Aug 12, 2021

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1 big thing: The micropayments mirage

Illustration: Sarah Grillo/Axios

Micropayments — the decades-old vision of a new way to support creators and businesses online — remain a dream in the U.S., despite 25 years of digital business innovation, Axios' Scott Rosenberg writes.

Why it matters: After all this time, the dominant revenue models of the internet — subscriptions and advertising — are exactly the same as they were in the pre-digital era.

The big picture: Tech thinkers have long predicted the development of thriving creative ecosystems supported by customers paying tiny amounts automatically as they read, viewed and listened to content online.

For a long time, the chief hurdles blocking such a micropayments system were technical.

  • The cost of processing and tracking tiny payments (on the order of cents or fractions of cents rather than dollars) for tiny acts of consumption (like reading a short article or watching a short video) would cost more than the payment itself — particularly in the U.S., with its high-margin credit-card-based payment systems.
  • But the cost of processing and data storage has now dropped to the point where transaction costs aren't a blocker, and non-credit card payments have begun taking root even in the U.S.

Another longstanding problem was psychological: Consumers hate the idea of a "running meter" and prefer to pay a lump sum for an all-you-can-eat plan.

  • But today's interface designers and data-driven marketers could easily devise a system that didn't nag you but just let you fill a wallet on a schedule and then ignore it.

The deeper reason we don't have micropayments sits on the producers' side, not the consumers.

  • Micropayments really are "micro," it turns out, even when you start adding them up — so much so that they're barely worth the effort.
  • The theory behind micropayments promises the creation of a robust middle class of creators online — but there isn't a single field test that shows such a scenario playing out.

Every micropayment-style platform running today shows that they're usually a bad deal for all but the most popular and successful creators.

  • Spotify, whose business is basically built around divvying up subscription fees into micropayments to musical artists, is notorious for how very little it pays out to most acts.
  • Medium, which fills up a pot with monthly subscriptions and then divides some of the fees among writers based on traffic and reading time, has seen a similarly lopsided distribution of contributors' income.

Between the lines: The "creator economy" that's emerging to support videomakers, streamers, influencers on social networks, authors of newsletters, hosts of podcasts and other creative entrepreneurs online is largely built around subscriptions (or, in the case of services like Patreon, recurring subscription-like payments) rather than fees for access to specific content.

What's next: If a popular micropayments system that provides solid income for a broad range of contributors ever does arrive, look for it to emerge from the public sector or nonprofits rather than the startup world.

  • Startups are always going to try to build "moats" — i.e., seek competitive advantages — so they can deliver big returns to investors. But a universal micropayments system would have to be open and neutral, letting every creator or publisher compete evenly for the public's nickels and dimes.
  • The system, in other words, would need to be like the protocols that underlie the web itself, rather than the giant companies that grew on that foundation.
2. New laws prompt new tech push on kids' privacy

Tech giants are scrambling to update their privacy rules for young users in order to comply with new regulations from the U.K. focused on teens' online privacy and wellbeing, Axios' Margaret Harding McGill and Sara Fischer report.

Why it matters: Historically, when Europe passes new data laws, the U.S. and other Western countries have eventually followed suit. So it's likely that the U.K.'s pending Age Appropriate Design Code will set a new global standard for the treatment of children's data.

Driving the news: TikTok on Thursday announced a slew of changes to its children's privacy settings, including adding a pop-up for kids under the age of 16 asking them to choose who can watch their videos before they upload them, and adding another pop-up asking them to confirm whether others can download their videos.

  • Instagram last month introduced a slew of new privacy features aimed at kids under 16, including making new accounts private by default for kids under 16.
  • Facebook and Instagram both said last month that they would begin limiting the way advertisers can target young users under age 18.
  • YouTube said it would adjust the default upload setting to the most private option for users between 13 and 17, and would remove "overly commercial" videos from YouTube Kids.

What's happening: The U.K. in September will begin enforcing 15 new standards for websites likely to be accessed by users under 18 that center around protecting young users' online privacy and wellbeing. The standards include:

  • Setting a high-privacy default.
  • Collecting and retaining the minimum amount of data necessary to provide services.
  • Switching off geolocation by default.

What they're saying: Sen. Ed Markey (D-Mass.), and Reps. Kathy Castor (D-Fla.) and Lori Trahan (D-Mass.) have urged tech companies to extend their new U.K. privacy protections to cover U.S. teens as well.

3. Senate bill targets Google and Apple app stores

Illustration: Annelise Capossela/Axios

A bipartisan trio of senators led by Sen. Richard Blumenthal (D-Conn.) unveiled legislation Wednesday that would upend Google and Apple's control over their mobile app stores in a bid to inject more competition into the sector, Margaret reports.

Why it matters: The bill's provisions would be a win for those app makers who have complained about how Google and Apple operate their app stores.

Driving the news: The Open App Markets Act, also sponsored by Sens. Marsha Blackburn (R-Tenn.) and Amy Klobuchar (D-Minn.), would ban app store operators from requiring use of their own in-app payment systems.

  • Under the bill, phone makers could no longer ban consumers from sideloading apps — obtaining them outside of an official app store — or from using alternative app stores.
  • App developers also could sell directly to consumers at a lower price than in app stores.

What they're saying: "This bipartisan bill will help break these tech giants' ironclad grip, open the app economy to new competitors, and give mobile users more control over their own devices," Blumenthal said in a statement.

  • Tile, which has testified about Apple's app-store practices before Congress, cheered the legislation, as did Epic Games, ProtonMail and the Coalition for App Fairness, which represents Epic, Spotify and other app-makers.

The other side: Chamber of Progress, an advocacy group whose members include Apple and Google, called it a "a finger in the eye of anyone" who bought an Apple or Android phone because they are safe and reliable.

What's next: The Senate bill is separate from the slew of tech antitrust bills approved by the House Judiciary Committee in June.

4. Groups pull objections to Verizon-Tracfone deal

Several groups that had opposed Verizon's purchase of Tracfone say that they are satisfied with fresh commitments being made to the FCC and will withdraw their objections to the deal.

Why it matters: The status of Verizon's purchase of the low-cost prepaid brand had been unclear amid the concerns.

Details: Under the new concessions, Verizon is committing to continue for at least three years TracFone's current services offered to low-income customers via the federal government's Lifeline program.

  • Tracfone has 1.7 million customers in 43 states that take advantage of Lifeline to subsidize their service costs.

The big picture: For Verizon, the Tracfone deal represents its biggest move yet into the prepaid business, while AT&T had purchased Cricket and T-Mobile had bought MetroPCS.

5. Take note

On Tap

Trading Places

  • Intel has hired Anton Kaplanyan as VP of graphics research.

ICYMI

  • DoorDash had acquisition talks with Instacart, but the discussions ended amid worries over the antitrust issues involved. (The Information)
  • Accenture is the latest big company to be hit with a ransomware attack. (CRN)
  • Code2040 says it won't partner with companies that have pledged to have politics-free workplaces, saying that doing so equates to support for existing systems of power. (Fast Company)
  • Reddit raised $410 million, bringing its valuation to $10 billion. (The Verge)
6. After you Login

A shelter in Germany is using Tinder to try to find homes for animals.