Blendle Will be the Next To Show That Micro-Payments Still Don’t Work
Techcrunch reported on Tuesday that the Dutch new startup Blendle is going to have a chance to show whether micropayments work on a large scale:
Blendle, a Dutch startup that’s applying a Netflix style marketplace to journalism, has signed up the mainstay of German publishers to its pay-per-article market. It said today that all major newspapers and magazines in the country have announced they will start selling individual stories via its website. The list includes Bild, Die Welt, National, Der Spiegel, Die Zeit to name a few.
Blendle launched its service in April 2014 in the Netherlands and now has more than 300,000 registered users, up from 130,000 last October. On the publishers side, it has signed up a total of 18 daily newspapers and 15 weeklies from 14 publishing houses — with two operational markets (Holland and Germany), and English-speaking media in the U.S. next on its hit-list.
For those just tuning in, micropayments are a particular type of paywall where a consumer pays for access to a single article rather than access to an entire website.
Micropayments have been bandied about as a business model in the news industry since 1998. Guess how many times it has been successfully tried in the past 17 years?
If you guessed zero, you would be correct.
The idea didn’t work when Kachingle (remember them? exactly) tried it in 2009. It also didn’t work during the first tech bubble when Cybercoin, Millicent, Digicash, Internet Dollar, BitPass, FirstVirtual, Pay2See, and many others crashed and burned (as detailed by Clay Shirky in 2003). Micropayments also didn’t work for PaperC (they sold textbooks by the page).
Nevertheless, the idea keeps coming back every few years. And just as predictably, pundits have been pointing out why the idea won’t work. (TechCrunch even weighed in back in 2009.)
I’ll boil it down for you. It all comes down to psychology.
While you could blame the tech bubble for the earliest failed attempts, the idea continues to flop not because the tech wasn’t ready or because the prices were too high but because no one has found a way to reduce the mental costs paid by the consumers.
Nick Szabo coined the term mental transaction costs to describe the process consumers go through when they decide to whether something is worth buying or not.
Take, for example, a cheeseburger at McDonalds; is it worth $5? If I offered it to you buy one get one free, would it be worth buying then?
The time you spent contemplating the value of that cheeseburger is an example of mental transaction costs. No previous micropayment has managed to reduce this cost; instead, as Clay Shirky pointed out in 2003, the mental transaction costs increase as the price drops.
While that might sound contradictory it does explain why you might be more willing to buy a $300 gadget than pay $1 for an app (The Oatmeal’s comic is funny because it’s true), and it’s not good news for services like Blendle.
From what I read about Blendle, they have not found a way to reduce the mental transaction costs. Rather, their platform doubles the cost.
First a consumer has to decide if an article is worth paying for, and then after they’re done they will get to decide if they want to ask for a refund. While that is intended to act as a negative reinforcement feedback loop to discourage clickbait, it is also going to double the aggravations placed upon the consumer.
That added cost could cause Blendle to fail even faster, but either way I am expecting Blendle to prove once again that this idea simply won’t work.
Thoughts?
image by photosteve101
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