Why micropayments can't save news

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In an interview with Nicholas Thompson last month, OpenAI CEO Sam Altman backed a micropayments strategy for news:<br>“What really makes sense in a world of agents is we try a sort of micropayment-based approach. […] My agent can read it, pay $0.17, and give me a summary of that. If I want to go read the whole article, pay $1, or however that works. If my agent wants to calculate something for me that’s really difficult to do, it can go rent some cloud compute somewhere and pay for that, but I think there will be need to be a new economic model for these agents doing lots of small transactions and exchanges of value with each other on behalf of their human controllers or whatever, all of the time.”<br>What he describes is a combination of pay-per-view and a utility model. In pay-per-view, you’re paying a custom price set by the publisher in order to access a resource; you as the user might get a prompt asking whether you approve the transaction, or you might just give it an approved budget. When he talks about an agent renting cloud compute, it would likely be paying based on usage like a utility, with financial transactions similarly carried out behind the scenes. It’s not really different from the Spotify model in the sense that artists are paid per stream; there it’s a percentage of your total listens, whereas here it’s probably a total budget that you preload into a wallet.<br>This keeps coming up in software circles: I’ve heard, again and again, that an approach like Altman describes would help provide revenue for publishers in an AI-intermediated information ecosystem. I disagree; while I think there’s certainly value for utility-style pricing on the web, proposals to use it for news are based on a misunderstanding of how journalism is valued and paid for today, set up the wrong incentives for publishers, and conflate every kind of publisher into one very flat model.<br>So, let’s talk about it.<br>First, it’s important to understand what a micropayment actually is. Then I’ll discuss the incentives micropayments create, how they might apply to different kinds of publishers, where micropayments might be useful, and how platform owners might embrace the needs of publishers more directly in an agentic ecosystem.<br>What is a micropayment?<br>Micropayments are small payments — sometimes a fraction of a cent — that are charged to access digital goods or services. Usually, this happens more or less automatically: you load a wallet connected to your web browser or AI agent, and then when you or your agent visit a resource, a small payment is made. This could be a flat fee or it could be charged as a percentage of your total browsing for the month.<br>There have been a number of attempts to make micropayments work on the web. Flattr was an early example: a browser extension that paid for content on your behalf. It struggled with getting enough people to fund their wallets and was faced with the high underlying transaction fees associated with credit card payments. It ultimately shut down in 2023. The Brave browser attempts something similar through cryptocurrency.<br>Today, the Interledger Foundation is working on creating an open protocol that can be used for micropayments, among other kinds of compensation. The protocol is intended to overcome the kinds of financial friction that Flattr experienced. The Foundation is working hard on the problems I’ll raise here in the rest of the piece.<br>We’ll make it up in volume<br>Clickbait is enabled at scale on the web by display advertising. Because the revenue received by a publisher is directly connected to the number of pageviews they receive, publishers that are entirely tethered to this model have two incentives:<br>To drive as much traffic as possible to their articles<br>To lower the cost of each individual article as much as possible<br>That’s led to an information ecosystem where many publishers produce low-quality content with misleading headlines in an effort to get as many people as possible to look at them. For many, it doesn’t even matter if the article is true; the reader doesn’t build a long-term trust relationship with the publisher and likely won’t come back unless they’ve been hoodwinked into looking at another one. These publishers are the tourist traps of the internet. There’s no ongoing relationship, so there’s no duty of care.<br>Micropayments are effectively this model, with the difference that nobody has to look at an ad. Revenue is directly tethered to traffic, like a display ad model; the difference is that the money for a publisher comes from the reader’s pocket instead of the advertiser’s.<br>Not only does this continue to incentivize clickbait, but these publishers are now competing for the checkbooks of millions of people rather than a few well-funded advertisers. In an advertising-based world, every visitor is highly likely (ad blockers excepted) to produce a small amount of revenue; in a distributed wallet world, we’re relying...