PayPal Opens Up Micropayments

PayPal's got some interesting developments for game developers and ebook authors: They've rolled out a micropayment system along with a digital goods payment system. Yes, you could sell digital goods and use PayPal before, but now you can take advantage of a special rate structure for charges at $12 or under. If you're selling a digital good (like, say, an ebook) PaypPal will charge you using their standard rates (30 cents per transaction plus 2.9% if your volume is under $3000 per month, lower percentages at higher volumes) or their new micropayment rates of 5 cents + 5%, whichever is lower.

Before, you obviously wouldn't want to sell digital goods for less than a dollar or so, because the fees would become to large. Now, a digital good costing $1 costs you only 10 cents in fees, which seems pretty reasonable. Heck, you can charge 50 cents for a short story and still do OK, losing only 7.5 cents for the transaction.

I'm not sure if consumers will go for this sort of nickel-and-diming for all types of content, though. It would be pretty annoying if you were looking at a web site and going to read interesting articles only to encounter little mini-paywalls. "Oh, you want to read that interview? 50 cents please."

Still, it would be an interesting experiment for a writer to charge separately for short stories, as well as a single price for a collection of short stories, and see what sells.

Of course, I think PayPal's really trying to get a piece of the in-game purchasing action, especially when you look at their examples of micropayments (which are all gaming-related). They have APIs to let you neatly integrate their micropayments into your game (browser or PC based). They are also touting the fact that they are enabling these micropayments for Android in-app purchasing. So if you've been waiting for Google to get around to in-app purchasing, you can go ahead now with PayPal's solution.

From my review of various payment processing methods, PayPal is the obvious choice for anyone at the low end of the sales volume (a few thousand a month or less). When you get into $5,000 or $10,000 a month volumes, then merchant card processing starts to look better since the transaction costs are cheaper (depends on you transaction size, too, though). But that does come at some added costs which have to be factored in. When your volume gets high enough you can afford some accounting help to sort this all out and deal with the ongoing issues of high sales volume (chargebacks and the like).

If you're a small developer or a writer looking to sell things on the Internet, PayPal is where is you should start off. And they've just made things even easier and less expensive, and opened up some new options.