Calling It In
Not every content provider is the Times or Forbes, however, and many complain that the credit card system makes it tough for a business model to survive on pay-per-view. People seem to want to buy music by the track at very low price points, for instance. Dating services, the fastest growing fee-based content category according to the OPA, often sell connections to other users by the contact. And "Want-to-have" hobby and passionate interest material tends to sell best in small impulse buys. "ISPs such as AOL, MSN, and Yahoo! are also looking to sell pieces of content individually," says Ben Macklin, senior analyst, eMarketer. But these publisher/ISPs already have a billing system with customers, so they will do things such as sell incremental access to ten music downloads and add $8 to an existing bill. For the rest of the publishing world, however, the search goes on for an alternative.
At transaction solutions provider PaymentOne (formerly eBillit), CEO Lynam wants to sell publishers his relationships with 1,400 local phone carriers, where he can add nickel and dime charges for a fraction of the cost of a credit card transaction, he says. He pays 50 to 60 cents to add a page to a local phone bill and then about 12 cents for each additional line item, so that the billing overhead declines substantially for him and the content partner. Like others in the transaction space, Lynam is hoping to convince content provider partners that consumers are ready to pay for more content if the prices are low enough and the process is painless enough. When he offers consumers a suite of billing options, he says that they tend to choose phone billing. "Consumers love it," he says. "It's the number one option when people sign up."
Working with etailers for now, but hoping to attract gaming, music and other media, Lynam says, "in 2003, you'll see a few of the top twenty content providers turn up on our service." PaymentOne billed about $250 million in 2002 and expects to bill $500 million in 2003, says Lynam. The jury is still out on the phone bill approach for content, however. Credit card facilitators counter that publishers themselves voice little interest in this method. "In the U.S., it looks like credit cards are still going to prevail as the primary means for payment on the Internet," says Leslie Poole, CEO of Javien Digital Payment Solutions, which services Forbes. com and Kiplinger.com.
Pay As You Go
Some argue that the holy grail of content micropayment solutions might be the increasingly ubiquitous cell phone, which is both a content delivery vehicle and a billing system. Jupiter MMXI estimates that Europeans already spent 590 million (Euro) on mobile phone ring tones, logos, sport scores, and stock updates to their cell phones in 2001, and the research company projects that by 2006 spending on mobile content (3.3 billion Euro) will far exceed money spent for Web content (1.7 billion Euro). Widespread acceptance of the phone-based Short Messaging System (SMS), which lets users add charges for content and products quickly to their cell phone bills, "is good news for the media industry," says Jupiter analyst Oliver Beauvillain in his report. In fact, Jupiter actually encourages content providers to use their Web presence to push people to the publisher's branded content on mobile phones because that is where the consumer is used to paying for content and so more likely to pony up an extra Euro or two.
In the U.S., transaction technology provider Qpass says it already detects this same phenomenon here. Qpass made its name as an aggregator and processor of small transactions for NYTimes.com and Corel, among others, but now focuses mainly on the wireless carriers and network operators who bill incrementally for added content services. The old Web-based model "never really took off, and it was never going to be a core business," says Tom Trineer, vice president of products.
Cell phones are not hobbled by the Web's bad habits; people expect to pay for content on mobile devices because they already do. Today, U.S. consumers buy cell phone content that personalizes the phone or entertains them: ring tones, greeting cards, and games for between 50 cents and $5, says Scott Blankskeen, director of product marketing at Qpass. But all of the major media companies, including AOL, MTV, and Newscorp are experimenting actively with bringing more informational content to the platform. "They are excited by what they see in Asia," says Blankskeen. "Within two months of launching with our first carrier, we saw one service from one provider exceed the usage from our biggest Web provider. Individuals are purchasing repeatedly and trying to purchase dif- ferent types of services for a broad range of content."
Qpass argues that cellular networks already have metering and billing systems in place, and their infrastructure was built to handle nickel and dime charges, so they may give content providers the lowest transactional overhead on microcontent. "The three major carriers are seeing up to $9 a month in pre-mium content fees in which 85% to 90% go to content providers," says Blankskeen. For instance, AT&T charges providers about 12% of the retail price on a transaction, which Blankskeen feels is a bargain compared to the various fees associated with credit cards.
With such a large installed base of cell phone users, Trineer argues, penetrating just a fraction of the audience with microcontent could pay big. "The revenue streams can be millions per month. That is what we are seeing in Asia," he says. "You don't need every grandmother buying Java games to make it a real business."
Zap Into the Future
Well, maybe, says Digital Deliverance's Crosby. While he credits Qpass for shifting its model to wireless carriers, who do indeed need a content and service transactional back end like this, he warns that international precedents don't necessarily apply here. Both local and cell phone billing schemes in the U.S. suffer from having too many payment systems vying for market share. "Here in the U.S. it's very hard to appreciate or judge the cell phone billing system," says Crosby. Carriers use old and incompatible networks that are not yet conducive to the sort of seamless and universal payment system he and others feel is needed for content micropayments to work.
Crosby thinks that the cellular SMS micropayment system emerging in Europe is a better way for consumers to pay for content and for Web and mobile publishers to bill in small increments. SMS users can call a billing number for any vendor to have a charge applied to their monthly cellular bill and get in return a text authorization code, which they can use on the spot to buy a mobile service or gain access to a small bit of Web content. British publishers FHM.com as well as The Sun and Times newspapers already use SMS schemes to charge for small content purchases online. And because it is text-based messaging, SMS also opens up yet another publishing platform for real-time alerts.
SMS may be most convenient, but for now it is no bargain for publishers. The European telcos take as much as 50% of the purchase price in commission, and users pay for every SMS message they send. As SMS usage increases, this rate should come down appreciably, Crosby argues. The FCC mandated interoperability among U.S. cellular networks that support SMS by 2006, so the approach will become increasingly viable over the next few years, he contends.