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Mark Grossman

Internet Micropayments

22 February 2001

In early 1997, I wrote a column that predicted that micropayments would become the dominant revenue model for information-providing dot-coms like Using my crystal ball, which is now in the shop for an overhaul, I wrote, ``I believe that micropayment-based websites will have more potential for profit sooner than websites that solely rely on advertising.'

Reviewing my predictions four years later, it's clear that I was onto something when I expressed misgivings about advertising as a revenue source. All you have to do is read about all the pure online information services like that are cutting back and you see that advertising alone is rarely enough to turn a profit.

Now that I'm done patting myself on the back for nailing the prediction about advertising, I have to say that my optimistic predictions about micropayments missed the target by only about 50 billion light years.

In Internet terms, a ``micropayment' is an extremely small electronic payment made while you surf. The idea is that while you may not be willing to pay 25 cents for every story you read, you might be willing to pay a half penny, especially if the payment process is invisible to you.

In 1997, I wrote, ``One of the biggest problems with the Web today is that most companies cannot figure out how to directly profit from providing information on a website.' Fast forward to today, and it's still true.

My old column continued by saying, ``[T]he sale of goods is not what the Web does best. After all, until Scotty can beam it down, there remain just a couple of minor technical hurdles to pulling a new shirt out of your modem. '

``What the Web does best is information. The Web is absolutely positively the best way to transmit unlimited amounts of information. The problem -- very few companies have found a truly profitable way to sell information using the Web.'

Back then, I thought that micropayments could be the most profitable way to sell information over the Net and I still think so in 2001. The problem with my thought is that nobody's making significant money with micropayments.

There are countless reasons for this. It starts with a complete lack of a standardized and simple system to implement micropayments. Until a micropayment system is built into Netscape and Internet Explorer, micropayments don't stand a chance.

The problems continue with consumers not being familiar or comfortable with the idea of paying for content. Let's face it, we all like to surf the Net and get lots of nifty content for free. This party can't last forever though. Something has to give.

It should be obvious to everyone that advertising alone won't be enough to support even the best information sites. What's ``giving' today is a cutback in the quality of what's being offered on the Web.

I'm no longer optimistic that micropayments will become common soon. Instead, I suspect that we'll see an increase in ``subscription-required' systems like The Wall Street Journal. With these systems, you'll have to pay a flat monthly fee to get in. It'll be take it all or leave it all.

They won't work for most websites any more than advertising. The problems with subscription sites are endless.

Let's start with the issue of how many sites can and will the average individual subscribe to? If you pay for The Journal, will you pay CNN too? And where does this leave websites with a narrow focus?

Let's say you want a really good movie site because, well it's Saturday night and you're going out. Will you pay a dollar a month for a good movie site if your local newspaper has online movie information?

A micropayment system resolves these problems. Want to read Dave Barry online? It'll cost you a penny. Want a movie listing? It's half a cent or maybe a quarter of a penny. You don't have to make any big decisions. You just pay in palatable increments as you go.

Don't want to pay? Then tell your browser to not make any payments.

I still believe that micropayments are the way to go -- just not yet. You don't want to be too ahead of your time. I think that several years from now, we'll categorize Web history into three parts.

The first-generation Web had lots of free content based on an advertising model that failed. The second generation will have had subscription-based content and it will have failed too. The mature, third-generation Web will be characterized by information being sold online for micropayments. See you in the future. We'll see how my crystal ball did.

Internet Micropayments is republished from
Mark Grossman
Mark Grossman