Digital Content Micropayments

Each of us consumes content on the internet everyday. Most of this content appears to be “free” when, in fact, it is being paid for by the advertising we see beside it.

Some content is available only through subscriptions — although in many cases today, including the New York Times, subscription revenue is still supplemented with advertisements embedded in the content.

There have been attempts to eliminate advertising through micropayments. For example, SatoshiPay enables websites to erect paywalls for specific content where the reader approves a small payment in Bitcoin out of their digital wallet in order to access the content. A major problem with this approach is that it requires users to have a digital wallet and to acquire Bitcoin to fund it.

Some content producers depend on donations rather than erecting paywalls or adding advertising to their content. Systems such as Flattr and Kachingle make it easy for sites to receive a share of donations made by readers. These systems also depend on readers establishing accounts and making donations through those accounts.

The biggest problem with these approaches is that consumers must establish accounts and fund them. That is a major barrier to adoption.

Let’s start with the first problem: establishing an account. Who wants the hassle and the risk of setting up a new account that is holding your money in it?

Cryptocurrency has the solution to this problem. With blockchain currencies, you don’t talk to anyone else to set up an account. You just choose a very large random number and that is your account! This random number is called a “private key”. From it, you can compute a “public key” that you share with others to make or accept payments. And magically you have a cryptocurrency account. It has a zero balance, but the account is otherwise ready for you to make transactions.

Now the second problem: How do you get funds into your account so that you can start making transactions?

Before we answer this, first consider the fact that you are watching all sorts of advertisements today. Advertisers are paying someone so that you will see their ads. But why aren’t they paying you? After all, it is your time and attention that they want. Why are they paying Google or Facebook for this?

Suppose that there is a way that advertisers could pay you directly for your attention. Each time you see an ad, suppose that they are willing to make a small payment directly to you. The good news is that you already have an account set up. So as long as they know your “account number” (your public key), there is an easy way for them to pay you.

So now this is interesting. Say you have a client that creates a private key for you. You see an ad and your client tells the advertiser your public key and they make a payment into your account. Now, when you visit some content, you can use the author’s public key and the money in your account to make a payment to them to access that content.

You might ask why this is any better than the system we have on the internet today. In both cases, consumers have nothing to pay out of their pockets, but they have to consume ads. Nevertheless, there are some compelling advantages to this new approach:

1. Consumers get the power. If they don’t want advertisements, they can simply fund their wallet themselves.
2. Consumers get choice. By decoupling the content from the ads, consumers can earn funds from advertisements they choose, rather than having to take the ads that happen to appear along with the content they are interested in.
3. With this approach, we eliminate the middleman. Advertising networks, like Google and Facebook, take almost half of all of the advertising dollars for themselves. And they run their “auctions” in a way that provides neither advertisers nor producers with confidence that they are being treated fairly.
4. Producers can price their content. In the current market, producers make advertising space available within their content and then have to accept whatever ads are placed there at whatever price the advertising networks provide. But in this new model, the producer can set any price they want on their content. Consumers can decide whether they are willing to pay that price.

We’re working on a system based on this concept. If you want to learn more about it, visit our website.