The News Ė 05/01/01
Micropayments Are Neither Micro, Nor Payments. Discuss.
Many folks are forecasting that micropayments are a coming
thing. Never mind that theyíve been coming since at least 1995. Back then,
I remember sitting in a meeting with Nathaniel Borenstein who was pitching
First Virtual Holdings and their e-cash solution. Micropayments were going
to be the Next Big Thing (NBT). People would retail their information or
other downloadable goods for pennies or fractions of pennies, First Virtual
would roll up the transactions, skim off a transaction fee, and pay the
content owner once enough money had accumulated. It was a brave new world
First Virtualís payment system didnít make it. Borenstein, a
true Internet innovator whom I wrote about in January, now is
Chief Scientist for NetPOS (thatís Point Of Sale). NetPOS is selling an
Internet Point of Sale (POS) system that uses the Application Service Provider
(ASP) model to provide real-time purchasing information to a central site.
They aim to replace cash registers, which definitely canít be used for
BTW, Thereís a bit of First Virtualís history preserved in the
ancient Downtown Anywhere site (last
updated, 1996) if you want to make like Disney and stroll down the virtual
main street of the retro-future. This was the demo that Borenstein pitched
us so long ago.
So, anyway, micropayments have been imminent for years, and
now, wireless providers are resurrecting them as the NBT for m-commerce, or
mobile commerce. Recently, Australiaís Telstra announced a micropayment
trial using mobile phones to buy soft drinks. This has been done already in
Finland, and it does sound cool. One major difference between the
micropayments of the First Virtual era and today is, pop costs a buck in
most vending machines, and thatís not really micro, in my book.
John Brand of the Meta Group calls the effort ďcute (and
mildly useful).Ē But Brand is not too optimistic about the long term use of
such technology. ďHowever, the infrastructure costs of networking these
machines and providing the billing applications ensure this will remain a
niche play for some time. However, we expect to see telcos move much more
aggressively into this Ďembedded servicesí space during the next 3-5 years,
as the competition for control of the customer relationship intensifies.
OK, thatís two howevers in a row, so itís hard to tell what
Brand means about telco aggression. However, there are others who donít
think the micropayment thing will ever fly. Clay Shirky, of The Accelerator
Group, is one of them. I wrote about his article, The
Case Against Micropayments, in a stratlet a while ago, but that got
caught in the bitbucket, and so Iíve recently reposted it. Basically,
Shirky argues that, for micropayments to work, at least for information,
users have to simultaneously believe that the information is worthwhile
(expensive) and that the information is not worth all that much (or free).
This doesnít seem to be a problem for a Coke; you know what itís worth, and
youíre likely to be willing to pay for it if youíre thirsty. But what about
a business transaction or a white paper, or maybe a special search?
Northern Light has
tried to make a business out of selling reprints of newspaper and magazine
articles at $2.95 apiece. Despite having more than 50 million articles, I
canít imagine itís working that well. On the other hand, Northern Lightís
last round of financing was in 1999, so they must be doing something right.
So what does this mean for businesses? Iíd watch the
micropayments effort closely, especially if you sell something that can be
bought on impulse. There are many problems to solve, not the least of which
is, what do you do when someone steals your phone? Will payment enablers
indemnify you against fraudulent use of a phone for payments like credit
card companies will? (BTW, and slightly off topic, did you know a thief can
use your Check Card without ID or your PIN? And that banks will cover the
fraud, but make you carry the charge in your account while they
If these and other issues get hammered out, the cashless
society may be at hand.
Canít Get Enough of ME?
In the unlikely event
that you want more of my opinions, Iíve started a Weblog. Itís the
fashionable thing for pundits to do, and Iím doing it too. A Weblog is a
datestamped collection of somewhat random thoughts and ideas assembled on a
Web page. If youíd like to subject the world to your thoughts, as I do, you
can create your own Weblog. You need to have a Web site that allows you FTP
access, and the free software from www.blogger.com.
This allows you to right click on a Web page and append your pithy thoughts
to your Weblog.
Iíve dubbed my Weblog
entries ďStratletsĒ, and they are available at www.stratvantage.com/stratlets/.
Let me know what you think. Also check out the TrendSpot for ranking of
the latest emerging trends.
to Mikeís Take