Never Too Cheap to Meter

Every bit of content has a value. A price can be set for even the most commoditized content. As electricity never became “too cheap to meter,” information’s value will never be too cheap to measure, no matter how wired the home or office.

A content item’s value isn’t the price asked, but the price people will pay.

The value for online content items can vary by magnitudes. A single day’s use of a research report about K-Mart Corporation’s anti-takeover defenses has a value of $80. A sewing pattern for a long-line skirt has a lifetime value just short of $8. And an Associated Press story about nothing really happening that day in Congress probably has a realistic value of only $0.008. That item appeared on 2,500 daily newspapers’ and broadcasters’ Web sites.

Value of a steady flow of content can likewise vary. As examples, 600,000 people find the value of access to The Wall Street Journal Online worth paying $39 to $79 per year. A similar number find the value of romantic possibilities to be worth up to $300 per year ($25 per month) at Match.com. Only one hundredth as many worldwide find the value of a premier English-language source of news about Hong Kong and China worth $32 per year.

The problems most online publishers face nowadays are either they want to charge more than their content is realistically worth online or they have no transactional mechanisms to process the realistic value of their content.

Charging What Content Is Worth

The solution for the first problem is to educate publishers. To paraphrase a saying from Detroit, online isn’t their fathers’ media vehicle. Online is a different vehicle. It doesn’t operate the same way as traditional print vehicles. Just because local residents value a steady flow of local news in a convenient printed format so much they’ll pay $8 per month to have a kid fling it onto their doorsteps every day doesn’t mean the same content, offered for real-time retrieval, viewed one story at a time, within the confines of a computer monitor, has the same $8 monthly value to those consumers.

Frustrated by that, quite a few publishers pontificate about “educating consumers to pay for online content.” What’s really happening is they are gradually learning the value of their content is a lot less when it’s online. The market is teaching them that.

Collecting What Content Is Worth

This leads to the second problem most online publishers face: How do you charge for content if its actual online market value is radically lower than in traditional media?

A hypothetical example might be The New York Times’s Web site. Online consumers won’t pay several dollars per month to access that site. Perhaps they’d be willing to pay $0.01 to view a story on the site? NYTimes.com recently logged 140 million page views per month. At $0.01 per page, that represents $1.4 million per month in revenue.

The obstacle is there isn’t yet an effective mechanism for processing such tiny transactions. Credit card companies and their transactional consortia charge merchants a minimum fee to process each transaction — often a minimum fee plus a percentage of the transaction. If the average consumer were to see five NYTimes.com Web pages at $0.01 each (a total of $0.05 per visit) but a credit card company charges $0.10 per transaction, there’s no point in NYTimes.com charging that. The value of each item of its content is lower than what transactional mechanism can profitably process for the site.

Most current microtransaction systems (Clickshare, Microsoft Passport) attempt to solve this by aggregating every consumer transaction until the total reaches a level where it can be profitably transacted through existing processing mechanisms. A passable solution, not an ideal one. Consumers must first set up accounts with whatever microtransaction system a site uses. Different sites use different, non-interoperable systems. There doesn’t appear to be a universal microtransaction system.

But appearances may be deceiving to U.S. residents.

We North Americans use electronic information devices in different ways than our counterparts elsewhere. A plurality of us access the Web only through AOL’s filter. Most of us carry mobile phones linked to cellular networks that are incompatible with one another. In contrast, most people in the rest of the world get Internet access directly and carry mobile phones functioning on the same basic network. There are advantages to that.

One advantage is SMS, the ability of mobile phone users to send and receive brief text messages to each other or to send messages between users and companies. Nearly half a billion SMS messages are sent each day.

Another advantage is the telephone system is perfectly capable of processing microtransactions (also true of U.S. mobile systems). Are you billed $0.05 per minute for long distance calls? Or $0.01 per minute to call someone 20 miles away? Those calls are microtransactions. The global telephone grid is a universal system for processing microtransactions.

Many of you have probably read how European consumers can buy soda by dialing a vending machine’s number from their mobile phone. A can drops out of the machine and the charge shows up on the consumer’s next phone bill. Why can’t such mechanisms be adapted for paying for online content? Want to read something online that costs $0.02? Dial a number displayed on the site. The amount will be charged to your phone bill. You don’t have to enter a credit card number because your phone identifies you and your billing information.

If you’re in London and the site you want to pay is in Singapore, you’d be reluctant to incur long distance fees to Singapore. That’s where SMS comes in.

SMS fees are still a bit high for processing microtransactions; they average $0.10 to $0.20 per message. But that’s fixed for messaging anywhere in the world, and the fees will soon drop. If the fee were $0.01 per message, then a charge of $0.02 per story becomes possible. If the phone company keeps one half and the publisher keeps the other, NYTimes.com and other publishers could earn $0.01 per page view.

Promising developments have occurred in this arena over the past two months. But I’m out of space, so I’ll discuss them in my next column.