Micropayments Are Multiplying

Wed Oct 6 16:31:30 PDT 2004

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 Emarketer.com

Micropayments Are Multiplying

October 07, 2004

 Exactly 14 million Americans made online purchases for less than $2.00
over the past year, reports Ipsos.

A survey from Ipsos-Insight on the small payments market, released
yesterday at the Micropayments Conference in New York City, reported that
more than 14 million Americans, ages 12 and older, purchased digital
content for less than $2.00 in the past twelve months.

 The rate of small purchases is going up fast. In July, Ipsos-Insight
reported that more than 10 million Americans purchased digital content for
less than $2.00 in the past year, and in November the number of US
purchasers in the past year was approximately 4 million.

 In all, the 14 million represents an increase of over 10 million
micro-purchasers since October 2003, a 350% yearly increase.

 By comparison, the survey found that more than an estimated 37 million
Americans are willing to use credit, debit or charge cards for purchases of
$5.00 or less. "The data suggest that increasing the availability and
consumer awareness of compelling online content for less than $2.00 could
be the key to sparking growth in this emerging online commerce area," says
Matt Kleinschmit, Director, Ipsos-Insight.

 The survey estimates that 30 million Americans are at least somewhat
likely to purchase content for less than $2.00 in the next twelve months,
and states that the primary reason consumers have not yet made an online
purchase for $2 or less is lack of compelling content in the price range.

 In fact, more than 44% of those surveyed have made an online purchase in
the past year - and over 50% of them indicated that the main reasons they
have not made a micropayment was because it was not worth the effort, lack
of interesting content or availability of content.

 "The technology is available today to enable cost-effective sales of
low-priced digital content," emphasizes Mr. Kleinschmit. "The most
significant challenge is packaging and pricing the content to meet consumer
demand."

 Among consumers who had made online purchases of $2.00 or less, the most
commonly purchased items were ring tones, music, games and articles, so it
is not surprising that teens were the age group most likely to make
micro-purchases in the near future. Teenagers are also the most likely to
make purchases of under $20.00.

 While the Ipsos-Insight survey focused exclusively on the US and the
online environment, a study recently released by Juniper Research, "Mobile
Commerce (M-Commerce) & Micropayment Strategies," looked at the worldwide
micropayment market with an emphasis on the mobile channel.

 Juniper projects that the global mobile commerce market - excluding mobile
entertainment - will become a $40 billion industry by 2009, fuelled by a
growth in micropayments. Juniper reports: "Large numbers of small payments
will make up the vast majority of sales via mobile phones, with the average
Western European making approximately 28 transactions a year via the mobile
phone by 2009. The average cost of each transaction in 2009 in Western
Europe is expected to be worth approximately $3.00."

 Foreseeing the day when the mobile phone could develop into a full-fledged
digital wallet, the author of the report, Marc Ambasna-Jones, says the key
to m-commerce growth is simplicity: "Will it be easier to use than a credit
card for example? Can it ever be more convenient than cash? Ultimately the
success or failure of mobile commerce comes down to this."

 Bruce Cundiff, an analyst with Jupiter Research, told CNET that "what it
comes down to is that there simply must be a viable transaction model for
smaller-cost products to make a dollar off e-commerce sales."

 As these two new reports make clear, both online and on the phone, a lot
is riding on consumers' ability to pay very little - quickly, securely and
conveniently. But can the micropayment market put its history of failures
(Beenz, Flooz and DigiCash) behind and really start to churn out macro
revenues? As for now, no one knows for sure.

-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'