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Microtransactions

From test answer.

Every financial transaction has a cost. Transporting the cash to the bank, computer database entries, etc. These costs are not small - Stripe (pretty decent service) charges 2.9% + $0.30 per transaction. They have to pay the card issuers (some of whom give 2% back to the user due to good credit; so fees could drop somewhat possibly at cost of less-universal card access). There is also a psychological cost to monetary transactions - free is easy, but asking for a penny drops conversions massively, though I’ll rarely bother to pick one up off the ground. Finance laws get complicated too if turning money into “credits” - so typically you have to buy into a non-refundable credit system for a minimum purchase for the sake of microtransactions as well…

The point of the above is this: microtransactions have never worked. I doubt they can - though I have no proof and would love to be wrong. That “advertising is the original sin of the web” and that we should have made microtransaction work… Yeah. Advertising is horrible, yes. Microtransactions could maybe run about the same as ads, but it’s poor UX. (Also, site owners would set rates much higher than ads, which are competitive market driven, would give them, as they have a monopoly on their content).

“Addiction UI” - trying to get people on the page and to stay on the page. With the ads. Dwell time, more UI devoted to ads, ads mixed with content, etc. Google also runs their own advertising network to put ads on other sites. Design for compulsion.

But - how else can you run a service? Donation-based/patronage works for archive.org and wikipedia.org, and SaaS/hosting services survive just fine with larger costs, but there are a lot of smaller infrequent use services which can’t fit into either revenue stream. Ads work for them, and other models have typically failed - taking the company with them. Anyway - another open area of research and one I’d love to see work.

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Addendum later:

Yeah, the 3rd paragraph is more of a direct answer to the question - realized I'd been providing too much background information and might get sidetracked from the expected answer, so I put that in. The market is efficient, and I've not been able to think of other services which aren't funded by ads, donations, or are high-fee SAAS (including servers-as-a-service like AWS).

Maybe Amazon's books API, though that's primarily donation funded - the costs are low enough that Amazon lets people use it for free. eBay takes a cut of transactions - overlooked that business model. Might be a few other key successful models, but they are few :).