Musk, Media And The Rejuvenation Of Micropayments

Despite all the evidence to the contrary, I remain convinced that there is a macro opportunity in micropayments. Now, it seems, the noted entrepreneur Elon Musk agrees. He is planning a new Twitter service that will give publishers a “one click” solution to charge consumers on a per-article basis. He says it will be a “win for both the public and media organisations“.

Latent Market

The idea that there is a latent media market that is waiting to be energised by a viable micropayments solution is hardly new. Many years ago, another noted entrepreneur Marc Andreessen said that a “fascinating use case for Bitcoin is micropayments”. Observing that it was not cost-effective to run small payments through the existing payments infrastructure, he thought that Bitcoin’s
BTC
divisibility would make it easy to send a thousandth of penny to anyone in the world for near-free. So far, this hasn’t happened. Rather than cryptocurrency, I have often thought that micropayments might be an opportunity for digital currencies in general and central bank digital currency (CBDC) particular, but at the time of writing, those are some way off.

While Mr. Musk and I seem to agree that there is merit in micropayments, many others are sceptical. I completely understand the arguments about mental computation costs and administrative overheads. But we are well past peak subscription. The publisher’s view has been that if a subscription is worth a hundred dollars a year, then even one person clicking on the “pay a quarter” button instead means the they will need four hundred people to buy articles to make up for the lost revenue. But perhaps a more accurate calculation going forward is that the alternative to a hundred people paying a quarter is… nothing.

In my recent subscription audit—as I call it each time a credit card expires—I got rid of one newspaper and three magazines subscriptions. Right now, their publishers might earn a fraction of a cent from me via advertising if I visit one of their sites but to a first approximation they now earn nothing from me. Micropayments are an opportunity for them to earn something from me.

with kind permission of Helen Holmes (CC-BY-ND 4.0)

We are remain overdue a working micropayments infrastructure. As of now, we have Twitter’s “Tip Jar”, which does not use Bitcoin or digital currency some other innovative DeFi application, but adds another layer on to the payment sediments to create a means to send someone a buck (while simultaneously giving away your Paypal address and paying a transaction fee of one-third). Clearly Mr. Musk has taken a look at this and concluded that is not really good enough to support the kind of creator economy that envisages and rather than look at the micropayment solutions that a variety of fintechs have developed, he has decided that Twitter should have its own service (undoubtedly because he sees micropayments as an opportunity to take Twitter into the payment space.

Twitter Is Not Alone

Even if Twitter launches a safe, simple, cost-effective and inclusive micropayment system, though, will it really matter? There are other smart people working on Twitter alternatives. One of them is Bluesky, backed by Jack Dorsey, and it appears to be gaining some momentum, so perhaps Twitter’s position is indeed under threat. It is entirely possible that one of these might integrate digital identity and digital money services to make micropayments part of an infrastructure that is attractive to creators who will then drift away from Twitter even faster than they appear to be going at the moment.

I still think that there is a chance that it will be central bank digital currency of one form or another that delivers a practical solution. Not Bitcoin, not a tip system built on top of Paypal built on top of credit cards built on top of accounts built on top of banking networks. If Twitter, for example, had access to my CBDC wallet, then it could simply transfer a buck from my wallet to a creator’s wallet (never mind the publisher’s wallet) with the pseudonymity integral to a well-designed CBDC. I never get to see any of the creator’s personal information (unless they want me to) and the creator never gets to see any of my personal information (unless I want them to).

Is Musk An Endorsement?

I am hardly the only person who thinks that we need a solid micropayments infrastructure to deliver a better internet, based on content not advertising, and many fintechs have targeted the space. As I write, however, none of them have reached scale. Just as Apple endorses a new market segment as it enters it, so perhaps with Mr. Musk involved, the micropayment market might be at an inflexion point.