Creators have three options for surviving online: closed marketplaces, recurring subscriptions and invasive advertising. It’s time for something new.

You’re in an arcade.

This arcade has a million machines.

Instead of coin slots, the games have different payment methods. Some are ad-supported, frequently pestering you with annoying pop-ups. Others won’t let you play until you enter your credit card. Some require a monthly subscription, and the rest have an up-front cost that is too much for casual use.

Some people will pick a few machines they like, and most will give up. Why can’t you just pay a quarter for a quick match against a friend? Why do you need to buy a game for a whole month, remember to cancel the subscription before it gets automatically renewed, and then go through the same process with another game?

This is the state of online transactions.

A lot of people are leaving the arcade.

There are other ways to do web payments.

We know that modern web experience is mostly terrible. Instead of individual creator sites, most people are living inside social networks that promote templated selves and divisive content.

Creators have three options for surviving online: closed marketplaces, recurring subscriptions and invasive advertising.

Are subscription models, advertising, or closed marketplaces really the best fit for the internet? If not, what might a system of transactions built with the open web look like?

THE MISSING MIDDLE

Recurring payment models are everywhere, but they aren’t a fit for every situation.

Consider an article on a news site. The site wants you to subscribe, but you’re only after one article. Subscribing requires finding a credit card, signing up for an account (or setting a calendar appointment to cancel before your ‘free trial’ is up) and questioning your purchase. You’re more likely to just read something else instead.

Even if you did buy the article, where does it go? Do you get a record that you purchased it? Is it stored somewhere you can easily read it again? Why would you pay for something which is destined to get lost and forgotten?

Take another example: an online art class. You don’t know up front whether or not the course will be a good fit for you. But you’re asked to pay for the entire set of classes instead of on an episode-by-episode basis.

An excessive bundling of content is hardly the only problem with the current way of accepting web payments.

Creators are financially damaged when they find their work used, re-sold or otherwise exploited without credit. This isn’t always intentional — creators who rely on third party content don’t have a reliable network for tracing assets back to their source. This version of a marketplace wasn’t built with the creators or consumers in mind, and the whole process suffers for it.

We need a solution for the smaller payments. And we can’t power it with credit cards.

WHY CAN’T WE USE CREDIT CARDS FOR SMALL PAYMENTS?

Credit card processing generally costs at least $0.29 per transaction. If you charge a user $0.50, you’re left with around $0.10 after fees. (Less if it’s international.) Add the cost of chargebacks ($15 per incident on Stripe for example) and transactions below $1 are generally not economically viable (i.e. you’ll lose money).

The point where credit card fees start to be a reasonable percentage of the total amount (5–10%) is around $3–5 which is why you see so many digital goods and subscriptions start to appear at that price range (thanks to Stefan at Coil for some of the thinking on this).

There is also a “mental cost per-transaction cost”, or the inconvenience of having to think about a transaction, enter a credit card, wait for a loading screen, and add personal data. How much it is depends on the person. The median for a US consumer seems to be in the $0.15 ballpark. When trying to figure out whether people will pay for something, assume an added cost of $0.15, representing their Many, many micro-transaction companies have failed, because they miscalculated how intolerant people are of wasted time when transactions are sufficiently small.

The way people sometimes get around this is by aggregation. That’s why games won’t sell you a $0.50 loot box but rather will sell you 1000 in-game diamonds for $5.99 and then with that you can buy twenty loot boxes.

By buying $10 of tokens up front, and using a cryptocurrency on the back end, micropayments could be delivered anywhere in the world, to any product, in any fractional revenue model, all with a minimum of transaction fees.

WEB PAYMENTS AT HUMAN SCALE

Having to fill out a form to make a 25 cent purchase is inhuman; it is an unreasonable amount of work to burden a human with for the reward. Being able to click directly through to a purchase is human scale.

When we talk about gaps in our tools and services, what we are talking about are gaps in our design thinking. Gaps often end up being filled by anti-patterns and can produce all kinds of negative effects. In this case advertising was seen as the quick fix, and arguably has had a disproportionate and negative impact on the web.

This class of design can be said to be at “human scale” in that they are systems that care about human time and do not waste it. They are designed to fit what people really need, as individuals and small groups. They afford humans the same rights that a marketplace has at an individual level. And they allow creators to create more desirable, innovative, and helpful creative content.

What we design, who we design for, what design seeks to produce — these are hard questions. Design has a way of escaping our grasp as new elements come into play we didn’t consider.

There has been a rising interest in building a Web Wallets, but a lack of in-depth research about what creators really need.

WHAT DO CREATORS NEED ON THE WEB?

Last year, Mozilla’s Anselm Hook performed months of in-depth research with individual creators about the challenges they faced on the web.

One of the most notable interviewees was Nonny de la Peña, an American journalist, documentary filmmaker, and entrepreneur. Her groundbreaking virtual reality work combines 3D environments with real witness audio to recreate powerful events users can experience using virtual reality headsets. She is widely credited with helping create the genre of immersive journalism.

Nonny brought up three major factors facing creators during her interview: Findability, Cryptocurrencies and Small Payments.

Findability: In Nonny’s opinion, the web has no “store”. Findability for creators is important.

“There’s no way for people to find any of the work our team create, our authoring work, our authoring tool, or us as a whole. It’s all random, ad-hoc, word of mouth and social networking. A Web Payment system should help people discover and support underground and emerging content all over the world. There is no forward facing filter on content by type.”

Content isn’t created by a single person. There needs to be a way to deliver revenue to multiple content authors:

“Creators should have access to participatory revenue streams. They should be be able to sell tools to creators as well as participate in creator revenue. Any monetization system that a third party creates should allow some way of splitting revenue out to various parties.”

Nonny brought up the need for small payments on the web.

“Steam, Oculus and Google Play are frustrating marketplaces. It would be ideal to publish straight to the web but there’s no way to do that and get paid easily. Creators are forced to choose between a marketplace or the huge hassle of setting up a Mastercard/Visa Paywall before knowing whether people might even pay for the product the studio has produced.”

Small Payments Support Healthy Web Ecosystems

If we design for a healthy interaction between creators and consumers, where consumers directly support the creators, then these interactions may benefit a whole ecosystem.

In fact Tim Berners Lee did design the web with a payment channel — specifically for this reason — but it just has not been formally implemented yet and remains only a tantalizing possibility.

DESIGNING A SUCCESSFUL WEB WALLET

Imagine a payment service built with the internet in mind. You refill it once every month or so, or even set-up automatic payments. It may be a site, a browser extension or built into the browser.

In daily use you wouldn’t have to type in any numbers, or worry about someone copying your info. You would simply click directly through your purchase to the product experience. If it is an article, you click through to the article and that is the purchase event. Same for a video or a game or any other experience.

Your purchase button card might be customized, so you would know right away that you were looking at an official purchase and not a fake pop-up from a questionable site. But the main way the service protects you is that it decertifies sites that attempt to deceive you.

You could easily see records of your recent transactions. You could revisit sites you had made payments to, or places you would like to make a payment in the future. You could pay for an experience after you consumed it. You could tip creators if you wished.

As a single click through payment; there are no forms, no redirection, no delay. It is frictionless, instantaneous and largely transparent. Behind the scenes any service fees would reflect true service costs rather than being a profit center for the wallet provider.

This would be a service that could be easily added to a creator website, and it should be built in partnership with a web-oriented non-profit that’s already positioned as an international web presence. Otherwise, the platform could get lost in the shuffle. The crypto backend could sit behind existing web wallet offerings, allowing startups to offer in-app payments without taking on the Herculean task all on their own.

With a direct relationship between a creator and a consumer, creators may be more free to attend to consumer interests and needs. And because we’re striking at the root of the issue (payments) rather than at the symptoms, advertising may naturally diminish (rather than you needing to put so much work into having an ad blocker or having to whitelist or blacklist certain sites, or even just having to put up with the headache of trying to read around the ads). Content should improve. Diversity of content should increase. More creators from different backgrounds should be able to participate in the support-based ecosystem of the web.

A smart wallet like this would not only be a payment method, but also a means to form a network with anyone you had supported (if you permit it), as well as tracking their content so you wouldn’t have to worry about losing track of it.

A web wallet affords more variety in spending habits — someone could spend a thousand dollars one month, and 25 cents the next. It also unlocks a category of content that we don’t see much of on the web; smaller, “pay by the individual item” digital products.

There’s also a possibility that it could be accessible to people traditionally unbanked, it would cross international boundaries, and it could have low friction.

And of course, a good Web Wallet would provide discoverability services for creators, with an API that would allow anyone to make their own independent view or segment of the creator market.

Cryptocurrencies are well-positioned to deliver fractional payouts, but few are in use on the web today. A Web Wallet with a crypto-based backend would allow for international transactions, asset tracking, and fractional payments for multiple creators. But the transactions cannot look like crypto. They must be smooth, delightful and magical. No one wants to look at a wallet. They want a pass-through system that gets them to the goal. A calm User Experience is crucial.

HOW CLOSE ARE WE?

When VentureBeat journalist Bernard Moon first moved to South Korea in 2000, he was surprised to see an camera phone market. In 2001 it was unfathomable that camera phones would be adopted a rapidly in the United States as they were in South Korea, but it happened. And today, South Korea is way ahead on cryptocurrencies and micropayment systems. Not only does South Korea have multiple and robust micropayment systems in the 50 cent range, the industry is rapidly growing. In his article on crypto and South Korea, Moon also mentioned while it seems impossible for an American to pay 50 cents for something right now, small scale Web Wallet services are fundamentally inevitable. Even though there isn’t a serious small scale Web Wallet in the United States in a sweet spot of $0.15 to $5.00 on the web, it’s something that on the future horizon. We can build it now, and we can learn from those who already rely on it.

WHO SHOULD BUILD IT?

We know that a lot of people are working on web wallets right now, but they are overlooking crucial elements like user experience, transaction cost, and they may be ignoring creators. A good Web Wallet should be built by a non-profit web organization with a small but exceptional design team. An entity that can offer a long term, sustainable home for the product to live in.

A good Web Wallet will make a lot of money. Micro-payment systems in other countries have proven that. But it needs to be guided by a set of design principles that empower creators and the ecosystem of the web as a whole.

It’s time for a real Web Wallet — one that acknowledge the many ways purchases have changed in recent decades — crowdfunding, cryptocurrency, donations, virtual tips, and other developing concepts becoming core parts of financial interactions. We can design better models for discovery, licensing, IP and payment for creators of all sizes and backgrounds. It can become an entirely good thing for the web as a whole — it can help heal an ecosystem.

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Thanks to Nonny de la Peña, Ben Greenstein, Kate Hook, Anselm Hook, and Stefan Thomas for feedback and input on this article.