Making Cents

Micropayments could finance e-government services a few pennies at a time.

by / November 21, 2002
Aside from adult sites, which have always been profitable, it has become increasingly difficult to make money on the Web. Business models that burst upon the scene with great bravado and gusto now lie discarded in the grass, their bones baking in the sun, the stink of death warning others away. Feeble attempts to replace these models with banner ads and pop-up interruptions gain little headway and embarrass those of us who have realized that annoying people is usually a bad way to get return business.

So how will the Web survive? If there's no money to be made, is the Internet doomed to join the eight-track tape and the beta video format? How will state agencies recoup the costs of putting their services online if no one is willing to pay?

Well, there is money to be made. Quite a lot of it, really. And you don't have to annoy anyone to get at it.

Currently, one of the most common ways to do business on the Web is through subscription fees. The problem with subscription fees is they tend to be an all-or-nothing proposition. You pay for all the services under that fee; or you don't, and you get, well, nothing. Users usually aren't allowed to sample the product, and the investment process can often be too intimidating to warrant what a user may get in return. Subscription fees are also the exact opposite of what the Web is all about: freedom of information. Subscription fees limit one's access to information the same way a roadblock limits access to a road. If you aren't willing to pay a large fee up front, you aren't going anywhere.

Another recent trend in trying to squeeze money out of the Web is charging convenience fees for government services. This appeals to government agencies because not only do they save money, but they make a little extra in the process. However in most cases, users again find themselves annoyed, especially once they become more Internet-savvy and realize an agency saves money by Web-enabling its services. Why pay more to save the agency money? Granted, there are a few situations where being able to do business with the state from the comfort of the home is worth an extra dollar, but these exceptions are few and depend heavily on the state's demographics and infrastructure.

Painless Payments
So where is the money, and how do you get it? The future of profitability on the Web lies in micropayments. With micropayments a user registers a credit card once, and every time the user accesses valued content, a tiny fee is deducted from the prepayment. A visit to the online reference section of a state library, and the user's account is debited 1 cent. A visit to the address change section of the Department of Motor Vehicles site, and the user is debited another cent. It may not sound like much, but for sites that generate high traffic and receive a lot of repeat visits - like many of those operated by government agencies - those pennies quickly add up to a chunk of change.

How much? Let's take my favorite state government site as an example, the commonwealth of Virginia portal . Say the home page of the portal is considered very valuable to users; it is updated frequently with current e-government information and gives access to a variety of important services. That page gets about 3.5 million page views a month. At 1 cent per page view - if that's how it is debited - that's $35,000 a month for just one page.

Instead of a few people paying for it in huge and painful chunks, thousands of users pay for it in miniscule pinpricks they hardly notice. It's better than taxes: You may never use the services your
taxes are paying for, but with micropayments you're getting information for your money. You probably lose more money every month in your seat cushions than it's going to cost you.

Micropayment Mechanics
The basic concept is fairly simple. The complicated part is in the mechanics. A payment gateway is needed to handle the transactions, which is tricky because credit card processing fees currently make charges that would qualify as micropayments cost-prohibitive. What state could make money charging 1 cent for something that cost it $10 to process?

Beyond the payment gateway, one must decide what format to use, and what sites will be part of the micropayment network. Furthermore, jurisdictions must determine exactly which pages are valuable enough to charge for, and which pages should be free as a means of getting users to the valuable pages.

An extra hurdle for the government sector is the politics behind what the public should or should not be charged for, even in miniscule amounts. The Virginia home page example mentioned earlier fits this scenario as well. It could be argued that a state's home page - no matter how valuable the content - should be free just as walking into a library is free. Of course, there's also the counter argument that even free government services aren't free; we pay for them one way or another. Settling issues such as this could eat up quite a bit of discussion time before anyone even addresses the technical issues.

Pioneering Players
This is not all pie-in-the-sky dreaming, though. Pioneers are already blazing the trail for the rest of the world. A Virginia-based company called microCreditCard already offers the ability to make small payments (10 cents and higher) on the Web, and it's only a matter of time before "small" reaches "tiny." NIC , the company that helped Kansas build the nation's first e-government portal in 1991 and now manages online services for 25 state and local governments, has entered into the early stages of exploring micropayments for state government needs.

It's a rapidly changing business out there on the Web, and you have to stay one step ahead at all times. Otherwise, while you're deciding if your brochures should say "cutting edge" or "bleeding edge," some other company will roll over your bottom line with the next big thing, and you'll find your $100 million IT investment netting nothing but dust. You'll be left standing confused and battered, holding your unplugged Atari 5200 joystick and wondering where your stock options went.

Chris O'Kennon is webmaster for the commonwealth of Virginia and the portal architect for VIPNet.
Christopher O'Kennon Contributing Writer