Speaker 1: Brought to you by the reinvented two thousand twelve Camray.
Speaker 1: It's ready. Are you get in touch with technology? With
Speaker 1: tech Stuff from how stuff Looks dot com. Hello, everyone,
Speaker 1: welcome to tech Stuff. My name is Chris Pollette, and
Speaker 1: I am an editor at how Stuff works dot com.
Speaker 1: Sitting across from me, as he always does on the
Speaker 1: occasions when we're talking about stuff in the studio is
Speaker 1: senior writer Jonathan Strickland. You'll find your fortune falling all
Speaker 1: over town. Be sure that your umbrella is upside down.
Speaker 1: That's a good one, Thank you. It's that's that's a
Speaker 1: that's an oldie that I'm going back to you there.
Speaker 1: But today we wanted to talk a little bit about
Speaker 1: the concept of micro payments and micro transactions, and they're
Speaker 1: gonna be some other related topics that fall into this
Speaker 1: um because we're talking about, you know, spending little amounts
Speaker 1: of money for something in return, usually some web content.
Speaker 1: That's really where micro payments kind of came out of.
Speaker 1: That's what the concept grew out of. So to really
Speaker 1: understand this um, you know what, I think we're gonna
Speaker 1: need to do something we haven't done in a very
Speaker 1: long time. No, we need to get into the way
Speaker 1: back machine, and I just happened to have it right
Speaker 1: back here in the corner. It's a little dusty. Um,
Speaker 1: it looks like Josh Clark has drawn wash Me with
Speaker 1: his finger on the dust. So that doesn't matter, all right,
Speaker 1: all right, pile in, let's go. Let's see. I'm just
Speaker 1: gonna I'm gonna set this to uh. Let's go to
Speaker 1: ninety two, all right, And here we are in nineteen
Speaker 1: ninety two. I was still in high school. Back then,
Speaker 1: I was still in college. Back then. I went to
Speaker 1: the Governor's Honors program that year. Anyway, But here's two So,
Speaker 1: so the web is just just a baby now, right,
Speaker 1: But people don't know really about the web. Yeah. Yeah,
Speaker 1: people at CERN know about the web, but outside of
Speaker 1: certain not that many people know. So at this point
Speaker 1: the web is nothing but potential, right. We have no
Speaker 1: idea where it's going to go from here. In fact,
Speaker 1: I can tell a story that back when I was
Speaker 1: in college, so a couple of years after this moment
Speaker 1: right now, I thought the Web was just a fad.
Speaker 1: And I looked at that and I said, who the
Speaker 1: heck needs that tail? Nick? And yeah, yeah, I was
Speaker 1: using a Unix shell account. Yeah, yeah, I did. The
Speaker 1: I would use a similar thing as well, and so yeah,
Speaker 1: you know you might tell that into another computer. You
Speaker 1: might use FTP, but you you're like, what the heck?
Speaker 1: This web thing that's for you know, that's for babies now,
Speaker 1: Just the way the same way I felt about graphic
Speaker 1: user interfaces when they finally started popping up. I'm like, oh,
Speaker 1: come on, you can't memorize forty pages worth of commands
Speaker 1: to navigate through your operating system. Sure, but why would you? Right? Yeah, no,
Speaker 1: I eventually came around, but it took a while. So anyway,
Speaker 1: at this point, no one really knows what's going to
Speaker 1: happen with the web, even companies that are looking at
Speaker 1: the web. As the Web is developing, we're just gonna
Speaker 1: we're just gonna stroll through time here. Well, you know,
Speaker 1: I'll just put the way back machine on this wagon
Speaker 1: here and we'll just tug it along behind us until
Speaker 1: we need to get back to modern day. We're just
Speaker 1: gonna stroll through time. And as as time goes on
Speaker 1: in the web develops, companies start to look at the
Speaker 1: web as a possible place to make money. Right, But
Speaker 1: how do you make money on this new medium. Yeah,
Speaker 1: I mean in the early we're talking about government and
Speaker 1: educational institutions. Big companies weren't really using the internet, right,
Speaker 1: and even even much private individuals weren't using it very
Speaker 1: much yet, so there was no need to worry about
Speaker 1: things like how are you going to monetize your website? Right,
Speaker 1: But by the time you get to around nine four,
Speaker 1: you've already got some companies looking to the possibility of
Speaker 1: using the web in a way to either supplement their
Speaker 1: advertising on television and newspapers, so they would create a
Speaker 1: static website. You would go to this website and it
Speaker 1: might have like a brief information page about the company
Speaker 1: and its products or services, and it never changed, very
Speaker 1: very dull for people who wanted to go back and
Speaker 1: check it out again. In fact, it almost felt like
Speaker 1: the web was like just gonna be this massive magazine
Speaker 1: and the articles would never change, you know. But that
Speaker 1: evolved over time as well. Now, in the beginning, when
Speaker 1: companies started getting onto the web and people started to think, hey,
Speaker 1: the web might be away where I could actually you know,
Speaker 1: leverage this medium to make money, So not just companies
Speaker 1: but individuals as well, the question came up how do
Speaker 1: I make money from this? And there were really two
Speaker 1: main schools of thought on how to make money based
Speaker 1: on web content. Now, I'm not talking about selling products
Speaker 1: on the web, because that's essentially using the web as
Speaker 1: a catalog, right, I'm talking about you are actually selling
Speaker 1: content on the web, whether that is some sort of experience,
Speaker 1: or it's a story, or it's you know, a a
Speaker 1: subscription to a news service, anything along those lines. One
Speaker 1: way of paying for that is to sell advertising space
Speaker 1: on your website. And another way of paying for that
Speaker 1: is to actually charge a fee for those particular little
Speaker 1: services or pieces of web content on a per instance
Speaker 1: basis to the user, a direct fee to the user, right,
Speaker 1: We're sorry fee or a monthly fee, association fee, paywalls
Speaker 1: another example. And we're seeing that back in the modern day.
Speaker 1: In fact, I think we've made our point about how
Speaker 1: the early web like no one knew what to do yet. Yeah,
Speaker 1: I mean, people aren't offering subscription rates right at that time,
Speaker 1: really and and you mean you did have people thinking
Speaker 1: about it, like O'Reilly Media was doing that with the
Speaker 1: g n N network. They were had a subscription fee,
Speaker 1: and of course people like a O L the online
Speaker 1: Uh services that weren't part of the Internet. You're paying
Speaker 1: a subscription fee to get their content. So I don't
Speaker 1: want to make it sound like nobody was doing that,
Speaker 1: but yeah, yeah, for for your average company, it just
Speaker 1: wasn't a thing yet. But you did have a lot
Speaker 1: of smart people at this time we're talking about in
Speaker 1: the mid nineties at this point, coming up with ideas
Speaker 1: to create a micro payment system, a system where you
Speaker 1: could pay just a few pennies sometimes depending upon the content.
Speaker 1: I mean, it might be something as simple as you
Speaker 1: wanna view this web page that has content on it
Speaker 1: that you're going to find valuable, it's ten cents to
Speaker 1: do that. There were a lot of smart people looking
Speaker 1: at ways to possibly standardize that, and including people at IBM,
Speaker 1: and you had people at the World Wide Web Conference
Speaker 1: trying to come up with ways of doing this UM,
Speaker 1: trying to find a way to standardize this so that
Speaker 1: people could take that opportunity both on the the side
Speaker 1: of the provider and the side of the consumer, and
Speaker 1: to take advantage of that UM because there are some
Speaker 1: problems right, A lot of transactions online and not even
Speaker 1: online but in person, have built into them a transaction fee. Well,
Speaker 1: if you add a transaction fee on top of a
Speaker 1: micro payment, it seems ridiculous. If you're you're spending fifty
Speaker 1: cents for the micro payment, right, and there's a let's
Speaker 1: say twenty cent fee on top of that, You're you're
Speaker 1: thinking that I'm paying I'm paying nearly a fifty seurcharge
Speaker 1: on top of what I'm already you know, what the
Speaker 1: cost of the content. Because the people who are like
Speaker 1: the credit card fee, for example, know that that's they're
Speaker 1: trying to make their money too, and on on something
Speaker 1: that's small, it's a much greater percentage of the actual transaction. Right.
Speaker 1: That's why a lot of places you go, like a
Speaker 1: restaurant or something, will say, you know, ten dollar minimum
Speaker 1: purchase because it's too expensive for them, because they're the
Speaker 1: ones paying taking care of the fee. Of course, They'm
Speaker 1: sure they pass it along. You sure they build it.
Speaker 1: They might build it into the actual price of the
Speaker 1: whatever the food items are. Yeah, but that I mean,
Speaker 1: so you may you may have seen exactly what we're
Speaker 1: talking about in a different context. Ye. So, but yeah,
Speaker 1: if you were to walk up to a store and
Speaker 1: you wanted to buy this, um like a something for
Speaker 1: ten dollars, and they said, all right, well, here's it's
Speaker 1: ten dollars. That's what's gonna cost you. But we have
Speaker 1: a transaction fee that we have to put on top
Speaker 1: of it, which is another five dollars, and so that
Speaker 1: brings up the tunnel price to fifteen dollars. You might
Speaker 1: bulk at that, and I've I've actually had that experience
Speaker 1: through a a a very large company that is a
Speaker 1: ticket broker. I think we can all guess what I'm
Speaker 1: talking about here, but I will not name names. But
Speaker 1: I was going to purchase tickets to go see um
Speaker 1: Metric because I really wanted to see Metric. I wanted
Speaker 1: to hear Black Sheep played live. And so I went
Speaker 1: to UH purchase the ticket and the ticket costs twenty dollars,
Speaker 1: and I thought twenty dollars, twenty dollars to see Metric play.
Speaker 1: I'm not really familiar with all their music, but I
Speaker 1: love the song Black Sheep. I am willing to pay
Speaker 1: twenty dollars for this experience. The convenience fee and transaction
Speaker 1: fees UH added up to ten dollars, so it was right, Yeah,
Speaker 1: it was fIF of the ticket price. Was was at
Speaker 1: it on top of it. And yeah, that's when I said,
Speaker 1: you know what, I don't care how convenient it is
Speaker 1: or how it transacts. I am not going to do that.
Speaker 1: And so so, yeah, there's this problem. And when you
Speaker 1: get down to the micropayments, it it sounds like, well,
Speaker 1: you know, you're just talking about pennies anyway, but people
Speaker 1: tend to to bulk at that, and companies do too.
Speaker 1: It's not just the consumers, but the companies as well,
Speaker 1: because they're you know, they don't want to to give
Speaker 1: that experience to their consumers. They because it reflects poorly
Speaker 1: on them. You know, most consumers aren't necessarily gonna take
Speaker 1: the extra leap and say the the financial institution that
Speaker 1: is in charge of this transaction fee is the one
Speaker 1: I'm angry at. What they tend to think is darn
Speaker 1: you company, A. I can't believe you're adding this fee
Speaker 1: on top of this this price. I'm met at you now.
Speaker 1: So it wasn't working out for anybody, um and so
Speaker 1: eventually these really smart people who were working on standardizing
Speaker 1: the micro payments kind of let it fall. They you know,
Speaker 1: just couldn't see a way of making it work. And
Speaker 1: plus a lot of a lot of companies at that point,
Speaker 1: we're looking to focus mainly on web advertising. They decided
Speaker 1: between those two pathways, the web advertising method worked better
Speaker 1: for the um than trying to charge people a per
Speaker 1: instance fee on their content. So let's first of all,
Speaker 1: let's let's jump back in the way back machine, get
Speaker 1: back to modern day. Okay, okay, So all right, well, um,
Speaker 1: the people with the big hair staring at us. Yeah, yeah,
Speaker 1: let's uh let's get out of here. And I'm not
Speaker 1: you know, before the grunge music starts to play. Okay,
Speaker 1: back in eleven. That feels better. Um, you know, it's
Speaker 1: bigger on the inside is on the outside the way
Speaker 1: back machine. I think it's the chameleon circuit that's doing that.
Speaker 1: But anyway, uh So, companies started to look at web advertising.
Speaker 1: It was an easier way in the long run then
Speaker 1: creating a micropayment system, because since there wasn't a standardized approach,
Speaker 1: you know, you would have to invent your own, and
Speaker 1: then you'd have to secure it and encrypt it because
Speaker 1: you wouldn't want anyone to be able to sniff out
Speaker 1: transactions and take advantage of uh that and steal from
Speaker 1: either the company or the customers that would be what
Speaker 1: we call a bad thing. So, uh, people and companies
Speaker 1: started looking at at web advertising. And it's not an
Speaker 1: ideal situation either, because web advertising itself is a little hinky, right.
Speaker 1: I mean, you know, your you might be getting a
Speaker 1: fraction of a penny per click on your website depending
Speaker 1: on how popular your website is and the advertiser that
Speaker 1: you're able to partner with. Yeah, but the desperation behind that,
Speaker 1: that the especially to make money on the part of
Speaker 1: the website creator, um led people to put banner advertising
Speaker 1: and you know, every nook and cranny they could find
Speaker 1: and start doing popovers and pop ups and pop unders,
Speaker 1: and uh, of course that creates a backlash too, right.
Speaker 1: You know, you get a point where the user experience
Speaker 1: is affected enough where the users say, hey, I don't
Speaker 1: like going to your site anymore because I feel like
Speaker 1: I'm being bombarded with advertising and I can't actually see
Speaker 1: the content. And so if your content isn't compelling enough,
Speaker 1: then there's no reason to go to that website. So,
Speaker 1: I mean, there's there's this delicate balance you have to
Speaker 1: make and and there's some companies that do this really
Speaker 1: well in the sense that they have a good reputation.
Speaker 1: They consistently put out content that people find valuable. However
Speaker 1: you wanted to find that it doesn't. I might not
Speaker 1: necessarily find it valuable, like I wouldn't necessarily go to
Speaker 1: a celebrity gossip site. But a celebrity gossip site might
Speaker 1: be very, very popular and therefore might be a a
Speaker 1: a desirable site for advertisers to put their ads on,
Speaker 1: and you might be able to get a pretty good
Speaker 1: click rate and a pretty good amount of money per
Speaker 1: click when you negotiate with that advertiser. Yeah. I was
Speaker 1: reading a couple of essays by Clay Shirky, who basically
Speaker 1: in in the early two thousand's was arguing that micropayments
Speaker 1: just don't work. Um. I think it could be argued
Speaker 1: that time has proven him right and wrong because it
Speaker 1: can work in specific instances. Right. Yeah. But that's part
Speaker 1: of it, though, is that, uh, there's an assigned value. Um.
Speaker 1: I think for things like luxury goods, like a high
Speaker 1: end sports car or brand name fashion close, there is
Speaker 1: a perception of value that this pair of genes is
Speaker 1: worth more than that pair of genes because it has
Speaker 1: this label on it. So it means you have money
Speaker 1: to spend. It means you know, it means something to people.
Speaker 1: The brand means something to people, um, and so people
Speaker 1: might be more willing to spend more money for that
Speaker 1: particular thing than the other. The thing is with micropayments,
Speaker 1: finding a way to assign a value to this very
Speaker 1: small thing that costs a very little amount of money.
Speaker 1: It's it's a matter of perception, and you have to
Speaker 1: fig you're out, am I willing to pay a dollar
Speaker 1: fifty for this? Or geez, it's only a dollar fifty,
Speaker 1: It can't be that good. Yeah, it's a it's a
Speaker 1: weird circular, it's strange argument, and it yeah, it is strange.
Speaker 1: It's very psychological and has has almost nothing to do
Speaker 1: with actual economics or technology. It has more to do
Speaker 1: with the way we think and the way we ascribe
Speaker 1: value to something. And another part of the problem is
Speaker 1: that so much of the content on the web is free, right,
Speaker 1: So we've conditioned ourselves to expect when we go to
Speaker 1: the web and we go to a website, we're gonna
Speaker 1: have free access to that information, and we just that's
Speaker 1: kind of how we assume it. And then when we
Speaker 1: encounter something like let's say the Wall Street Journal and
Speaker 1: you hit an article where you only get that first
Speaker 1: paragraph and it says, in order to get the rest,
Speaker 1: you have to subscribe. I'm wondering what the bounce rate
Speaker 1: is on that website. How many people say, you know what,
Speaker 1: I can find content about this story? So where else?
Speaker 1: It's not going to be The Wall Street Journal. So
Speaker 1: it's not going to be that take on the content.
Speaker 1: And if that's the take you want, you may end
Speaker 1: up ultimately disappointed in wherever you go. But I wonder
Speaker 1: how many people are willing to do that as opposed
Speaker 1: to breaking down and paying for that paywall experience. UM.
Speaker 1: I think part of where that comes from it's from
Speaker 1: the early days of the internet, because, as you what
Speaker 1: we're called we were just talking about, the early nineteen
Speaker 1: nineties is when the Internet really started making a transition
Speaker 1: from government and university UM communications to a commercial entity,
Speaker 1: at least here in the United States, and UM, you know,
Speaker 1: at that point, and there were online community splaces like
Speaker 1: the well um and other UH sites that basically sort
Speaker 1: of adhered to UM. Those are things that created the
Speaker 1: concepts like netiket Well, you don't talk to people like
Speaker 1: this on the Internet. If you're using all capitals, that
Speaker 1: essentially means you're shouting um articles. Information on the Internet
Speaker 1: should be free because the Internet is a you know,
Speaker 1: it's not owned by anybody, So anything that is online
Speaker 1: should be free to you. As you know, once you
Speaker 1: pay your subscription fee to your I s P. You know,
Speaker 1: the information is available to anybody. Uh, you know, because
Speaker 1: they were using net groups and you know, gopher sites
Speaker 1: and all sorts of other things where where you could
Speaker 1: find things like that. UM. And I think that started out.
Speaker 1: I mean, I think the early people who were there
Speaker 1: UM really got the sense that this is the way
Speaker 1: it should be. Uh. The Internet is a place where
Speaker 1: anybody can talk about anything and it's available for everyone.
Speaker 1: And companies are saying, well, we have responsibilities to our shareholders.
Speaker 1: We need to make money on this, and we have
Speaker 1: to find a way to recoup the investment that we're
Speaker 1: making in this new medium, and as a result of that,
Speaker 1: we're gonna put advertising on it, or charge a subscription fee,
Speaker 1: or charge you her article. UM. But I think that's
Speaker 1: where the conflict lies is that people who started using
Speaker 1: the Internet in that transitional period got used to the
Speaker 1: idea too and that, and and for a long time
Speaker 1: people on the internet have offered stuff for free to
Speaker 1: get started. Oh yeah, yeah, yeah, no, no no, no, no no,
Speaker 1: for the first two months you don't have to pay anything,
Speaker 1: or the first ten articles or um. And the music
Speaker 1: subscription services that like mog and audio that just started
Speaker 1: making a certain amount of time available, you know, to
Speaker 1: get you hooked on it so you will pay the
Speaker 1: subscription fee or the per song price or whatever. So
Speaker 1: now we get into where micropayments and micro transactions actually
Speaker 1: do work on the web. And well, like we said,
Speaker 1: they don't work in everything. It's not like, um, I
Speaker 1: don't think the average web developer when he or she
Speaker 1: is launching a website is going to necessarily find a
Speaker 1: lot of success through the micro payment method. Even if
Speaker 1: you think, hey, this is a fair price for this content,
Speaker 1: and it's not a lot like it might just be
Speaker 1: a cents again, because of the psychological barriers we've talked about,
Speaker 1: both the idea of oh it's if it's twenty five cents,
Speaker 1: it can't be worth anything. It's it's crazy to think
Speaker 1: that something that's priced at cents is somehow worth less
Speaker 1: than something you would find for free. But there's that perception, Um,
Speaker 1: you know, it's it let's but there are places where
Speaker 1: it does work, like iTunes for example, or Amazon the
Speaker 1: Amazon Music Store, the Digital Music store, where you're buying
Speaker 1: songs on a per song basis, and you're talking about okay,
Speaker 1: well I'm buying a song for you know, anywhere between
Speaker 1: sixty nine cents and a dollar twenty nine. Um, that's
Speaker 1: where it is working. I mean, that's that you would
Speaker 1: consider that a micro payment. Um. Micropayment, by the way,
Speaker 1: is one of those terms that doesn't have a firm definition. Yeah,
Speaker 1: you don't really have a way of saying, well, anything
Speaker 1: under this price is considered a micropayment. Anything over it
Speaker 1: is not a micro payment, although depending on the financial
Speaker 1: institution you're dealing with, that could be defined, you know,
Speaker 1: like PayPal I think says that anything below twelve dollars
Speaker 1: is a micro payment. Um, but that's PayPal, you know,
Speaker 1: It's it's not like that's the the definitive authority on
Speaker 1: what is and what isn't a micropayment. Anyway, the model
Speaker 1: of buying per song at nine cents or somewhere around
Speaker 1: in that area has worked. You know, people have have
Speaker 1: bought into that, and that's one of the cases where
Speaker 1: a micro payment approach has actually paid off. And you know,
Speaker 1: that's kind of interesting to me. It's it makes sense
Speaker 1: in a way because you know, we're used to buying
Speaker 1: music albums or even singles, you know, the back in
Speaker 1: the old days, we used to buy singles all the time,
Speaker 1: and either on cassette or on vinyls. I do too
Speaker 1: up left over from Chris's childhood, but from mine. I
Speaker 1: will make sure to get Hello Mota, Hello Pata back
Speaker 1: to you as soon as possible. Please, I'm you know,
Speaker 1: I'm sorry. I'm sorry. Sometimes I like to you know,
Speaker 1: Spin Records, and that's one of my favorites. Uh. Anyway,
Speaker 1: the um the we're used to buying songs, and we're
Speaker 1: used to buying music, so going to this micropayment model
Speaker 1: where you can buy individual songs, it appealed to a
Speaker 1: lot of people, including myself. You know, I had gotten
Speaker 1: to the point where I was no longer feeling like
Speaker 1: I was getting the album experience, you know, which is
Speaker 1: where I would buy an album from a band or
Speaker 1: artist that I liked and listen all the way through,
Speaker 1: and that was like the experience I wanted. I wanted
Speaker 1: to hear the transition from song to song, and sometimes
Speaker 1: that actually created a more meaning for me, or I
Speaker 1: just wasn't interesting to hear how they crafted the songs
Speaker 1: and how they arranged them on the album like that
Speaker 1: was a big deal. And then eventually it starts sounding
Speaker 1: to me like there were more and more albums that
Speaker 1: didn't really convey that experience to me as much, and
Speaker 1: then it was more like, hey, there are a couple
Speaker 1: of really good songs on this album. Those also happened
Speaker 1: to be the singles, and all the other songs are
Speaker 1: not that good and or at least I don't enjoy
Speaker 1: them as much. So that gave me the the ability
Speaker 1: to buy specific songs from an album without having to
Speaker 1: get everything else that I may or may not actually like.
Speaker 1: So I think a lot of people followed that they
Speaker 1: enjoyed that as well. So we started seeing that actually
Speaker 1: applied in other areas besides just music. In games, it's
Speaker 1: actually fairly it's becoming more and more common yep, and
Speaker 1: uh not just and and that actually is very common
Speaker 1: on the social network games, yes, the freemium games. Yeah,
Speaker 1: like on on Facebook and Google Plus. You see you know, games,
Speaker 1: especially Zinga Zingca is well known for doing this. UM.
Speaker 1: And I've played a couple of those games where I
Speaker 1: still think they're more like software toys than games. But
Speaker 1: you know, I'm not going to argue that in this podcast.
Speaker 1: The thing is, UM, you get to a certain point
Speaker 1: where you it's like, yeah, you can do this and
Speaker 1: it will take all day. Or if you pay us
Speaker 1: a dollar, you can do this now and move ahead
Speaker 1: more quickly, and you can get ahead past your friends.
Speaker 1: Look where they are, you can move ahead of them
Speaker 1: and it gets you this. Um You're like, wow, a dollar?
Speaker 1: Is it worth a dollar to me to move forward?
Speaker 1: Because I'm I'm frustrated now. UM that in and in
Speaker 1: app purchases for uh Android and iOS, which is the
Speaker 1: operating system for the Apple mobile devices. UM, that's become
Speaker 1: a very common thing. Course advertising in app advertising has
Speaker 1: been also, uh but a lot of not just games,
Speaker 1: but other enhancements and things for your inn app. Uh.
Speaker 1: You know where you don't actually go to the the
Speaker 1: app store to purchase and add on for your game. UM,
Speaker 1: you actually say well, okay, this is a dollar and
Speaker 1: you'll get these extra screens, so you'll get this extra benefit.
Speaker 1: If you do this, Um, yeah, they're there. This model
Speaker 1: has the freemium model has received a lot of criticism
Speaker 1: from gamers UM, particularly freemium games that that spawned out
Speaker 1: of South Korea. A lot of those games, UM the
Speaker 1: the the problem is that gamers will say that the
Speaker 1: game is designed so that you pay to win UH.
Speaker 1: In other words, in other words, the the model, the
Speaker 1: financial model the game is based on UH is a
Speaker 1: moral right. It's not. It's not. It's not immoral. It's
Speaker 1: a moral it's not a good or a bad necessarily,
Speaker 1: it's how you apply it. But that in the way
Speaker 1: that it's applied in these games is that it lets
Speaker 1: people who have discretionary income get an advantage over people
Speaker 1: who are, you know, just playing the game to try
Speaker 1: and you know, use the best strategy that doesn't necessarily
Speaker 1: involve pouring money into it. It's it's not too different
Speaker 1: from using a cheat code in a game in order
Speaker 1: to get advantages, right, It's just instead of instead of
Speaker 1: entering in a cheat code on your computer or in
Speaker 1: your console, you're entering in real money to get that advantage.
Speaker 1: And so some people would argue, hey, this game is
Speaker 1: not really about skill, it's about who's gonna pour enough
Speaker 1: money into it to get the advantage of everyone else,
Speaker 1: and really, where is that? How is that really a
Speaker 1: game at that point? Well, just to clear it up too,
Speaker 1: there will be things where you might be battling an
Speaker 1: adversary in the game, and you can do that all
Speaker 1: you want to, and eventually you may win or you
Speaker 1: may not. But uh, if you're willing to cough up
Speaker 1: a dollar fifty, you can have this weapon added to
Speaker 1: your storehouse and that might be the difference between winning
Speaker 1: and losing. Or you might be able to buy certain
Speaker 1: kinds of buildings for your town which will enable you
Speaker 1: to create more uh fighters or you know, better weapons
Speaker 1: or develop faster technologies. Yeah, yeah, that kind of thing.
Speaker 1: It's not like you're saying if I pay five dollars,
Speaker 1: I'm going to win the game. I just wanted to
Speaker 1: clear that up so that people understood understand. Yeah, yeah,
Speaker 1: A lot of these are multiplayer games as well. When
Speaker 1: you're playing, you're both cooperating with and competing against other
Speaker 1: players and uh and so that gives you the incentive
Speaker 1: to try and uh and out out with your opponents, which,
Speaker 1: you know, why outwit them when you can out buy them. Uh.
Speaker 1: You know, like if if it means that if you
Speaker 1: spend you know, ten bucks on this game, Uh, then
Speaker 1: you get a huge advantage over other people. For some people,
Speaker 1: that's going to be Uh, that's gonna be a compelling reason.
Speaker 1: And you know, I can't say whether that's right or wrong.
Speaker 1: I mean, you're playing the game for free, and there
Speaker 1: are plenty of games out there. I've spent lots and
Speaker 1: lots of money by certain games, right, And I I
Speaker 1: don't blink an eye, you know, I'm I think, Hey,
Speaker 1: I want this new Xbox three six game. It's gonna
Speaker 1: be sixty dollars when it comes out. I'm gonna go
Speaker 1: buy it, and I pay sixty bucks and I come
Speaker 1: home and I play. Now, I'm not being given any
Speaker 1: specific advantages, you know, or disadvantages. Uh, it's just playing
Speaker 1: the game as is. I might eventually buy downloadable content.
Speaker 1: We'll get into that too, which is related to micropayments,
Speaker 1: but I don't you know, that's what I purchase, is
Speaker 1: what I get, and that's the game. Um playing the
Speaker 1: freemium games, you know, it may be that I would
Speaker 1: spend a fraction of that sixty dollars, you know, maybe
Speaker 1: I'd only be spending five bucks just to get this
Speaker 1: one thing. But again, it feels it feels cheap to me.
Speaker 1: Not cheap in the sense of, hey, that's a great value,
Speaker 1: but cheap in the sense of I feel like I'm cheating.
Speaker 1: Well here, here's okay. I've seen people complain about the
Speaker 1: freemium type games, you know, because they say, well, they're free.
Speaker 1: And the thing is, though, that the companies behind them
Speaker 1: are in the business to make money. Um, so I
Speaker 1: have a difficult time to begrudging the freemium game creators
Speaker 1: from restricting some content to people who pay for it
Speaker 1: because simply because they're in it for the money. Now,
Speaker 1: if Henry wants to build a game in his spare
Speaker 1: time that he just wants to share with the world
Speaker 1: and wants to make it free, doesn't have any like
Speaker 1: the paid content in there at all. Yeah, I mean
Speaker 1: it's then that's the thing I mean. Or if he
Speaker 1: wants to make a few bucks, But the thing is,
Speaker 1: I mean, you have to. I think it's one of
Speaker 1: those things that's important to look at both sides of. Now,
Speaker 1: on the other hand, um, I feel like I'd rather
Speaker 1: go ahead and I'd like to know what it is
Speaker 1: up front, It's like, well, you know, if you spent
Speaker 1: let's say, thirty dollars, you could have everything that's useful
Speaker 1: in this game. I'd kind of rather pay for it upfront,
Speaker 1: you know, I'd rather, you know, spend the fifty dollars
Speaker 1: on uh say, Age of Empires and get all the
Speaker 1: weapons and all the buildings and all the stuff that
Speaker 1: I'm gonna need to play the game against anybody. I'm
Speaker 1: gonna play it against uh and have it come down
Speaker 1: to my strategy in the end. UH. And the reason
Speaker 1: I'm getting pulverized rather than going, well, if I just
Speaker 1: spent the other three dollars, I could get that thing.
Speaker 1: But I really don't want to spend that three dollars.
Speaker 1: And there are ways of implementing this that feel less
Speaker 1: less like a cheap cheat to me than others. So
Speaker 1: so the games that I'm specifically yeah, the games I'm
Speaker 1: specifically talking about are the games that are kind of
Speaker 1: like real time strategy games. So things that fall into
Speaker 1: that category include, By the way, I'm going to mention
Speaker 1: a few game names here, UH, and all of them
Speaker 1: are essentially identical. The concept behind the game is the
Speaker 1: same concept the graphics are different, some of the gameplay
Speaker 1: elements are a little different, but the basic idea is
Speaker 1: exactly the same. So things like Evany, Dragons of Atlantis,
Speaker 1: Global Warfare, all of these games have the same basic concept.
Speaker 1: You create a city, you create buildings in that city
Speaker 1: that give you certain abilities, and some of the things
Speaker 1: you need to build depend upon you having other buildings
Speaker 1: or our research or whatever in place before you can
Speaker 1: actually start on them, like especially military units, because there's
Speaker 1: a military component to and you have to build mining
Speaker 1: buildings like stuff, stuff that's farming out resources and you
Speaker 1: use those resources when you're building other stuff. There are
Speaker 1: hundreds of these type of games, and their model tends
Speaker 1: to be, Hey, if you want to speed up building
Speaker 1: this building, pay us you know this amount of money
Speaker 1: and then it will instantly be finished. Or if you
Speaker 1: want to speed your troops so that they attack your
Speaker 1: opponent before your opponent can react, spend this much money
Speaker 1: and your troops will instantly get there. You know that
Speaker 1: kind of thing heating exactly. That feels like you're playing
Speaker 1: the god mode in a in a in a video game.
Speaker 1: Now there's another way of doing this, where there's another
Speaker 1: way of doing this where it's like role playing games
Speaker 1: where you know, you can play the role playing game
Speaker 1: for free and there may not even be a cap
Speaker 1: on your character's level, um, so that you can play
Speaker 1: it until you hit whatever the maximum level is for everybody,
Speaker 1: and you can play that game for free, but you're
Speaker 1: not going to get access to certain areas of the
Speaker 1: game unless you pay money. And I don't have as
Speaker 1: big a problem with that because to me, that's saying, hey,
Speaker 1: you know what, if you're willing to go through this
Speaker 1: experience and you know you're not getting everything in the game,
Speaker 1: but you're not also, um, it's not like when you
Speaker 1: pay money you're getting an advantage, you just get access
Speaker 1: to a different area. That seems less of a problem
Speaker 1: to me. And uh, the game that I'm thinking of
Speaker 1: immediately from this was Dungeons and Dragons Online. In d Online,
Speaker 1: it started out as a subscription based game, so sort
Speaker 1: of like you know a lot of other multiplayer games
Speaker 1: that you'll find, um, but then it moved to free
Speaker 1: online play and just areas of the game were restricted
Speaker 1: and if you wanted to be able to play a
Speaker 1: certain quest, you might have to actually purchase that quest,
Speaker 1: and if you couldn't purchase the quest, well, then you
Speaker 1: could play other parts of the game. You just that
Speaker 1: area was off limits to you. And uh, that didn't
Speaker 1: seem as big a deal to me, And it seemed
Speaker 1: like I thought, that's a pretty cool way to try
Speaker 1: and do it, because if you like the game enough,
Speaker 1: you're gonna say, hey, you know what, I really want
Speaker 1: to see what's back there, because this is an entertaining
Speaker 1: game to me, and I'm willing to pay for it.
Speaker 1: And if you're not, then you know, you just you
Speaker 1: move on to do something else. Uh. So that you know,
Speaker 1: that kind of leads us into the downloadable content area.
Speaker 1: It's it's related. It's not necessarily a micropayment, because sometimes
Speaker 1: a downloadable content game can be as much as a regular,
Speaker 1: maybe mid tier game. I've spent probably around I don't know,
Speaker 1: twenty dollars for a piece of downloadable content to in
Speaker 1: a game I already had purchased. But that's also a
Speaker 1: way that that companies are finding, uh works when you're
Speaker 1: trying to sell um sells content on the web. And uh,
Speaker 1: you know, there are a lot of Xbox games that
Speaker 1: do this where you can purchase downloadable content. Actually Xbox
Speaker 1: even adds another layer of complex uh analysis on top
Speaker 1: of this, because in Xbox you purchase games through the
Speaker 1: Xbox Point system, which means first you transfer your money,
Speaker 1: your dollars into Xbox points, and then you use the
Speaker 1: Xbox points to buy stuff, so that that actually, you know,
Speaker 1: if you're buying something for eight hundred points, let's say
Speaker 1: your mind doesn't necessarily automatically make the transaction of oh,
Speaker 1: that means a hundred points, that equals this many dollars.
Speaker 1: So it's a little different, right that that might be
Speaker 1: a way of trying to get away from that psychological barrier.
Speaker 1: It is, yeah, because it's not easy to make that
Speaker 1: translation in your head. Right. So you're so you're ending up,
Speaker 1: you're ending up purchasing stuff, but you're not having you're
Speaker 1: not hitting that wall where you're thinking, hey, wait a minute,
Speaker 1: this is ten dollars. I'm not going to spend ten
Speaker 1: dollars on this. No, it's not ten dollars, it's a
Speaker 1: hundred points oh andhred points. Yeah, I'll spend inhred points
Speaker 1: on that. Um. Yeah, So there's that level of complexity. Two. Uh.
Speaker 1: Downloadable content I think has been a pretty successful method
Speaker 1: of of doing the micropayment model. UH. And you see
Speaker 1: that also in games like the multi massive multiplayer games
Speaker 1: where you can pay to get specific items that don't
Speaker 1: necessarily give you an advantage, but they give you your
Speaker 1: character a certain look. Like. I've seen a lot of
Speaker 1: that on both on computer games and console games, and
Speaker 1: that seems to be working pretty well too. So micropayments
Speaker 1: can work. It's just that it's interesting that if you
Speaker 1: look all the way back to the beginning of the web,
Speaker 1: there are thoughts about micro payments from the star. It
Speaker 1: just didn't you know, it didn't work on a broad
Speaker 1: spectrum approach. Yeah, well there were there were. There were
Speaker 1: the two pieces which we which we really covered but
Speaker 1: in in a nutshell, the two pieces being the UH
Speaker 1: infrastructure needed to make it work, UH, to make a
Speaker 1: secure transaction. And in the beginning, there were a lot
Speaker 1: of different models for that and they didn't all work
Speaker 1: the same. UH. And you have to make sure things
Speaker 1: are are UM are squared away. UM. I was actually
Speaker 1: reading an article went doing my research for the for
Speaker 1: the podcast UM by Max zeladon Itt UH Bloomberg Business Week,
Speaker 1: who was saying that you have to watch out for
Speaker 1: things like UM security risks, you know, stolen passwords, break
Speaker 1: ins like we've seen in the last year, um you know,
Speaker 1: for other types of sites UM and once. And that
Speaker 1: leads to the other part, which is the the mental
Speaker 1: acceptance of micropayments. Once established a value, a relative value
Speaker 1: for these these very small transactions, and you've established that
Speaker 1: it's my money is going to be safe, it's gonna
Speaker 1: get where it's supposed to go, and nobody else is
Speaker 1: gonna hit my credit card for something else, then you know,
Speaker 1: it's just taken a while for the models, uh to
Speaker 1: catch on. I mean, I remember when iTunes the idea
Speaker 1: of paying a dollar for a song per song UM
Speaker 1: bothered a lot of people, primarily the recording industry. UM,
Speaker 1: you know, because suddenly it was it was broken down
Speaker 1: from the album you could just buy individual songs. Uh.
Speaker 1: Now it's pretty straightforward. People don't really question a dollar
Speaker 1: twenty nine. Of course, the price is going up um
Speaker 1: or or whatever. You know, an older album, Hey, you
Speaker 1: know it's it's fifty years old. Let's say it's you know,
Speaker 1: five dollars. Um. You know, those kinds of things are
Speaker 1: not uncommon anymore. It's interesting, though, we do still find
Speaker 1: bands that resist their problems, broke it up into individual
Speaker 1: songs A C, D, C UM and uh, you know,
Speaker 1: and then it's it's you could see this, I think
Speaker 1: in uh publishing for e books, because people are still resisting, Well,
Speaker 1: if I have to pay the hard back, why do
Speaker 1: I have to pay uh, you know the book or
Speaker 1: sevent it's not a book. You didn't print it, you
Speaker 1: didn't find it, you didn't ship it to me money,
Speaker 1: you didn't incur those costs. Why should I incur them? Yeah?
Speaker 1: And that's and that again we well we've touched on
Speaker 1: that before, but but that's I think you could see that.
Speaker 1: Though for music it's established if you know, you've got
Speaker 1: a price point, you have an idea of what's going on,
Speaker 1: and you're comfortable with it. This is newer and they're
Speaker 1: still fiddling with the prices on the exactly. And because
Speaker 1: they're fiddling with prices, and because you could have a
Speaker 1: company come in and undercut everyone else, it's still very
Speaker 1: much the wild West in that in that realm. Yeah,
Speaker 1: but I think that's an example of uh, sort of
Speaker 1: how online transactions and the idea of micropayments, like, yes,
Speaker 1: you have to an establish and a value. You have
Speaker 1: to establish a value for these things, and people have
Speaker 1: to become accustomed to, you know, the prices and the
Speaker 1: payment system. Yeah, and there's a lot more to this
Speaker 1: topic that we could cover. We didn't even talk about
Speaker 1: micro lending, which is related to this UM And actually
Speaker 1: micro lending is another example of sort of a micropayments
Speaker 1: like system that has been fairly successful. And Uh, Stuff
Speaker 1: you should Know did a great episode about micro lending.
Speaker 1: It's an older episode if you guys have not heard that.
Speaker 1: First of all, you should be listening to Stuff you
Speaker 1: Should Know anyway, because it's a great show. But that
Speaker 1: particular episode is is very UM particular episode in particular
Speaker 1: that it's both repetitive and redundant um that. Let me reiterate,
Speaker 1: the episode is very very good. And and Stuff you
Speaker 1: should Know even has their own Kiva project charity that
Speaker 1: or micro lendings uh project that that was incredibly successful
Speaker 1: and continues to be very successful. So I suggest you
Speaker 1: listen to that episode and we'll probably do an episode
Speaker 1: of micro lending ourselves at some point talk about kind
Speaker 1: of the technological aspect of it and how that whole
Speaker 1: model developed and how technology has really enabled that model
Speaker 1: to to flourish, because it's one of those things that's
Speaker 1: much more difficult to do without the aid of the Internet. Yeah. Well,
Speaker 1: I mean even in the political campaign for the two
Speaker 1: thousand and eight elections and and forward and more recent
Speaker 1: in the United States, a lot of the candidates were
Speaker 1: raising dollars and twenty dollars at a time, which wouldn't
Speaker 1: make a big deal to a candidate who needs millions
Speaker 1: of dollars to in in their his or her war
Speaker 1: chest to attract voters. But when you have millions of
Speaker 1: people donating ten or twenty dollars, that makes a huge difference.
Speaker 1: That's going to be the norm now. But you know,
Speaker 1: that's really when it kicked in, and that's kind of
Speaker 1: a micropayment. It's not you know, in the cents to
Speaker 1: two dollars to three dollars realm. Right. Still, in terms
Speaker 1: of the big picture, it is, yeah, considering that you're
Speaker 1: talking about you know, and when you think about political
Speaker 1: donations or or contributions to a campaign, you're usually talking
Speaker 1: about thousands of dollars. So yeah, it's it's and you know,
Speaker 1: it's it's difficult to implement that on a non technological basis.
Speaker 1: I mean, you have to have an army of volunteers
Speaker 1: marching door to door and uh and you know risk
Speaker 1: being yelled at, but you never know who are who
Speaker 1: are who are supporting the other party. Well, we're gonna
Speaker 1: wrap this up, but if you guys have any suggestions
Speaker 1: for topics we should tackle, or if you have your
Speaker 1: own thoughts about micropayments, micro transactions, micro lending, that kind
Speaker 1: of thing. Um, you know how it works or maybe
Speaker 1: how it doesn't work, let us know. You can drop
Speaker 1: us an email that addresses tech stuff at how stuff
Speaker 1: Works dot com, or let us know on Facebook and
Speaker 1: Twitter are handled. There is tech stuff each sw and
Speaker 1: Chris and I will talk to you again really soon.
Speaker 1: Be sure to check out our new video podcast, Stuff
Speaker 1: from the Future Joint House Stuffork Staff, as we explore
Speaker 1: the most promising and perplexing possibilities of tomorrow. The House
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