Flattr Me, If You Have The Cash

Flattr, which bills itself as “social micropayments”, is starting to gain press coverage due to some recent “wins” by bloggers in the system. For those of you who haven’t heard about the service, readers pay $2 or more a month into the service, and when they see and click on a flattr button on a blog, the system remembers to allocate some love, or in this case cash, to the publisher.

According to the article and follow up at other sites such as hacker news,  the offering addresses some problems of past micropayment systems and could have some legs.  Before I throw my opinion into the fire, I’m glad to see that others have not forgotten the sentiments and thought provocation from Clay Shirky and his anti-micropayments stance due to the “mental transaction costs” discussed in his article here.

Unlike the professional naysayers and negative types, I applaud this attempt at micropayment innovation. This implementation uses the same prepayment and balance draw down that we used at BitPass, but by not showing the “price” at the time of clicking the Flattr button, it removes the potential of mental dissonance around the decision if the content is worth paying for at that moment. This benefit is not without its problems, as you’ve probably figured out by now. If you click the Flattr button and aren’t asked how much to pay, how much are you really paying and how much are the publishers actually receiving?

Moving on, another innovation is the subscription cap. The amount of money you spend does not increase with each click, so you limit your exposure to the self-selected subscription amount.

Benefits and drawbacks

So from an ease of transaction standpoint, I would say that Flattr is a step in the right direction. However, I see a number of challenges remaining in its potential for success.

  1. Subscription fees
  2. Lack of compelling content
  3. Transaction fees

Subscription fees, while starting at $2 per month is $2 more than what people are spending now. While I might spend the $2 a month, at BitPass, we saw people complaining about $3 accounts. Things may have changed since the BitPass days, however, in one of the worst recessions the US has seen, spending an extra $2 is not likely, making the timing of this evaluation unfortunate.

Lack of compelling content is also tied to that subscription fee. I pay for Netflix, and I get convenience and as much streaming as I have time for each month. I can’t really get that content anywhere else. On the bright side, I see investigative reporting as the only example I can think of where I might pay for content at news sites.

Transaction fees can be a killer.  Flattr’s 10 percent cut is admirable, given that Facebook wants to take 30 percent off the top for their social network game partners, but what’s in that 10 percent? At $2, a 10 percent cut is 20 cents. The typical credit card fee at that level is in the 30 cents plus 2.9 percent ballpark. On a good day, other services might go as low as 5.5 percent + 9 cents, or nearly 15 cents. At a $2 subscription, that’s 5 cents a month or 60 cents a year per subscriber. If they get 10 million subscribers at 60 cents/year, they’ll net $6 million before expenses of operations, salary, charge-backs, regulatory fee, etc.  Not impossible, but a very difficult business.

No one said it would be easy, but Flattr has made some innovations and has its work cut out for it. It seems like an idea worth a try, and I wish them luck.

Now if only the comments are flattering.

About Duane Kuroda

Business ninja, deal hunter, Internet marketer, and technology fiddler obsessed about growing companies and launching products. Currently at Peerspin, Duane’s past lives include Vice President of Marketing roles at companies leading micropayments, Internet video, and online communities as well as research and consulting for mobile advertising. Duane has spoken at conferences including Digital Hollywood and Digital Video Expo on topics covering monetizing online content and online video, has appeared on TechNowTV and KNTV, and has been quoted in various magazines. Follow Duane on Twitter: @dkuroda.

4 Responses to Flattr Me, If You Have The Cash

  1. andrew wee says:

    @Duane, sorry to be one of the naysayers here, but the system seems to encompass the worst of both worlds when it comes to microtransactions:

    1) A lack of transparency, especially since there's no control over how much "love" or in this case, dough is being allocated to a content or service provider.

    2) A new age-y/touchy-feely vibe that seems to want to capture a "pay it forward" mentality, but the implementation leaves me feeling confused because I don't have control over how much I want to reward each site.

    I might be shooting in the dark here, but maybe this might be oriented towards p2p or filesharing sites and maybe some niche bloggers. Maybe I'm one of those who wants to measure out how much I want to reward a site, but a Paypal "Donate" button seems like it'd fit my needs better.

    I wonder what happens in cases where sites aren't "flattr-ed"? Does Flattr consumer the 2 euros worth?

  2. Duane Kuroda says:

    @Andrew, if you're saying that you need the transparency and dislike the pay-it-forward implementation, then I applaud you, as you sound like one of the few who have paid either via a paywall or used other services like payattention or a donations button. If you haven't but still complain about transparency, then why not.

    Payattention went out of business because there weren't enough people willing to wanting that transparency who would pay publishers. Likewise, the successes around donations have been few and far between.

    The good news is that a publisher doesn't need to choose only Flattr or a donation button, you can choose to have both. Those who prefer donations can donate, while those who prefer systems like Flattr can use that system.

    So with both options, why don't people pay? I'd say we're still left with my points above.

  3. Nick J. West says:

    Micro-payments is a topic and business model that is continuing to evolve. Whether or not it will be profitable for the payment system, or the blogger has yet to be proven but I for one am excited at the opportunities that exist. Thank you for the informative article.

  4. Where can I flattr this very detailed description of flattr? …