What is the story with Microtransactions?
During the initial boom years of the Internet at the end of the last and beginning of this century Micro-Transactions were a big topic. Then this concept went asleep for a few years, now the iPhone, Kindle, and the discussion of how to save newspapers brought it back into the center of interesting business models. Maybe it’s just a coincidence that Amazon announced today its new Kindle application for the iPhone and iTouch? Or this announcement might even further heat up this discussion.
There are a few reasons why microtransactions are getting more attention than a few years ago:
- The concept of “free economy” has taken strong place in today’s world in which huge players like Google establish themselves as major forces. Microtransactions are closer to a free economy than most other business models. Consumers got used to receive a lot of things for free which limited their willingness to buy larger items. But it will not hinder them to buy items for a small amount of money. The huge iTunes success with a $0.99 price tag per song versus widely available free music downloads proves the collaboration between business models centered around “free” and microtransactions.
- Today’s world of recession and consumer hesitation of buying large ticket items might further accelerate the acceptance of microtransactions. I know that a $13 price tag for a monthly Kindle subscription for a New York Times is not a true microtransaction but it is definitely a significant cost savings versus a $40 fee for a monthly paper-based home delivery. The borders between a traditional microtransaction and a just cost efficient monthly subscription fee might get more and more blurry.
- Even industries like computer games might move closer to a smaller transaction model instead of a sticker price of $40-$60 per game. Microtransactions will enable brands to move from a infrequent large transaction relationship to a more ongoing subscription like relationship. This could significantly enlarge a loyal and stable customer base for a lot brands.