So what exactly are micropayments then?  As ever Wikipedia is bang on the money.  “Micropayments are means for transferring very small amounts of money i.e. 1/1000th of a dollar.  They are typically payments that are too small to be affordably processed by credit card or other electronic transaction processing mechanisms”.

So why am I writing about micropayments then?  Well would you be reading this article if it cost you £0.10 for the privilege.  Probably not, but I won’t hold that against you.  Micropayments are getting a fair bit of coverage at the moment for a number of reasons.  The main one is that we are in a global recession, marketing budgets are in free-fall and as such quality content providers (especially journalism – great article by Freakonomics, and news) are seeing their ad revenues drying up.  This brings us back to the debate over the free vs subscription model for online news providers which was reignited by Rupert Murdoch and the WSJ recently.

In a nutshell the WSJ is one of the only online news provider out there that has successfully maintained a subscription model ($100 p/year) and Murdoch wants a piece of this.  In an article with the Guardian last week Rupert Murdoch stated that he expects to start charging for access to News Corporation’s newspaper websites within a year as he strives to fix a “malfunctioning” business model. He also added “The current days of the internet will soon be over.”  Now Rupert Murdoch is a guy you have to respect, but ultimately he knows that if he starts charging £10 per month to get our daily dose of The Sun and The Times then we will migrate to alternatives in our droves.  This is where the idea of micropayments comes in.  By charging miniscule amounts per article News Corp’s scale would mean all those fractions of a dollar would eventually start adding up.  The WSJ also announced last week that they will be bringing in micropayments for users that don’t want to pay the $100 upfront for the year, so this is a very real prospect.

It seems that Murdoch clearly has a vested interest in micropayments but who else does.  Well predictably it’s Facebook.  Facebook have been working on a payment platform since late 2007 which is rumoured to be close to launching.  The possibilities for Micropayments on Facebook are huge.  Obviously they have at a basic level gifting, ranging through to their app platform.  The crucial thing about Facebook is that micropayments obviously work best on a large scale, so when you add in Facebook’s 200m+ audience you have a very interesting revenue model.

As we read down the list of who else could have a vested interest in micropayments it reads like a who’s who in silicon alley, Google with Google Checkout, Ebay with Paypal, Apple with iTunes / iPhone, but it could actually be none of these guys that come out on top.  Perhaps one of the biggest opportunities lies with mobile network operators.  As the mobile internet starts to gain critical mass through smartphones we could see mobile networks acting as a single billing point for online micropayments.  Techcrunch wrote a pretty cutting article on micropayments a few days ago, their idea was that you would deposit money into a Google account and it slowly depletes as you go around the web consuming content.

Thus far everyone seems to be pointing towards the future, but there are a couple of success stories for micropayments floating around already.  The first is a company called Zynga who are making a good living according to Techcrunch out of micrpayments around their gaming apps on Facebook, charging for time spent on the game or for chips in their poker game.  Gaming lends itself to being one of the biggest possibilities for micropayments.  Computer games are a premium product that people are happy to pay for.  World of Warcraft is a great example of people changing up real money for the game based currency which is sort of like a micropayment.  Habbo Hotel also have been utilizing micropayments of a kind for quite a while now to great effect.

So what are the barriers, well the main one is probably going to getting people to pay for something that they used to get for free.  The web has completely changed consumer expectations of content delivery especially with regards to how much they are willing to pay for content or rather how much they aren’t willing to pay for it.  People expect news and social networking for free now and that isn’t going to change anytime soon.  In terms of a world where we pay for news on a per article basis, micropayments might gain some traction in certain niche’s like the WSJ but I don’t think they have a future in the mainstream as people will always migrate to free alternatives.  However, micropayments may well have a bright future in gaming and mobile where additional services can be provided for a nominal fee.

I’ll leave you with something I read last week.  Apparently Twitter co-founder and current Chairman Jack Dorsey seems interested in a payment platform also so expect to hear a lot more about micropayments in the near future.