It has often been cited that Blockchain, Bitcoin & Decentralization can & will change the game when it comes to Fintech, eCommerce and online retail when it comes to Payment Models.
This post will explore Payment Models past and present – and what the future may hold, as an attempt to chart out the landscape of the payment ecosystems that we may encounter.
Let’s dive in.
The buyer/seller Relationship
The buyer/seller Relationship defines many businesses today, whether the buyer is a business or an individual. A medium of exchange (in this example, money) is exchanged for goods or services directly in a singular payment.
A business develops goods/services where there is a demand, prices their goods in order to produce more, with a profit, and entices buyers to part with their money. Other businesses spring up in competition to any serious demand and fill niches where they exist.
A payment model emerged to cater for goods and services with ongoing costs, that provide an ongoing benefit for buyers. Selling these as one-off items where a cost is incurred means that eventually the cost would override the price the buyer paid and the service would be lossy (excluding scenarios where cross/up-selling is used).
In some cases, the service is initially offered as a loss to the seller, but once the subscription has been running for some time, it pays for itself and becomes profitable.
Such a model is popular in newspapers, magazines, telephone lines and later the internet, mobile contracts, and with many eCommerce services.
It has become so widespread that a trend amongst many online businesses is intentional disruption of traditional buyer/seller relationships by introducing subscription services.
A case in point is the Music industry, which never really had a particular good model for the musicians, due to it becoming rapidly centralized, which did make a lot of sense when it was expensive to produce & distribute albums, but less so, now that it is, if nothing else, a much cheaper endeavour.
The emergence of Music service providers vs traditional record shipping has been one of the most significant disruptions in history.
Providing a huge library of music, this represented a big and obvious improvement for listeners – but it also brought many negative aspects. The low cost employed to compete with Album/CD costs and revenue sharing models meant that Musicians were losing out even more and receiving sub-pennies-per-listen.
Simplified Advertiser Model
The emergence of the internet enabled unrivalled content creation possibilities – in the course of a few years it became virtually free and incredibly simple for anyone to create content of any kind, and host it online to an audience of unlimited people.
A website content creator could use a relationship with an advertiser to fund continued content production, and serve ads to their users, to piggyback on the attention the user was giving to the website:-
For large & prominent websites, it was possible for them to directly work with advertisers who could provide relevant ads and enable the content creator to profit from their content.
Within a short space of time, advertiser networks sprung into existence, opening the ad-serving model up to websites of any size and allowing a greater degree of tracking and targeting, with a whole host of options, such as pay-per-click or pay-per-view.
As the value of network ads rose, due to increasing number of people using the internet for eCommerce transactions, so did the value of user information, which was being used to target advertisements better.
Content Provider Model
The content provider model incentivises users to create content on the platform, free of charge – this content is then provided to users, free of charge, with the website itself operating as the advertising network.
The website absorbs the high operational costs, and enables advertisers to serve ads via the platform.
An example of this kind of model is with video streaming sites – running the ad network themselves enables them to retain control of tracking & targeting and enables them to interface directly with advertisers and content creators whilst growing the entire centralized ecosystem to millions of users.
Such platforms appear to be relatively fair, however with stakeholders involved, the ‘payouts’ given to content creators are often criticised as being far below the amounts they should be.
User Commodity Model
In the user commodity model, content creators are removed from the equation – and the users themselves are the content creators – the attention/information flow is between users on the platform, which is then interspaced by advertisers using the platforms’ own ad network.
The user content on the platform is both free to post, and free to read – registration and interaction is also entirely free of charge.
This model marks the modus operandi of current social media platforms, and the model proves itself as profitable for both the platform and advertisers – users are not rewarded for their contributions or interactions, and it is argued that the platforms usage of attention & information is, in many cases, abused.
Introducing the Stakeholders
With the largest such platforms, there are of course share/stakeholders in the Mix, who provided the capital necessary for the platform to grow and develop, in expectation of the ability for the platform to monetise successfully and become profitable.
For video sharing and social media sites, the stakeholders cut can significantly decrease the amount that content creators are paid (if anything) and further issues arise with centralization, stakeholders with no skin in the game, who do not use the platform or have it’s best interests in mind.
Into the future…
For the purpose of looking into future models, I will build a demonstration models for a decentralised social media platform which could potentially exist.
Tokenomics should primarily concern itself with applying philosophical approaches to existing business and corporate models, in an attempt to understand and apply decentralized solutions where plausible.
This tokenized social media addresses 2 key aspects of the above model:-
People are made aware that user data/attention is valuable.
Platforms are responsible for making their projects profitable to appease stakeholders (who may not have any skin in the game by actually using the platforms they are investing in).
One of the key differences here is that people are now cut into the monetization model – previously the platform just took their share for providing the platform, and, with stakeholders involved, needed to make this profitable at all costs – even at the cost of good user experience.
In the above model, the Attention/Information (obfuscated in prior examples) becomes transparent. Users obtain control of their own information to a greater degree as part of the transparency.
Users are rewarded with tokens for their content, attention & interaction they provide to the platform.
Ads/other monetization is retained, but is transparent, no longer obsessively profit-drilling (on the part of the platform) and respects users data correctly. (Note: Ads could be removed, but for my example I have left them in).
Free Market Token values the platform based on it’s users, monetization, future potential, and allows investors to buy in directly to fund operations & development (possibly delivered via decentralized worker proposals).
Tokens rewarded to end users in a controlled manner results in users of the platform becoming stakeholders (resulting in more stakeholders with skin in the game).
Rewards, based on reach & value of content incentivizes users to use platform more & grow their fanbases from external sources – growing price/scarcity of token adds further incentive to gather & hold rewarded tokens.
The Future could be Tokenised
Tokenised approaches to current business models which cut users into the process of monetization/marketing and build an economy around decentralised, transparent applications could seriously change the game.
Already with apps like ONO and Everipedia in the works on EOS, and the BTS/Steemit 2.0 on the Horizon that Dan has alluded to in Telegram, we could be in for a rapidly transformative period. It’s important to note that the original Steemit now finds itself around #1700 in the continually-updated list of most visited websites in the world, and this is a significant achievement for a decentralized project that leaps boldly outside the norms of regular networks.
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