[March 1998]

See Also   Why You Need an Add URL Page   A Tale Of Two Sites   Don't Duplicate...Differentiate!   The Continuing Battle Against Online Fraud   Taking Care of the Pennies   How To Recession-Proof Your Business   Your Fulfillment Choices   The Silent Thief - How to Get Rid of TopText   A Checklist for Accepting Credit Cards Online   Five Questions That Will Help YOU Succeed Online   Back To "E" Basics   Beyond SET: Enhanced Security for Online Transactions   Just How Serious is Online Fraud?   Your Direct Channel to Customer Service   Online Customer Service: Best (and Worst) Practices   How to Survive the Dot.Com Shakeout   Step-by-Step to Your Own Profitable Web Business   Where Do Average People Find Business Success?   What's REALLY Required To Start An Online Home Business?   CRM in SmallBiz: Disappointing Misconceptions

Yesterday, I shared a few birthday beers with a good friend of mine. As well as an interest in fine ale, we also share an interest in the Internet as he is the Webmaster for a local electronics company and inevitably the conversation quickly turned in that direction. Whilst our conversations normally centre around the latest technologies and cool Web sites, this time my friend had some serious complaining to do:

"First those guys in Marketing started poking around my Web site asking about things like page access statistics and click-to-view ratios. Now those suits along the corridor in Finance are sticking their noses in demanding to know about revenue streams and return on investment ratios. Why can't they leave me to manage my Web site and not bother me with all this garbage?"

Sound familiar? If you haven't had a conversation along these lines yet then you will soon, because 1998 is going to be the year when the money well starts to run dry for Web sites and further expenditure will have to be justified just like any other investment. And while it's possible to justify Web site investment in cost savings alone, increasingly the focus is going to shift to real revenue generation.

So how do you make money on the Web? Currently, the most common revenue models give the content away for free with the cost being met through the sale of advertising space or the on-line sales of goods and services. However, for many sites the Holy Grail of revenue generation will be the sale of the content itself.

Major content brand names (with the Wall Street Journal being probably the best example) have had success with selling subscriptions to their services. The key to revenue generation for most sites though, will be the ability to sell content in small pieces, for example a viewing of an individual news story or the one-time use of a Java applet. However, traditional payment methods do not support these small value transactions, as the cost of processing the transaction is higher than the revenue generated.

To overcome this, several vendors are developing micropayment systems. Digital Equipment Corporation for example, has recently launched a worldwide public trial of its MilliCent microcommerce system that allows for the cost effective processing of transactions from a minimum of $0.01 or less to a maximum of approximately $5.00.

Whilst I'm sure that technically these micropayment systems will work just fine, the real key to their success will depend on the ability of Digital and its competitors to market their products successfully to software vendors, financial institutions, content providers and the end user. The content providers will then have the task of persuading consumers to buy their content.

Will these micropayment systems succeed? For now, I don't think so. At present it's all just too difficult for the consumer, having to download and install a software "wallet" and then to set up an account with a broker to buy and download digital cash. And even once set up, consumers are likely to resent being continually badgered for payments no matter how small.

From a content provider's perspective, the real killer for many will be the widespread availability of free information and services: how can a vendor hope to charge for content when it's available free elsewhere? Even those with unique and compelling content will find themselves competing for a share of a small revenue pool.

Will micropayment systems be successful? Let us know what you think.