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Strategic analysis
Publishers and Micropayments. We Completely Miss the Point

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Written by on April 6, 2017

Last month, I wrote an article about why a Spotify For News model is mostly just a distraction and what we need to do instead. I also wrote another article about why news startups are all failing, and how to rethink that.

But there is a third concept that people keep talking about that is also constantly failing. It's how startups are trying to fix the future of publishing with micropayment models.

We see these startups all the time, but none of them really make any difference. In the last month alone, I have been contacted by five different micropayment startups, all believing they have come up with something completely new. Yet all of them are doing pretty much the same thing that every micropayment startup has tried for the past 10 years.

And if I look back to all the micropayment startups that have contacted me, almost all of them have gone out of business. The only ones who are still around are those who have pivoted away from micropayments, and instead focused on creating very user-friendly payment solutions.

We also see this with with the market in general.

For instance, payment startups like Stripe or Square are doing amazing things, and so are movements from Apple or Google Pay (although these are severely limited by being closed ecosystems).

I also see this locally. In Scandinavia, we have new solutions like MobilePay (in Denmark), which was created by one of our largest banks. In Norway, we have Vipps, which was also created by a bank, and in Sweden, we have Klarna.

All of these payment services are very interesting because they simplify the way we pay for things. And some of them can also do micropayments, even though that's not really the focus.

But the reason they are successful isn't because of the amount of money that you can pay. Instead, their success is due to the usability, convenience (i.e. easier mobile and web payments), and availability.

This is important to understand, because it has a lot to do with why micropayment startups fail.

Successful payment startups make paying simple to do, and reduce the time people have to spend on paying for things. Micropayment companies increase the burden of a transaction by asking people to pay on every visit or with every article, all while lowering the value of what you are paying for by reducing the price to a micro-transaction.

This is the opposite of what we need. Micropayment startups think the problem is about how much money people pay, but that isn't the problem at all. And I can illustrate this in a very simple way.

Take a magazine like Yoga Journal (or any other magazine). Their current offer to get you to subscribe is this:

That's $1 for the entire magazine!

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Thomas Baekdal

Thomas Baekdal

Founder of Baekdal, author, writer, strategic consultant, and new media advocate.

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