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Tuesday, September 07, 2021

Is there anything iTunes Music Store can’t do? It’s made digital music into a legitimate business, it’s practically re-oriented Apple’s business model, and now, it’s helped revive the stillborn micropayment model for ecommerce.

Actually, iTunes isn’t the only thing helping to popularize nickel-and-dime transactions on the Web; PayPal and similar services share some of the credit. But even PayPal acknowledges that Apple helped kick it all into high gear:

For officials at eBay’s online transaction subsidiary, PayPal — who say the company is already handling millions of low-dollar transactions-it is clear that digital content represents the most promising opportunity for immediate growth in micropayments. Peter Ashley, director of business development for San Jose, Calif.-based PayPal, believes that with iTunes, Apple drew up a template that many other companies will try to emulate.

“Once there is ability for more companies to facilitate smaller charges, going as far down as pennies, nickels and dimes, without incurring the same sort of credit card transaction fees you see today, new businesses will open that simply could not exist in the past,” Ashley said.

The executive envisions transaction systems soon allowing e-commerce companies to process any transaction, no matter how small, letting people creating new kinds of digital content, such as games or ring tones, to more profitably market their wares. Ashley said that PayPal’s role as an established leader in online transaction processing will give it the ability to watch other firms test the waters with different micropayment systems before it begins more actively pursuing the market.

To get around the prohibitively high credit-card usage fees, companies wishing to employ micropayment transactions needed sheer sales volume to compensate. The popularity of digital music as a commodity was established with the fileswapping movement; when iTunes demonstrated how that movement could be monetized (not a sure thing, but definitely aided by tying it to the iPod), that volume was realized. Similar digital products like ringtones and games are natural extensions for this market.

Of course, small-scale transactions aren’t necessarily a means unto themselves:

“Subscriptions are what every vendor wants to sell, but you have to start somewhere with the consumer, and the other types of micropayments can allow companies to do get in the door with buyers,” said [Mercator Advisory Group analyst Nick Holland]. “A lot of content companies are going to look at micropayments as a stepping stone to future subscriptions.”

I see that as a short-term approach, since subscriptions are still the easier model to pull off. Not that subscriptions will ever go away. On the contrary: As more media products are offered through ecommerce, subscriptions will be the desired delivery method, much as they are in old media (periodicals). But, as with old media, expansion of micropayment capabilities will mean that subscriptions won’t be the only way to sell. Just as newsstand sales prime the pump for more profitable subscriptions, so will micropayments for ecommerce.

- Costa Tsiokos, Tue 09/07/2021 11:36:32 PM
Category: Internet, Business | Permalink |

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