very successful players in the new web today? Google and eBay are two heavy-hitters, among others. These two companies don’t make bank from huge purchases where large amounts of money get transferred from hand to hand. They make the majority of their revenues from small transaction that range from $0.05 to $5.00.

Google’s model is solely ad based. Advertisers pay, say $0.25, per click. On the other side, publishers receive anywhere from cents to a couple dollars (on average) per CPM. These are not huge sums of money, but their recurrences help drive large revenues. In other words, the volume of these transactions more than make up for their small amounts.

eBay relies on commissions - often under $10. Though these $2 or $3 transaction fees seem minimal, they add up over time. Due to incredible volumes and mass selling, the company is able to gross billions in revenues per year - and this rate continues to grow.

The psychology behind micropayments is very interesting. People seem much less willing to pay $70 once, than $1 seventy times. Just think about your cell phone bill. Sure, your plan may proclaim $30 a month, but after service charges, text messaging fees, excess minutes, and that 2 hour drunken long distance call with your ex-girlfriend, you’re looking at a $100 bill. A far cry from $30.

These small charges sneak up on us like the expiry date on my 4-litre jug of milk. But from a company perspective, they are ingenious. The psychology allows you to swindle tons of money out of unsuspecting conscious, yet naive consumers.

Sounds like a damn good model to me. Where do I sign up?