“I predict that most sites that are not financed through traditional product sales will move to micropayments in less than two years.”

Unfortunately, Jakob Nielsen in his essay The Case for Micropayments made that bold prediction back in 1998. Nielsen’s overstatement seems humorous in hindsight, but perhaps he was just a bit ahead of his time. Companies from media to online gaming are taking a fresh look at advertising’s baby brother, and the numbers are startling.

  • Apple’s iTunes store has sold more than 6 billion song downloads for around $1 each.
  • Virtual goods (assets that exist only in online worlds) sales now reach more than $2 billion per year. TENCENT, a Chinese website, reported $719 million in sales of virtual goods last year alone.
  • SKYPE reported $550 million dollars last year selling internet phone calls for pennies per minute.
  • Online poker players can now get started with a deposit as low as $10 at some sites. Poker cash games can be played with as little as 40 cents and tournaments for 10 cents.
  • Millions of Facebook users now have virtual pets from Pet Society, and are outfitting them for around a dollar.

Are consumers finally ready to pay for online content? Google CEO Eric Schmidt recently encouraged newspapers to begin charging for their online articles. His position is that by getting users to pay pennies for stories, online media companies could earn enough to make up for lost ad revenues.

But virtual jewellry and leather jackets are one thing, and news quite another. While internet users may be willing to pay for new trends (online clothing, music, etc.), they may not open their wallets quite so quickly for something they are accustomed to getting for free. Nevertheless, as we have seen with the micropayment industry as a whole, initial resistance to an idea does not necessarily mean that it will not eventually turn into a sustainable model in the future.

What do you think?

(1) Would internet users be willing to pay small amounts for online media content like news?

(2) Apart from music, news and virtual property, what other goods are naturals for micropayment systems?

(3) Do you use micropayments? If so, what company have you found works the best for processing them?