Paying for Stuff on the Web

13 min readFeb 26, 2020

This article reviews payment options on the web and then looks at Libra and other options.

Introduction

Last week Facebook kicked off a plan to introduce a new cryptocurrency named ‘Libra’. This revitalizes an exciting question about the future of the web which is: “How can the future Internet move towards a direct compensation model for creatives?”. It’s widely believed that if it is possible for people to more easily be paid for creating content that we may see a flourishing of the web. We do see that closed ecosystems such as Apple’s mobile store do well when they both make it easy to make purchases, and perform some curation and discovery services on content.

A direct payments system could create a flowering in the desert as millions of creative minds around the world suddenly were able to get direct compensation for their creativity and inventiveness.

As a contrast today the way people are paid on the web is often indirectly, through the advertising based revenue model. I don’t want to spend a lot of time examining this traditional advertising based revenue model but this quote underscores a few of the issues at hand:

The marketplace for online advertising, once dominated by advertisers, publishers and users, has become overrun by middleman ad exchanges, audience segmentation, complicated behavioral and cross-device user tracking, and opaque cross-party sharing through data management platforms. Users face unprecedented levels of malvertisements and privacy violations. Mobile advertising results in as much as $23 per month in data charges on the average user’s data plan, slow page loads, and as much as 21% less battery life. In response,over 600 million mobile devices and desktops (globally) employ ad blocking software and this number is growing. Traditional publishers have lost approximately 66% of their revenue over the past decade, adjusted for inflation. Publishers face falling revenue, users feel increasingly violated, and advertisers’ ability to assess effectiveness is diminished. [ https://steemit.com/cryptocurrency/@crypto.advocate/a-new-digital-advertising-model-a-review-of-bat-behavioral-attention-token ]

Right now, of all the ways that we consume content, the web has the least mature revenue model. It’s very difficult for creatives to get paid directly, often they resort to advertising which creates a disingenuous relationship between consumer and creator; and in fact forces a stronger distinction between those parties since creative work is seen as a defensible asset and theft a problem rather than an opportunity.

10000 Foot View

If we step back to a 10000 foot view we see a few traits in how people consume digital media today:

1) Time/Attention-Economy. We live in an information economy filled with a cornucopia of media, information, entertainment, tools. Some of this is invaluable to us and much of it is noise. In our economy time itself is the most scarce resource. We take our most precious resource, our remaining time, and direct it towards consuming experiences created by content creators. Because time is so precious we are more than willing to pay for experiences that are worth our time.

2) Money/Payments. It can be difficult to know a-priori if an experience is worth consuming. Even if we decide a piece of content is worth consuming, we still have a problem compensating the creators and fostering any kind of sustainable pattern. The Internet is a hodge-podge of protocols and standards, with a variety of payment mechanisms. The payment pathways also play a critical role in signaling that a given piece of content is worthwhile; total sales or attention is an indicator of quality.

3) Brokerages/Discovery. Almost universally the Internet has shifted from a collection of random sites that you visit directly, to sites that curate or broker a relationship between you the consumer and a number of content creators. It’s more than just the discovery problem for finding new content but that extremely difficult for people to surf the web at random, we at the very least have to ‘google’ for the best site (and in that moment is an opportunity for the broker to manage the relationship). Brokerages have complex roles, they enforce policies, guarantee quality, offer compensation when promises are broken (remove bad actors, act like stern parents when need be, compensate people who have been injured). We put ‘trust’ in brokers. Brokerages have emerged in many other places as well such as AirBNB, Uber to occupy traditional roles held by civic institutions and culture.

Brokerages in more detail

Brokerages are under-appreciated and yet today brokerages dominate. Brokerages connect consumers and creators and bill us in various ways:

1) Personal data and attention/time. Brokerages such as Google, Facebook, Youtube and Twitter make dollar profits by accumulating and selling our personal information to advertisers. We don’t expect to pay actual dollars for ephemeral social media or other lightweight content, instead we watch an advertisement or provide our email address or our biometrics — often unwittingly. We don’t pay dollars to listen to our friends grouse about their vacation, and we don’t pay dollars for the random memes that fly past on social media. Fluffy news articles are often free. Shorts on youtube, some music and books are free as well. We trade our data or time for access. The pernicious aspect of this form of billing is that it creates perverse incentives to optimize customer behavior to increase revenue streams.

2) Outright purchase using dollars. Brokerages such as Apple, Amazon, Kickstarter sell us products or experiences in exchange for dollars. We buy applets, movies, books, a promise of an amazing product and so on. They skim off a larger or smaller portion of the transaction for their work, and they make some efforts to guarantee that the quality of what we’re consuming is accurately described. Extremely rarely today we can make a direct purchase from a creator as well. One of the issues that brokerages are solving here is that they make it “one click” to make a purchase. Each road-bump can cause a creator to lose half of their customers, and large brokerages work hard to reduce the friction of purchases.

3) Subscriptions using dollars. Brokerages such as Netflix, Apple Music, The New York Times, aggregate and produce content streams that are “all you can eat buffets” with a flat payment fee on an ongoing basis. To a very small degree we see new ideas here like Coil / Imgur which is attempting to create a subscription model for meme content creators.

4) Donations. Services such as Patreon, Gofundme sell a subscription to ongoing content, or a promise. Effectively we purchase theater. These appear to be less transactional, and arguably Kickstarter also overlaps this grouping. There’s an excess of personal energy and time that we’re willing to devote to causes we believe in and that align with our values — and that help us see ourselves as a certain kind of person having certain values.

A future Internet — Requirements

A future Internet that offers a direct relationship between buyers and sellers will need to:

1) Educate. Consumers need to become used to ‘filling up their gas tank’ when they are surfing the net.

2) Money. It needs to be very easy to fill up the online gas tank. Friction must be low — basically money must work well and do it’s job.

3) Broker. This is an extremely challenging relationship that at the heart is about ’trust’. Do you trust the system? Is it the best solution? How does the system protect you or offer renumeration when things don’t work out? The broker guarantees trust and curates options; match-making participants to options that suit them.

A few Stories

Web industries know that they want to do better for content creators, that they want to offer some kind of consistent, easy to use, safe, secure web payment system. They want to offer content creators more money, more incentives, they want to foster more creativity, and give creators a foundation to strive for a higher bar. There are conversations around content creator monetization, cryptocurrency integration into the browser and so on.

Beyond this there’s awareness that any new payment system may itself become a way to discover good content. But it’s difficult to reach consensus, and it’s difficult to tackle problems at scale. It will take a gargantuan effort to make a dent in the current system.

Let’s try imagine a number of stories about the near future:

1) No payment solution. In this future the web proceeds along the same path as usual. Apple continues to grow market share, and it becomes a normal experience to download a dedicated app to have an experience. Since Apple has integrated payments so effectively, those who have credit cards are able to enjoy a fairly high standard of app quality of life. The world continues to be divided into the haves and have-nots. But, content itself doesn’t fully express the diversity of human concerns and values, and to some degree content consumers lead increasingly blinkered lives; increasingly out of touch with the real world. Web content continues to be primarily text (which travels well on the web) and there’s less incentive to create or push rich interactive or immersive storytelling experiences in a medium where there’s no compensation model.

2) Crypto Lite. In this model the web magically somehow embraces one light micropayments system that somehow actually works. This currency avoids taking on some of the obligations and duties traditionally held by banks. People occasionally get ripped off by bad actors and there’s no compensation. This is somewhere to the right of EBay, Paypal or Apple Pay, but still, it successfully creates a flat world wide platform where anybody can get some compensation for any web page they put up. People can put up tip-jars (which are socially seen as something of a faux-pas) or, they can also markup their site with tags that allow them to receive compensation directly on a subscription basis, or finally it’s possible to also just have a pay-to-read button where you pay a fixed small amount to consume a specific piece of media. The subscription model turns out to be the most successful. A significant educational process takes place on the web to educate consumers that they should fill up their gas before going surfing on the web, and that this is a critical part of how web content creators are compensated. Content creators can create trickle down streams, so that they can repurpose and remix other content creators work — although enforcement continues to be a challenge because these services are not extremely robust and consumer protections are low. Governments and the like are not entirely supportive — issues such as liens or judgements are not entirely addressed.

3) Multiple Wallets. In this model no single currency emerges so to foster the process major browser vendors offer multi-wallet support. Here the web user can top up their gas with a variety of currencies, and an exchange behind the scene converts to the creators desired revenue stream. Again there are three primary payment models, tip-jars, micro-payments for visiting or subscriptions, and one time purchases. However there are scaling issues with various crypto-currencies, and currency fluctuations make it difficult for people to know if they’re spending all their money or not. Also the regulatory and security systems are messy; if a consumer bought an article in ethereum but the article turned out to be a blank page, but then the price of ethereum dropped, now they cannot be compensated, and the cost of inspecting the transaction itself is too expensive to perform.

4) Libra. In this model Facebook somehow gets wide industry adoption of their low-compute-energy currency. They effectively become like Google, receding into the background and becoming a utility. Consumers have strong guarantees, regulatory agencies can do KYC/AML, governments and so on can issue liens against assets (although it’s not clear if these assets are recoverable). There is a stronger conversation engaged between people of radically different backgrounds and geographies. Likely as not the entire thing gets blocked in several countries by several hostile governments. This is the most interesting possibility right now and the rest of this text will look at it more closely.

Censorship

Many brokerages are seen as a publisher rather than a common carrier and need to regulate their traffic from the top down — they have to be the bad people and censor traffic and get critiqued for their censorship or failure to censor. Services like Wikipedia instead delegated policing to the participants themselves, building a hierarchical vetting process that feels more inclusive.

Libra

Libra is a centralized currency that phrases itself almost like a cryptocurrency but the validation nodes are simply trusted. Since it is backed by a basket of currencies it should be more stable than bitcoin. It has a fairly elegant internal architecture similar to Ethereum, but much cleaner.

Libra ostensibly allows for a low cost exchange between arbitrary people; initially those people on the Facebook graph it seems like. And services like coinbase allow for exiting with $$$, otherwise purchases can be ostensibly made with Libra of Libra participants (in some hypothetical future date). Entities not participating today however include potential future competitors such as Amazon, Google, Apple, Microsoft, Bank Of America — although Libra does try to present itself as a broad based industry coalition.

Libra is a response to several observations about the state of the web today. The web needs some kind of improved payment system because advertising creates perverse incentives such as to create fake news to get more visibility. As well it’s been widely recognized that we’re fighting an uphill battle to protect user privacy from advertising based models, and by fixing the core physics of the web we may achieve our goals better.

At the same time, individual parties, Facebook included, cannot be responsible for a payment system entirely. Money in the real world is surrounded by the paraphernalia of enforcement. There are laws and enforcement. Liens can be made, judgements taken. When consumers are ripped off there are compensatory mechanisms to make it better and to retain consumer trust in the system. Libra attempts to work within existing institutions although it’s not entirely clear how this will play out.

Risks of Libra

At worst Libra will fizzle but if it does succeed are there more serious risks?

1) Will users be protected from rampant exploitation if this succeeds? It’s not clear what kind of recourse users have if they get ripped off by a Libra purchase. Apple avoids some of this by making applets very low cost, so that users throw away the lost dollar or two. But one can imagine class action suits where an organization has ripped off many people for a small amount.

2) Many of the parties who have apparently already agreed to be part of Libra have not actually paid up — they’ve only signed letters of intent. This comes across as less of a broad based industry coalition and more of a facade therefore.

3) Many of the Libra participants have user policies that are anti-ethical to the highest bar of user protection around anonymity and privacy. They routinely sell user information and are incentivized to do so. This may change if Libra succeeds since motives may change.

4) Power corrupts. It’s probably reasonable to trust Facebook initially, but if the system succeeds it may generate fabulous wealth and centralization of power. It’s best to build systems like this in a truly group governed manner and it is not clear that Colibra is truly group governance. On a similar note, any solution that doesn’t dominate will invite competition from other similar solutions which will fracture the user base and undermine the whole point of the system.

5) Ease of use. This is more of a design issue, but people lose their private keys all the time. Are there going to be intermediary Libra key hosting services (like Coinbase?). What will those look like from a user perspective?

Conclusions

The challenge the web industry has is reaching a consensus on how to broker b2c and c2c relationships. How do the many companies and organizations with a vested interest in the future of the web find a way to distill their opinions and achieve a fundable goal? Challenges like this are too broad for any individual company.

Many industries have effectively built b2b services for brokering relationships between themselves, NASDAQ being one example, or just in time warehouse allocation. But b2c and c2c brokerages are a thicket of many more needs, at low dollar values and are exceedingly complex and much harder to solve.

We know that a web payments system would be a good thing (generally speaking it is hard to imagine something worse than what we have now). But we don’t know how to score, or evaluate, or try the options in such a way as to materially move forward as an industry.

Libra may not be the right answer but it is the least wrong answer so far because no other solution have the impetus and alignment of values to possibly succeed yet.

My criticisms are not so much of Libra per se, but rather of crypto as a whole. Much as I think cryptocurrencies solve several issues with money, I’m concerned when I think of my grandfather or uncle using these things and getting ripped off. I want to see more emphasis on user recourse from theft in a world of pseudonymous payments. At the same time, I see the pernicious effects of fake news and advertising driven revenue models on the civic discourse and I do believe we urgently need to fix money on the web.