I'm reading Chris Anderson's FREE while performing research on pricing models for an internet service. FREE is a jolly bus-ride through old and new business models, and ideas about market share, pricing, and behavioural economics. You can tell I'm enjoying it very much. The book covers four basic financial models and really - let's face it - focuses on behaviours in developed countries only. Anderson bases his argument on the tenet that it's in everyone's best interest to fast-track brand establishment and market share. If you've done corporate finance you'll concur and point solemnly to texts that note that endless wild growth is unsustainable and that most high growth operations tend to fall in line with CPI within the first few years. The point of FREE is that it's much easier to blow the competition out of the water if they don't have to get out a wallet. People who know me will attest to my ongoing passionate interest in micropayments. Micropayments are typically transactions between $1 to $12. The idea is that you should be able to make small payments that will - through their sheer volume - lubricate the market enough to keep it going. Anderson doesn't agree with the proposition. He uses Nick Szabo's "mental transaction costs" as an argument against micropayments saying that,

"If you charge a price, any price, we are forced to ask ourselve if we really want to open our wallets. But if the price is zero, that flag never goes up and the decision just got easier.

"... (Szabo was right: Micropayments have largely failed to take off.)"

I find this an extraordinary thing to say given the phenomenal success of Legion Interactive, iTunes, Ebay & Google Adwords. I also happen to believe that the FREE model has been foisted on creatives for way too long and they often have a huge challenge meeting basic needs. It's fine to gather brand share but then what? What's the endgame? Well to quote Bruce Sterling's response to Cory Doctrow in his State of the Nation 2010:

"Ever heard of "disruptive innovation," "disintermediation," "offshoring," "small pieces loosely joined," "de-monetization," "plug and play," "the network as a platform"? Of course you've heard of all that crap, because you've been tub-thumping it your entire adult life, but what the hell did you think that was all about? Did you think you were gonna bend every effort to virtualize reality, and then get a gold railway-retirement watch and a safe place to park the cradle?"

Appropriateness is obviously the keyword when thinking about both FREE and micropayments. Micropayments in particular are going to succeed when the billing situation is appropriate. Think about phone credit as a trusted central payment gateway. Would you use your phone to buy a loaf of bread and a paper on a Sunday morning?  To lend someone five bucks?  To get into a movie theatre? To pay off a student loan? Maybe you get paid in phone credit and it's handy because the government will find it harder to track and tax you. The mobile money schemes in Africa are the product of some of the greatest thinking in micropayment execution and a model that I'm sure will find its way here. African consumers have an immense need  for a reliable, secure, low cost banking system. So how handy is it when banking can effortlessly piggyback on the region's high uptake of mobile phones that don't required fixed line infrastructure. In September 2009 The Economist published a special report on the power of mobile money. They reported that in Kenya 7 million - just under a fifth of the population - use M-PESA. Roughly $2m is transferred every day, with an average transaction cost of $20 From Africa to Brazil, China, Australia, New Zealand and through Europe - I think there is a place for mobile banking. It may not be a huge profit card for mobile carriers but it will make them popular, revitalise brands and who knows - it might shake up the EFTPOS and the credit card cartels. The point is that both FREE and micro are good.