HOT COMPANY PROFILE: Social micropayments platform Flattr

The Pirate Bay founder, Peter Sunde, is somewhat notorious when it comes to online content. While The Pirate Bay distributed content for free, Sunde’s new project, Flattr, is heading in the opposite direction. Flattr allows users to spread donations across the online content that they wish to ‘Flattr’, and enables websites to embed their own Flattr button to encourage payment. The platform is gaining traction among German newspapers’ websites and Sunde believes ­that it can provide a payment layer that was missing with The Pirate Bay.

¤ What makes Flattr different from other micropayment platforms?
We call Flattr the social micropayment system because we have a lack of better words. It’s a micro-donation system where you have a monthly fee where you pay the system when you note which people and which things on the internet you like and want to give money to. You press a button, like you would press the ‘like’ button, and then at the end of the month we make a calculation and divide your monthly allowance equally between the number of things you like.

We have about 80,000 users and thousands of clicks every day and it’s growing steadily. A lot of users come from Germany; it’s a big success there because a lot of newspapers have started using Flattr on articles and allow people to add their own Flattr buttons to the comments – on some articles you see more Flattr buttons for a comment than the article itself. It is used in the UK and Sweden quite a lot as well. The US is a bit more cautious because we don’t know the system as well, and people in Europe generally know a bit more about the background.

¤ What is your business model?
We want to be profitable soon, but that’s not something we’re focusing totally on right now, we’re working on developing the product and making sure that everything works. Obviously we have a business model – we’re not one of those startups that have no idea how to make money in the future – but first it must be comfortable for the community otherwise it will fail.The 10% cut [Flattr takes from users] is something we’re probably going to lower in the future because it’s too high, but it is somewhere to start, and will cover some of the costs we have right now.

¤ Who are your main competitors?
There’s really nothing like Flattr. There have been attempts like Kachingle but they’re all working differently, and we think that the way we approach things is more based on a P2P system where people are treated equally and we don’t put people into different categories of creators or consumers – that’s the power of Flattr. It’s a very easy system, it’s very wide and it’s very adaptable as to how we want to use it. It’s a very open system compared to other people who have a really closed system, or use it more as a payment method rather than some sort of quality assurance, or social quality thing, which is where we want to focus.Hopefully we will have competitors in the future, because that probably means we’re bringing something right.

¤ What is the biggest challenge you currently face?
Getting the word out there and getting people to understand the system because even though it’s pretty simple when you understand it, it’s really hard to get to understand it, so that is the biggest problem. And getting it implemented where it should be implemented is also one of the big hurdles we have, so we’re making the technology easier and we’re trying to find partners to help get the word out there.

¤ What do you think is the hottest trend in digital media?
We’re going to see a lot of tests [in monetising online content], so a lot of these companies will use paywalls, try different donation systems and push more and more for it.It’s a long time in internet history, but it’s a really short time [in] finance history. Flattr is only one of a few really innovative suggestions, there are really no people trying to do new payment or money finance systems online even though we have so much new technology – that’s a big problem. So I hope people will try to make up new ideas on how to handle finance.

One of the things I’m really looking forward to is things like Bitcoin, which is a peer-to-peer money system which is currency without central governance. It is quite an interesting technology and we’re going to see more and more of those things that are working outside of the banking system, and it’s going to be interesting to see how that develops.

VERDICT
Flattr is bound to initially gain traction as Sunde’s reputation precedes him. There is a proven success for firms integrating buttons with websites, with
Facebook, Twitter and Digg the obvious examples, and the uptake from selected newspapers hints at the potential of the service. But, crucially ‘liking’ thing via these outlets is free. Enabling users to select their donation amount, from as little as EUR0.01, is Flattr’s main attraction, and places it ahead of rivals such as PayPal, where the minimum donation is much higher. The fundamental issue is the fact that many internet users don’t like to pay for online content. This is why Sunde’s previous project, The Pirate Bay, was so successful in terms of usage.

However, for long-term success the platform has to place a greater focus on revenue generation. Sunde’s plan to reduce the 10% Flattr currently takes from users’ monthly allowance appears unwise but he believes that mass adoption will offset the cut.

The micropayments market appears set to soar in the coming months. Digital media consultancy Value Partners claims that the European market will reach EUR15bn (USD20.53bn) by 2015 from EUR6bn (USD8.21bn) in 2010, presenting an opportunity for Flattr to secure some of the estimated EUR8bn (USD10.95bn) to be generated this year. Flattr’s adoption at taz.de and Freitag.de also hints at a potential alternative method of monetising online newspaper content as the debate regarding paywall effectiveness rages on.

AT A GLANCE

Chairman: Linus Olsson

HQ: Malmo, Sweden

Founded: 2009

Commercial Launch: 2010

Number of employees: 11

Investors: Angel investors from White Bear Yard: Eileen Burbidge and Stefan Glaenzer.

Funding to date: Undisclosed