While storing a customer’s credit cards may encourage impulse buying, publishers may be wary of this model due to the burden of individual costs they’d be saddled with each time a transaction is processed. The examples illustrated here do offer some lessons for how and when micropayment technology could flourish. First, like most Web technology, micropayments rely heavily on network effects, and thus must wait until e-cash or some other form of digital money becomes widely used. In this sense Kelly and Goldhaber are right in that companies should concentrate on providing free services to grow networks. But their theories fail to see that once people begin to rely on networks different payment schemes can be imposed. Companies that adopt differential pricing schemes could choose to offer certain data to casual users for mere cents while charging businesses a much higher rate for the same information, as Shapiro and Varian predict.
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Vendors are therefore reluctant to sell proprietary information over the Web until safeguards can be put in place to protect that information’s scarcity. Other research suggests that profits can also be made by allowing easily copied information to be circulated among small groups for free. 23 According to this theory bundling may occur among consumers as well as goods. Small groups that know they will share a product will be more willing to pay a higher price than the total revenue generated if a few chose to buy an item at a given price while others passed on the opportunity.
Users can still purchase only one item, say a 99-cent song, and then not purchase anything else, leaving the merchant no choice but to process the microtransaction by itself. If the merchant has gift cards in brick and mortar stores, they must pay to distribute them. Not having a user pay a sum up front does not create a merchant-customer bond that can encourage the user to come back to finish off their prepaid amount and end up spending more. Tomorrow, a lot of publishers are meeting in London to discuss subscriptions and how to make money online. When you go into the grocery store, you don’t check out each individual product. You put all the products you need into your bag, and checkout all of them at once.
Self-made media stars have been emerging throughout China through WeChat and on other social portals, like Youku Tudou, one of the country’s many Youtube-esque websites. One such star, Luo Zhenyu, a former CCTV anchor, posts 60-second clips on WeChat and earns money from his followers by directing them to an e-commerce page with books for sale. Luo has more than 197,000 followers on Sina Weibo (WeChat doesn’t reveal follower numbers for public accounts), and Youku Tudou just invested in his media business.
Users can watch their electronic wallet grow, spend the balance on digital or physical products, or gift currency to other users. “What WeChat has subtly done is condition users to get comfortable exchanging very small amounts of cash to groups of strangers. Now it’s being extended to this praise button,” says Schorr.
This is less common, however, than prepay subscription models. Retailers must face the burden of high transaction costs when processing the micropayments, making some micropayments not even worth processing. Cash In-Cash Out is one of the most popular services which mobile consumers across more than 90 countries today use daily. The current process largely relies on USSD technology and is tedious, time consuming and prone to error.