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Matt Mankins
Matt Mankins

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Monetization for Digital Economies

Part I in an overview of a study in alternative business models for the web. Part 2: A Journey of Subscriptions, Ads and Web Monetization. [Part 3: What if the Web had Rewards?]


What does a purely digital economy look like? If you started with a clean sheet of paper–or rather an empty document–and built a set of rules that would support digital life, would you end up with the same economic primitives that define our current digital transactions? Or would a bits-first approach build an economy with slightly different rules than the one created in the age of atoms? It's easy to imagine that things would be different if we started with bits rather than atoms, yet not as obvious what the differences would be.

During my time as a Fellow at Mozilla studying alternative business models for the web I imagined potential incremental changes to our existing systems in the name of digital progress in the areas of openness, fairness and inclusion. By the time I started this work in 2021 digital platforms had grown away from favoring open protocols that defined the early Internet era, instead choosing the creation of closed platforms that gave a larger degree of control. In 2021 large tech companies produce tremendous value by leveraging these closed platforms which are cleverly monetized often without up-front money from web readers. For my research I wanted to explore ways we can revive protocols to enable creators large and small to earn money from their digital lives.

My fellowship was sponsored in part by Coil, a company that is using Interledger to build a better way for creators to earn in a fair, open, and transparent way.

All It Takes Is Eyeballs

I can remember when the commercial web was taking off I'd ask my customers–I was selling webmail software–how they planned to make money and they almost always mentioned the word "eyeballs". At the time eyeballs was shorthand for "I'm not sure, but we think if we get enough people using our site we'll be able to sell our user base to someone else with ads or some other arrangement." These early entrepreneurs were right in acknowledging business was about to change profoundly as a world of customers became addressable, yet wrong about their own businesses. Most of these early ventures failed to find a revenue model that supported their particular form of value creation for the long term. I think it's never been as easy as it should be to convert digital value into a currency on the web, in part because this was never a design goal of the web.

We haven't (yet?) found a magical technology or model because there isn't one that will work for everyone in every circumstance. Instead we need a multifaceted approach to monetization, exchanging value for money at the moments with the least friction for the parties involved and the magnitude of value exchanged. With that caveat, I think there's more we could do by introducing new digital-first payment rails while continuing existing efforts to reduce friction at exchange points to our traditional banking system.
At the start of the year I saw the problems of monetization as being closely aligned with the problems of friction. Friction in the digital sense is a gradient of woes from "a bit longer to complete a task" to "I forgot my password" to "Where's my wallet?". By the end of the year I still believe that incremental progress matters, yet am more convinced than ever that profound change is needed to unlock the potential value stored in our digital economy. Fixing identity is part of the way forward, but so too is updating our economic models to give us digital-first primitives and easy to understand techniques to transfer value.

How Many Ways Are There To Earn? Do We Need Another?

Thinking back to my days selling webmail in the early commercial web in the 1990s, we made money every way we could: we embedded ads in the free version of our software, sold enterprise software licenses with support contracts, had a software as a service offering called SMTP.com, and had ads in a free consumer version of our software called MollyMail which was eventually "paywalled" requiring a monthly subscription. Each of these monetization methods required a large development effort–at least for my small business. Ideally new monetization techniques are universally available, without the need for risky technology development, capital outlays or infrastructure. This simplicity requires coordination with core web software like our web browser (or possibly new protocols and user agents) to make it easy for all parties.

There are tradeoffs involved in any implementation. How many ways are there to earn, and do we need another? Cash is a good example of a value transfer technique that's easy to use for all, but it comes with the requirement of governments needing to print it. Sending a website cash per web view isn't practical, but using Web Monetization to compensate the site is possible, if not yet universally available.

Auto-Compensation

Stepping back a bit, let's look at how a system for rewarding intellectual output might function. Intuitively, if I'm creating value, I would like to be compensated by society for that value. In an ideal system it would be automatic–auto-compensation–I don't want to think about it or have the people that derived value from my work have to think about paying me. Just as early intellectual property laws featured copyrights, patents, and other primitives, we could imagine that a digital system that promotes production and rewards consumption would create models of its own to help us nudge society towards this dream. It may take some more work to get to these primitives, but stick with me.

In the physical world my compensation was easy to quantify in terms of wages for a day's labor or an artifact of my construction that I could barter. When we shift temporally our existing economic frameworks no longer provide easy tools to help us figure out how to be compensated for our production of a song, a story, a poem, a movie, a web page, etc. When the incremental cost of spreading the output of our work tends towards zero, the unit pricing models seem to make no sense. We've made intellectual property rights laws to work around the conundrum, but in the Age of Digital Reproduction these laws are fragile limiters of production rather than the robust catalysts they aspired to be.

Imagine the perfect way to earn a living. For me the ideal way to live life would be to think and do things that are interesting to me. Somehow I'd get paid for that to be able to support my family. I believe that we almost have the tools to make this dream a reality through automated money transfers on value recognition. We're not yet there, but this is the dream: make society better and it will support you too.

Engineers, designers, and business leaders will continue to push to make the experience of paying for web access as easy and painless as possible. For this they will need new concepts, such as micropayments as well as new technology stacks, such as Interledger (which Coil is built on top of) which is a sort of universal transport layer to access and transfer value.


In the rest of this series I will look a bit at existing monetization methods, and then introduce a new framework called Kudos, that is what I imagined when thinking about the rules for a purely digital economy.

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