Apple and the "M" word

March 19, 2009 | written by Bruce Cundiff

The Chicken and the Egg of Micropayments

For about the past 10 years I have been hearing about the onslaught of micropayments (purchases anywhere from several cents to $10 or so…depending on how you look at it) and THE NEXT BIG CATALYST for driving them, ranging from the right kind of digital content (news articles, ring tones, games, etc. ad nauseum). What is going to be the real reason for a “tipping point” to “monetize” the internet? Buzzwords aside…Apple’s announcement earlier this week caught my eye.

Apple has now made it possible to purchase things “In App” meaning your iTunes account can be charged for online subscriptions, add on game modules, books, services, photos, ringtones, etc., using the iPhone/iPod Touch [h/t to Jay Galvin http://www.digiassist.com/main/ for pointing us in that direction…].

The catalysts (the chicken and egg) for successful micropayments are twofold:
1. Compelling content—you gotta have something that people are willing to pay for…
2. A viable micropayments solution—has to be cost effective for the content vendor, and relatively easy for the consumer to use

The problem is creating and fostering both the chicken and the egg at the same time—building the consumer desire to purchase specific content, and having a ready-made way for them to easily do so.

We’ve never really gotten there on a wide scale for an abundance of content. Examples of past solutions (which have had varying degrees of failure…) include, transaction aggregation, adding the content purchases to an existing bill (wireless, ISP, other), dedicated stored value accounts, etc.

The one success story has been iTunes. But one of the reasons for its success are that the content “provider” (distributor, really) didn’t care a whole lot about the cost of the solution. iTunes is a mercantile solution that exists for the good of selling devices, iPods and iPhones. The content sales are secondary. iTunes is part chicken, part egg. It’s a vehicle for (compelling) content delivery that is easy to use (or at least easy enough for millions to get over the usage hurdle). But it’s still a point solution, not a widespread micropayments revolution.

So…looking forward…are we entering a realm where the content sales (and their profitability) are primary? And following that, is this the potential, long awaited, broader success of micropayments? I think this announcement might pave the way for that.

Let’s break it down:
1. We already have the captured user base using the solution, and now the content expands beyond music.
2. That may in turn serve as a catalyst for consumer familiarity and content download to non-iPhone/iPod devices (Android platform handsets, Blackberries (Blackberrys?), etc.
3. The replication of the “App Store” for other handsets and content groups is already underway.

Way to early to tell if this is for real (this time…), but it could be a game-changer.

Speaking of games—Go Tar Heels!