Like Transactions, But Smaller

Free stuff is great! Free, convenient stuff is even better. So with trends shifting in the digital age to a culture filled with “there’s an app for that,” how are creators of those handy little pieces of software making a living? Free doesn’t pay the bills, unfortunately. Well if you’ve ever downloaded a free-to-play game, or something on your smartphone to help measure or plan or count; chances are you’ve run into a popup offering to make your experience better in exchange for a small dollar fee. Please insert 25 cents to continue reading, because this is the emerging and, now spreading, world of microtransactions.

The issue with free software of any kind is the time it takes to create it, manage it and maintain it. Let’s take something most of us have heard of as an example: Spotify. This music streaming app is, technically, free to download and use. In exchange for this, it will play ads in between songs and limit your features to things like a limited number of skips. Want full functionality? Simply a pay a small fee, and the entirety of the app’s features become available to you. The model Spotify uses, offering basic things for free but keeping richer benefits behind a paywall is called “freemium” and the subsequent small, seemingly throwaway fee is called a microtransaction.

It’s easy to see why someone might favor this freemium method of delivering software. From a consumer standpoint, you can enjoy something (albeit in a limited way) without laying out any cash for it. As a developer, you might want to use this model as a way to “hook” people initially, hoping that they’ll pay a few bucks to unlock the rest of your work. It’s lucrative, too. One runaway success story of this model is Pokémon GO, with its over $5 billion in revenue since its release in July of 2016. It gives its users a choice whether to play at a slightly reduced capacity, needing more time and effort to progress, or to simply pay a little in exchange for less restricted gameplay. One could argue it’s a win-win.

On the flip side however is its reputation as being very slightly predatory in nature. Let’s say an app wants to charge you a dollar in order to not show you advertisements. On the surface that’s quite reasonable, but when the number and frequency of the ads being displayed prevents you from using the app at all, why not simply charge that same dollar for the download in the first place? This point of view is made even more valid when we look at microtransactions in other industries. Software isn’t the only world in which people have cottoned onto one’s spending being less considered when you’re just asking for a small amount at a time.

Automakers are one such group. The idea of paying a small monthly fee for something like, remote start from your phone is one thing, but the shift looks to be much less reasonable than that. Recurring charges for things like heated seats, cellphone integration or sportier drive modes are something vehicle manufacturers undoubtedly have coming down the pipe. We’re already accustomed to bundling in satellite radio for a few bucks a month, why not write off a dollar or two more for voice activation or automatic headlights? For me it’s a slippery slope fraught with cynicism. You could make a good argument for not having to “subscribe” to heated seats during the summer, but it might be naive to think the goal here is to save you money.