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Performance-Based Advertising, Paid Content and Micropayments

Like baseball's spring training and Washington's cherry blossoms, the debate over micropayments as an alternative form of online transactions is practically becoming an annual ritual.

March 20, 2001
By Erin Joyce: More stories by this author:

Like baseball's spring training and Washington's cherry blossoms, the debate over micropayments as an alternative form of online transactions is practically becoming an annual ritual.

There are those who think the concept has a future and those who think the term is too fuzzy to start arguing from anyway.

So before the arguments, buds and Derek Jeter's batting average burst forth, let's be straight about the term for the sake of this two-pronged argument about micropayments use on the Web.

For consumers, I define a micropayment as an electronic transaction or payment in the range of about $10 to about one-tenth of a cent, which travels over the Internet or public network infrastructure. For businesses, however, I think it's time to expand the definition to electronic payments ranging from $25 to less than one-tenth of a cent.

Why? Because businesses are already turning to the use of smaller-sized payments for per-click advertising and performance-based advertising charges on the Web. In the process, I think they are helping all of us to expand our thinking about payment systems.

And since the credit card clearing and payment infrastructure remains the main conduit of consumer and business transactions -- even small ones -- online, it is also a part of the definition of micropayments. It has to be for now anyway.

After all, if Big Credit Card Company is collecting 24 percent interest charges each month on all those millions of Americans who carry a monthly balance, does BCCC have any incentive to enable smaller, direct debits online and incur more wear and tear on its systems, even though they would be easier on debt-ridden consumers pockets?

Big Credit Card Company makes it nice and easy for consumers, already awash in a culture of easy credit, to extend their love affair with plastic into the online realm anyway. And to be fair, the backbone is more secure, unlike the current alternative payment systems that are wending their way into our currency.

But if I'm a business looking to make sure my company's name pops up on a search engine, I'm already using micropayments for those per-click charges. As my ad buys or bids on keywords with Goto.com or even Findwhat.com go from pennies to dollars, the charges are applied to the account I have already set up with those search engines, which was created with a charge to my corporate credit card.

Those pennies per click that my account is charged are micropayments in action. As the concept becomes more commonplace, I believe other secure forms of transferring monies from account to account, aside from credit card charges, will emerge.

And on the consumer side, the current erosion of free content on the Web, in the face of declining sales for advertising-supported sites, looks to be another catalyst.

Even Tom Brokaw of NBC, the network that built a broadcasting empire on the free-for-watching-advertising model, believes that more and more content sites will require a subscription or some form of payment. After all, as he said after the recent Silicon Summit in New York, the duopoly that existed with the Red and Blue networks in the early days of broadcasting (I can never remember which one was CBS and which one was NBC) is nowhere to be found in today's billion channel, billion Web site media universe.

And how about the latest from the editor of highly-regarded and still-free site, Salon.com. In a letter to readers today, Salon editor David Talbot says that starting next month for a $30 annual subscription, the site will start offering readers a premium section which would include additional "bonus" features for subscribers only.

"Premium subscribers will be able to view Salon without banner or 'pop-up' ads. Over time we will add additional features, like an easy-printout download," Talbot wrote. Right now, the form of payment would be a monthly charge to my credit card. But smaller charges for bits of content will one day follow on many sites, which I believe will help push alternative forms of payment other than credit cards online.

On last Sunday's "60 Minutes" news magazine, there was Mike Wallace talking about the impact that Tivo and other stop-action TV technology will have on traditional broadcasting content models. And there were the pundits predicting that more content will be in the form of paid content.

Even Businessweek magazine's cover story, "Rethinking the Internet" weighs in on the idea that some forms of content will still be free (which we at Internet.com kind of believe in) and others will be paid. These evolving trends, in addition to more performance-based charges based on pennies at a time, will advance the concept of micropayments on the Web.

Let's not forget that ideas and approaches to payment systems keep evolving and developing, helped by forces in the marketplace. After all, credit cards were once a new concept. New and alternative payment systems started germinating with the rapid uptake of Web usage. When the timing is right, those seeds will push through.

* Got tips or comments? E-mail atNewYork.com.





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