Tuesday, October 31, 2006

Paying people for UGC

In a recent post Umair wrote a reply to a question that had come up in a recent Beers & Innovations night. Summary is when will people be paid for "user generated content." I made a point in the comments about how different people get value from services in different ways i.e. monetary payment is not the only form of received value. This is all well and good but many people will still want to be paid.

The biggest hurdle is that transferring small sums of money is prohibitively expensive for the size of the funds transferred. Widespread payment for UGC will not occur until someone cracks problem of providing transfer of funds between parties with a cost approaching zero.

There are several possible methods for doing it. The first would be for a company such as Google to create a financial transfer company and absorb transfer fees the banks impose as a cost of doing business. This is a big and costly option that runs up against (massive) regulatory problems.

The second would be to create a frequent flyer style points system that people can accumulate and then use to for discounts at stores or to purchase gift certificates. This option is probably one that would work well. The "frequent generator" (FG) points would be tied to an identity. For example, I could state (just as Amex holds my "loyalty points") that all my FG points would be held by Google whom attaches my FG points to my Google identity. I can then go to various stores and reclaim the points for discounts, gift certificates etc.

The third option is to essentially create an "internal market" where parties with an identity can transfer, at zero cost, funds. For this to work a provider, lets say Google, would create relationships with the various users of UGC. These users would deposit an opening balance to Google (Google holds this in escrow). When a user uploads some UGC to the site, which then makes some money, the service "transfers" money to the user by saying to Google "user x receives y amount". Google records against the users identity that they have received x without directly transferring the money. The costs are only paid if the user moves money to their real world bank account. Paypal on steroids if you like.

My guess is that a frequent-flyer like system is probably the best option. There is less regulatory overhead, capital and technical requirements. The other major attraction of FG points is that everyone understands frequent flyer systems and the redemption of points. GAYME companies are the obvious candidates to create these systems (they have identities and relations with the users and UGC companies) and I can see this being the next battleground for the hearts and minds of internet users.

Tags: UGC, Web Services