Micropayments: Where Charity and Social Networks Meet

Micropayment systems are popping up on a variety of social-networking sites, creating a new form of philanthropy

By Max Zeledon

Micropayments for microbloggers—it sounds like a no-brainer. In a community based on real-time content, social causes, and brand awareness, users will want to execute real-time transactions with the same enthusiasm with which they tweet about their favorite daily activities.

So goes the thinking behind a host of startups that aim to help users of microblogging site Twitter make payments and carry out online transactions as conveniently as appending 140-character updates to their profile pages. "It's about making a statement in the stream and telling everyone what you stand for," says Michael Ivey, chief executive of one such site, Twitpay, which lets Twitter users make online donations and pay for downloadable content. "When you donate to a charity or cause, you're making it public. Look at it as payments attached to our intentions and aspirations."

Another site, Twollars, lets users transact with virtual currencies, exchangeable for real money, in support of a cause, such as Lance Armstrong's Livestrong or the Water Project, which aims to provide access to clean drinking water in developing nations. "There are no transaction charges if you are a donor," says Twollars co-founder Eso Kant. The company relies on corporate sponsorships and charges fees for widgets, promotions, and microsites for charities, Kant explains. "We're also educating charities on how to raise funds," he says. "You want exposure? You want to bring your own charity—like the Pepsi Foundation? No problem—we'll do it for you."

The micropayments model goes to the core of who we are as people—our passions, political beliefs, cultural preferences, and aspirations. It's no longer just about George Soros making a million-dollar donation to a drug treatment program and getting a lot of press for it; it's about the millions of Twitter users making small donations and getting peer recognition for it. But just as Twitter faces big challenges in moving beyond a small core of committed, repeat users, associated micropayment sites can be expensive to maintain and may not resonate with a broad user base, experts say.

Branching Out

To get a sense of how micropayments work, consider the case of Twitter user zendawg1. Micropayment site Tipjoy lets bloggers collect tips from readers. Zendawg1 used his to make a donation to Twitanthropy, a microphilanthropy that raises money for water, sanitation, and public health projects worldwide. "From a giving standpoint, I am impressed with its ease of use," says zendawg1, who used Tipjoy to contribute to a rainwater-catchment system for a clinic in Central America. I used Twollars to make a donation toward digging a well in Kenya.

Micropayments are taking off beyond Twitter. Tipjoy is branching out across multiple social-network platforms, including Facebook. "We're moving horizontally, but Twitter certainly contributes a great deal of volume," says Tipjoy co-founder and CEO Abby Kirigin. "We want to be a full e-commerce engine for bloggers or any merchant who wants to put our payment system in their site."

To succeed, Kirigin and her counterparts will need to overcome at least two big obstacles. One is psychological. For the nontechie layperson, the concepts of micropayment or virtual currency add a new layer of complexity to Twitter (or any other social network). Many people are driven by fear and don't try new things until they become established standards. That's a big obstacle in the middle of a recession. How these startups educate users will be critical.

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