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How Does the New Amazon Honor System Measure Up?
By Margee Fagelson
(more articles from this author)
2001-02-08
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So Amazon.com has added yet another lousy idea to their stable. Not only is the once-simple bookseller now vending lawn and garden furniture, as well as encroaching on eBay's auction territory, but now Amazon.com has taken to perceiving itself as a philanthropic bridge.

On the heels of PayPal and Fairtunes, Amazon.com seems to have entered not only the 'virtual tip jar' world, but also the wonderful world of online escrow. Confused? Well even the Amazon.com website doesn't make their agenda wholly clear. The gist is, they have created a way for you to fork over money to baby websites you use a lot. They call it the Amazon Honor System and you can either use it to 'tip' the website owners or to make a payment for premium services, at a sum level that is lower than the usual minimum or at a site where there was previously no set functionality to collect monies.

Why should you join the Amazon Honor System?
* More than 29 million Amazon.com customers are already set up to pay you.
* With hundreds of millions of transactions under our belt, we know how to make online payments safe and simple for you and your payers.
* Collect payments as small as $1.00 with our patented 1-Click technology.
* Credit card security is guaranteed

It's time you got paid for your Web site.
Your Web site's visitors return time and again for great information, entertainment, and community. The Amazon Honor System lets them show their appreciation--by giving you cash.

Okay. Here's the rib(s). I take no issue with not being the 'first' out. That does not necessarily mean you can't be the 'best.' But I take issue with a couple of things. The very first being that Amazon.com has already spread itself thin. It just laid off a number of hardworking folks and closed a distribution center in McDonough, Georgia as well as a customer service center in Seattle. Funny how the one thing that still gets overlooked is customer service and order fulfillment. I – for one – shop Barnesandnoble.com because of their customer service and their customer retention programs. I won't bore you with examples. Barnesandnoble.com does one thing and does it WELL. That is the secret to a successful website. The second issue I take with it is this: when did it become de rigeur for us to compensate websites with free content?

No, banner ads don't work. Well, I have a newsflash for you. They didn't work all that well as early as 1998, so all these companies building their businesses around profits made from ad revenue...Tough luck. If you can't figure out how to make money in or from this medium, perhaps you shouldn't be participating. As a consultant, I don't anticipate anybody paying me for the website, but I do hope that the website will drive traffic and new projects to me, the person. When I put links on there to Barnesandnoble.com as an affiliate, it will not be because I anticipate that my site will be the premiere, one-stop shopping experience for all your information and entertainment needs. It's merely a convenience.

Now for the Amazon.com Honor System – specific criticism again, our guest, Mr. Peter DiCola, Director of Economic Analysis - Future of Music Coalition: "It is nowhere near as attractive a service as Fairtunes. Amazon charges a much higher transaction fee, and also insists that consumers hand over their own demographic information. This information then feeds Amazon's business model of knowing their customers, making targeted offerings, and charging "personalized" (i.e. discriminating) prices. So basically it appears that consumers are being offered the chance to finance the enlargement of Amazon's main asset base by paying more than market price for voluntary contribution transactions. Some offer.

Fairtunes is a company in Ontario, Canada which offers – in fact, may have originated – the online tip jar.

Fairtunes is a web service that connects fans with artists directly, harnessing the revolutionary changes online music distribution is bringing about in the recording industry. Fans can use the web site to make a financial contribution to an artist, securely, with their credit card, in the name of a particular song or album. Fairtunes will locate any artist the user specifies and forward them the money in a fast and accountable way.

But Fairtunes is not used only as a resource for musicians' tip jars. Recently the Future of Music Coalition offered benefactors the opportunity to 'sponsor' the attendance of (an) artist(s) at their conference. Where to send their sponsorship monies? Try Fairtunes. They created a business with one concept in mind but the viability of their functionality opens up other opportunities.

Which is not to say that the virtual tip jar model is a particularly useful or societally constructive one. Some may say, "Where's the harm? In this day and age, it's something. Is that not better than nothing? What about those among us who really, really want to just send off money and feel philanthropic?"

Well, there's a point to be made there. For right now, with no other solid compensation models (MP3.com's Payback for Playback has a minimum, Emusic may not have the songs you want to buy…) this is the simplest way to get your money where you want it. Even in the case of musician' compensation (the void in which Fairtunes was created), this may be a more direct route to the artist than buying their album sometimes….recoupment, anyone?

But there also may be a complete undermining of our whole work-compensation models and ideologies. In the thoughts of my resident economist friend, Peter DiCola: "I have strong doubts about the viability of the tip jar model. The notion of paying for [content] one has already obtained and [used] is based in goodwill or certain moral values. It is not economically logical to pay for what you already have, however, and most people don't (and won't) do it. Will people tip to finance unspecified future works? Probably not, due to discounting of the future versus the present. But not only is the tip jar model unlikely to produce much revenue – for Amazon or for the [participants] – it's also likely to reinforce the devaluation of labor in people's minds. Notice that most highly-paid, highly-trained, and highly-respected professionals don't work for tips."

And if you opt in to the 'tip jar' process, mightn't you want to choose the one that works best for you and that you trust. Speaking to Amazon.com and their Honor System, specifically, the voice of experience comments from their website, quotes from Matt Goyer, CEO and President of Fairtunes:

From Amazon.com, "There are limits on both the size of individual transactions and the total dollar amount processed in a given period. The maximum dollar amount we can process for any individual transaction is $50. The amount of money you can receive in a given time period is based on our evaluation of your application. Similarly there is a set limit on the total Honor System payments an individual can make in a given period. At this time, contribution and receive limits are set and cannot be raised."

"This is interesting since we have processed a number of transactions in excess of $50. Some people just love to give. I'm very unclear as to how the maximum limit that you can receive is set or even what it's numerical value is. If I earn too much money they can just cap it? What is the message that the people who send the money will get?? Hmm."

Goyer also speaks of the "enormously high" transaction fee that Amazon.com's Honor System imposes. So much for the internet being cheaper, faster, more convenient.

On privacy dangers… It is useful to note, by the way, that Amazon promised privacy initially then changed the parameters of that privacy down the road. Are these the folks you want to trust with your philanthropy and generosity?

From Matt Goyer again: "It should be noted that the PayBox is hosted by Amazon, meaning that they can track your users across multiple sites that have PayBoxes. They also know how many people view the page with the PayBox. If that PayBox is on your front page do you want them knowing how many people visit your site? Do you also want them to know where those users are coming from (referrer logs)? They know the profile of your users, which is a little scary. They can tell how people get to your site."

One more problem as noted by 'all's fair' Matt Goyer. He tried to set up his own honor system. Oops! No can do. Why? Matt Goyer (and Fairtunes) are not…AMERICAN!!! Fairtunes discriminates against NO currency or nationality. Come one, come all. You can send American or Canadian dollars anywhere in the world.

It's up to you.

Linkography

Amazon - www.amazon.com
Barnes & Noble - www.barnesandnoble.com
eBay - www.ebay.com
Emusic - www.emusic.com
Fairtunes - www.fairtunes.com
MP3.com - www.mp3.com
PayPal - www.paypal.com

Related MusicDish e-Journal Articles:
» Fairtunes.com – We'll Pay the Artist for you! (2000-08-05)


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