Internet Micro-Payments Are Not the Future of Paid Online Content

Barry Diller has made billions of dollars on the Internet. So when he said that Internet content would be “paid” content within five years I agreed. But then I disagreed.

First off, I have to state that I’m damn impressed by the amount of money that Mr. Diller generates each and every minute on the Internet (his firm, IAC, uses around 30 sites to generate over $1.5Billion a year).  With that type of street cred, it’s hard to argue with him.  And yet, I can’t help but disagree with his recent statements in a BusinessWeek interview that “everything of any value” on the Internet would be fee-based within 5 years.

No, he isn’t wrong about his core statement – I agree that “most” valuable content will be fee-based.  But I think he goes astray with his timeline (5 years) and payment structure (micro-payments).

Follow me with this (I’m taking a leap of faith here):

1. I do not believe that there is that much “valuable” content on the Internet today (as a % of total content). Sure, there is a tremendous amount of “interesting” content out there (ranging from news to blogs to information services), but not much of it is really “can’t live without” stuff – it lacks the research or analytical content/commentary to add value. A CNN (or any) news feed is of interest, but “analysis” of the news – what it really means to me, my family or my business – is of real value (note that some blogs and Wiki’s are great examples of how user interaction/collaboration can circumvent the paid model to deliver value).

2. I think that much of the really valuable content on the Internet is already being paid for (interestingly, Barry’s $1.5B is not a particularly good example, and I don’t see consumers ever paying to use as it exists today). Look at sites like the Wall Street Journal ($1.99/month), or the litany of valuable research and analytical/commentary sites that have successfully migrated their subscribers from “hardcopy” business models to “Internet subscription” business models.  Even “interesting” information often comes with a price (in the form of advertisements). Note that there will always be some type of subsidized content at a reduced cost (or ad-based) – look at the Fox News CableTV/Internet blend for a good example there.

3. The Internet is overloaded with “not valuable” content, and it is only going to get worse before it gets better. As much as I like the extremely varied content available online, there is simply too much of it out there today, and much of it is repetitive news-based information that varies little from site to site (suppose 90% of all news is repeated on 90% of all sites with only about 10% added value). At some point, people will be more inclined to pay for content that they consider “quality” or reliable. [before anybody jumps here, let me state that focused blogs and sites like Wikipedia will likely be one of the best values on the ‘Net]

4. Valued information and information applications will merge even further. To really make information valuable, you need to be able to apply it in an actionable manner, and that means having an application that makes the data usable (and re-usable). E-Trade, MotleyFool and are good examples here. 소액결제현금화

5. Micro-payments are like the Holy Grail (they are better in a Monty Python movie than in reality). There are many who argue that micro-payments (between 1 and 10 cents) are the next logical step, citing the 99 cent availability of music via sites like iTunes.  However, payments at iTunes are essentially a restructuring of the purchase process for a CD, allowing the consumer to purchase individual pieces of the CD (#tracks * .99 = cost of full CD) – a model that I just don’t see translating to the news or journalism markets (I just do not see the market demand to pay – even pennies – to read an individual article of value). Plus, the music that we purchase is tangible (we save it and listen to it over and over again, something you can’t say about a reading a news story).

So what is the answer?

Valuable content is already being paid for today, and that isn’t going to change any time soon. We might find that the price we are willing to pay is a good bit lower than sites would like to charge (and those sites that cannot live with that fact won’t live long). But I don’t think that micro-payments (which will continue to evolve and be a part of future payment systems) are the ultimate answer or even necessary at this point.  Rather, I believe that low-cost subscriptions will likely be the rule for most “non-music/video” content. I would even rank low-cost multi-site or limited-vew subscriptions as more likely than micro-payments.

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