by Amish Shah on November 21, 2009

Micropayments are popping up in every business model online lately.

From iTunes to the AmazonKindle and now Google – all getting involved in micropayments.

Micropayments are what Wikipedia defines as “financial transactions involving very small sums of money. PayPal defines a micropayment as a transaction of less than 12 USD, and offers less expensive fees for micropayment transactions.”

iTunes charges 99 cents a track, the kindle charges $1.29 per month subscriptions to magazines and now Google says they want to save the “newspapers” by allowing people to purchase subscriptions to newspapers for pennies on the dollar. The first time I saw this was with Yahoo Music about 5 years ago charging only $3 a month to listen to unlimited music. Obviously this model has been around forever, but it’s just starting to get bigger and bigger.

With content and syndication and information being blasted from every corner of the internet, it’s becoming more social. People only want to see and read the information they are interested in. Hint: this is a PERFECT example of why people are going into their “communities” and seeking information from within their “social network”.

Think about it – it’s all digital delivery so the costs of shipping, fulfillment and all that are minimal. Making the cost to deliver any product way lower.

So what does this mean? If you own a product or plan on making a product, you should look into the micropayments model. Consumers will buy or join a site for $3 bucks a month and get what they want and be happy.

Which is why a lot of people shoot themselves in the foot when they measure their “ROI”. Would you rather have 1K customers and only make $10 per customer? Or would you rather have 300 customers and make $20 per customer?

It’s not about the margins, it’s about the volume.

http://www.amish-shah.com/

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