Jakob Nielsen on Micropayments :::

Jakob Nielsen on Micropayments ::: Jakob Nielsen, publisher of Alertbox, predicted last year that “free” web sites would vanish. The ad-supported web site would become a thing of the past, he said. He was right.

The problem is that content providers still haven’t figured out how to get it right (am I the only one who doesn’t visit Salon anymore, thanks to the full-screen ads, pop-up ads, restricted content, confusing presentation?). Nielsen suggests micropayments are the answer.

Nielsen doesn’t see a mature micropayment service in 2002, but I think we may be closer than he thinks. PayPal is set to go public soon, looking to raise a little over $70 million when it debuts on the Nasdaq. Unlike the prior generation of digital cash efforts (remember DigiCash? CyberCash? First Virtual?), PayPal kept the model simple – as Fast Company says, by building its system around e-mail, by learning from its mistakes, and by not “inventing a new currency.” (Cf Beenz, Bippy Dollars, Flooz)

I’m a PayPal user – have been for almost 2 years. It’s easy, makes selling anything on eBay remarkably simple, and they are wonderfully responsive. Though this article in Technology Review says that PayPal hasn’t seen a huge demand for micrpayments, I can see them becoming a very simple application of their technology. (PayPal could restrict the way in which micropayments were processed, at least by requiring that the payments go from one PayPal account to another, instead of involving credit cards; in this sense, they wouldn’t impose any external transaction fees and would just be shuffling bits within their system.)

(Saturday Night Live fans: the transcript of the “First Citiwide Change Bank” sketch in which they make change in any number of combinations is available here.)

Here’s hoping PayPal’s IPO is strong. They represent the best opportunity we’ll have in 2002 to see a solid, viable infrastructure play for enabling micropayments next year.