A jar full of fail: Why tipping and donations don’t work on the internet
Online tipping is for natural disasters and not your blog or podcast…
Besides the failure of startups like TipJoy and the problems of TipiT in making it easy to do micropayment tipping, there are other more fundamental problems. Take this from a guy that used to do magic for tips as a teenager. I know all kinds of ways to fail.
What about Wikipedia?
I love the TWiT podcast network. MacBreak Weekly is my 60 Minutes and Tonight Show rolled into one. Leo Laporte is a broadcasting god among men. Yet, for the life of me I can’t understand why TWiT uses a donation system to support itself outside of advertising (check out Leo’s latest post where he explains the “tenuous connection” between listening and donating). I can kind of sort of see how to Leo it seems the nice thing to do and it kind of sort of looks like the way NPR and public broadcasting support themselves, but it’s not.
For starters, every previous attempt at creating an online system for tipping has pretty much failed. TipJoy is now defunct. TipiT has minimal traffic and suspended its services while it deals with a massive fraud problem. The little donate buttons we were supposed to click on to support our favorite bands as we gave the finger to the RIAA never panned out. It turns out we really were just cheap bastards that didn’t want to pay for music after all.
Besides the failure of startups like TipJoy and the problems of TipiT in making it easy to do micropayment tipping, there are other more fundamental problems. Take this from a guy that used to do magic for tips as a teenager. I know all kinds of ways to fail.
Problem #1: In the real world you get tipped when you make eye contact. Not one way, but both ways. I see you, you see me. It taps into millions of years of evolutionary behavior. If I don’t make eye contact with you, there’s no complicit acknowledgment that we had some sort of imaginary agreement. It’s hard to get anonymous strangers to tip.
Problem #2: A bigger crowd doesn’t always mean more tips. If I perform for 200 people, 180 of them consider themselves bystanders watching the people watching me. When it comes time to tip, in their minds they weren’t there for my show, they were there for the crowd. Your blog and to a degree your podcast is like that. This gives rise to this rule: The degree of personal responsibility your audience feels is inverse to the size of the audience. If your audience knows you have a big audience, the individuals feel less responsible.
Problem #3: Tipping creates price uncertainty. If the value of something is entirely subjective it makes it very, very hard for people to make a decision. It also says you don’t know what it’s worth. And that’s the same as telling people it’s worthless (which it’s not).
Problem #4: Why pay for something that’s free? If we think it has no value, isn’t going away and have no personal connection to it, why would we give up something like money that has value, is scarce and we’re very deeply personally connected to?
Those four problem underscore the basic problem of online tipping. It’s not about people being greedy or not caring. It’s the opposite. The average person cares about a lot of things and is generous to a lot of people. But between their family, the waitress at Outback Steakhouse and earthquake victims in Haiti, you don’t factor.
What about Wikipedia?
Wikipedia is entirely supported by donations. So why isn’t it a good model for everyone else? Last year they raised $6.2 million from 125,000 donors. While that’s a lot of money and more than covers their operating budget for the year, Wikipedia gets 190 million visitors a day. Think about that for a second, one of the most import information sources in human history with daily traffic bigger than most nations only got 125,000 donors? How much is one of Wikipedia’s 5 billion monthly visits worth when it comes time to donate? $.00124. That’s a fraction of a penny. If you’re providing a human experience enriching service on par with Wikipedia, multiply your total audience size by $.00124 to figure out how much you can expect to make from donations. That comes to about 8 million people to stay above the poverty level ($10,000). Wikipedia’s efforts worked well enough, but it’s a frightening proposition for anyone who doesn’t one of the most trafficked websites on the planet.
Doesn’t it work for PBS and NPR?
Not in the way we think. PBS is very shrewd when it comes to getting you to part with your money. These are the folks that told us Big Bird was going to die if we cut off Federal funding. That’s some Chicago-style gangster bargaining. A large part of their funding comes from private trusts and foundations and Federal and state funding. Individual viewer contributions (not counting foundation grants) are less than half the budget for public broadcasting. But even that’s not a straight up donation.
In every PBS telethon you’ll notice that they don’t just ask for money they offer you tote bags, DVDS, and books for donating at different levels. As well as tell you that your favorite show is going to go away if you don’t pony up some cash. If they’ll off Big Bird, they’ll kick Miss Marple to the curb in a heartbeat. Besides all that, you get to deduct the amount of your donation (minus the value of stuff they gave you) from your taxes. Imagine if we could do that with HBO? Donations work for PBS because they do three things:
1. Give you actual physical goods that increase the value of the donation.
2. Imply scarcity in a market with limited options for their audience.
3. Makes the donation *appear* essentially cost free to the donor via tax deduction*.
I’ve heard NPR cited as another example of why a model like TWiT might work online entirely viewer supported. The problem is this; NPR is funded so heavily by private trusts, like the one set up by the family of Ray Kroc (the founder of McDonalds), it really doesn’t need your money**. Add to that the Federal and state funds it got in the past and listener support for NPR is a fraction of its budget. To follow their model you need:
1. Federal grants to start.
2. Corporate sponsorship to keep the lights on.
3. The widow of a fast-food billionaire to bequeath you the largest charitable donation in history to keep you on air forever.
The budgets of PBS, NPR and the Corporation for Public Broadcasting are larger than Wikipedia by a considerable factor. They’d die if they had to survive the same way Wikipedia does. This doesn’t give much hope for anyone else.
Why not at least try it?
Chances are you will get a few donations if your blog or podcast is popular. Probably more than the $.00124 a head Wikipedia gets (I irrationally blame all those One Laptop Per Child children in poor countries for bringing that average down). But at what cost? The moment you put the donate button on your website you’re calling yourself a charity case. You’re putting a value proposition into people’s heads and telling advertisers that they get to call the shots on pricing. If you’re Leo and have TWiT’s audience, maybe that doesn’t phase you as much. For everyone else it could be a bigger problem, especially when there are better solutions out there. Especially when you understand there are two kinds of audience out there which I’ll explain in a later post.
The bottom line is this: If you want to get people to pay you, sell them something. Here are some suggestions instead of offering a donate button:
Will people work their way around these features to get the content anyway? Of course they will. But here’s one of those obvious points that seems to have eluded a lot of smart people: If someone is going to steal your content, they were never going to click the “donate” button to begin with. Give people a reason to buy and you create a value proposition in the minds of the people who recognize value.
*By this I mean *appear* cost-free to the intended donor.
**There is a difference between how NPR and NPR member stations are funded.
Have any questions or suggestions? Email me at andrew@andrewmayne.com
