Your Money’s No Good Here

As I write, those of us on the East Coast are preparing for Hurricane Isabel, one of the biggest storms to hit the Northeast in decades. While I’ve been running around trying to clear my yard of deadly projectiles (scary stuff like lawn chairs, grills, and potted plants), I started thinking about the other storm we in the Internet biz have been dealing with lately: the gathering storm(s) around file sharing.

Maybe I’m stretching the metaphor a bit, but there’s no denying issues of ownership in the digital age are big news, particularly in the music biz. The RIAA has kicked the subpoena machine into high gear, sending out summons to everyone from big ISPs (Verizon) to 12-year-old girls who happen to like downloading MP3s. Verizon is resisting giving up subscriber information. Parents all over the country fear their kids will get them in trouble over their file sharin’ ways. In the meantime, CD sales are down, sharing continues, and… that’s a whole other debate.

I’d like to step back a moment and look at the file sharing issue (or “piracy,” depending on what camp you’re in) in a larger context: how we marketers and sellers of goods online deal with the customers who potentially have the most cash and the biggest obstacles to spending it online: kids.

I recently wrote an article comparing all the pay-to-play music services available. While some are kind of crappy (I won’t name names), others kick proverbial butt. Services such as Apple’s iTunes store, Emusic and Rhapsody Digital Music Service represent a very real, very viable alternative to illegally downloading MP3s via Kazaa. They’re easy to use, have great selections (depending on what you’re into), and are much more reliable than file sharing programs (not that I’d know). There’s only one problem: All require credit cards.

It’s a big problem. Think about it: you’re a 14-year-old who wants as much music as you can get your mitts on. You know there’s “free” music via file sharing, or not-free music via these services. You could ask your parents for their credit card number, but… heck, it’s just a lot easier to download the free stuff, right? No one’s gonna know.

According to a recent Harris Interactive study, 8- to 21-year-olds have a combined wallet of $172 billion per year (yes, with a “B”). Pre-teens spend an average $946 per year; teens spend a whopping $3,309 per year. Overall, these kids only save 19 percent of their total income. They’ve got bucks to spend and spend they do. Without credit cards, they’re not spending online. In fact, only 15 percent buy things online, with boys outspending girls 1.7 times, even though they spend more time on the Internet than they do with any other medium.

It’s no wonder kids don’t buy online: They can’t get credit cards (the most prevalent form of online currency) until they’re 18. This doesn’t mean they always use cash. This article reveals close to 60 percent of kids have used prepaid phone cards or gift cards. As anyone who knows a teen will tell you, they don’t have any trouble figuring out how to use them.

OK. Kids have money. They like to spend it. They use the Internet a lot. But their ability to shop online is hampered by the fact that they don’t have ready access to a payment means. I think you see the pattern here.

To boost e-commerce, raise online revenues, curtail MP3 sharing, movie pirating, and software stealing, we must come up with a way to let kids translate their spending power from the cash economy to the online economy.

Yes, I know there have been many “electronic cash” and “digital wallets” attempts in the past, and I know services like PayPal and pre-paid credit cards can fill the gap. But they’re cumbersome, difficult to use, and often require more financial know-how than kids possess. No, what we need is something just like cash, as widely accepted as a major credit card, so kids can buy just about anywhere with cash. We need a universal NetCard.

What’s a NetCard? Like prepaid phone cards, NetCards should be available in places where kids shop. Malls and convenience stores are obvious places. And, like prepaid phone cards, NetCards would be purchased for set amounts, used once, and tossed when they’re used up. They’re anonymous, easy to use and (above all) simple. A kid who wanted to subscribe to an online music service could go to a 7-11, buy a $20 card, go online, enter the number and get a month of service. Simple.

I know there are many barriers to implementing this kind of system. First, it would have to be standardized and work through existing credit card networks. It’d have to be secure. It’d require some big infrastructure changes. It might even require legislation. Big barriers, but not insurmountable ones and no worse than a lot of the hurdles we jumped over in the early days of e-commerce.

Most important, it has to happen. We’ve reached a point where the music industry should demand such a solution rather than try to sue their way out of their predicament. We’ve reached a point where those who use the Web the most are shut out of one of its most important aspects: e-commerce. We’ve reached a point where the Internet is such an important part of people’s lives many of us couldn’t imagine living without it, yet we leave financial barriers in place that shut others out.

E-commerce continues to grow, but the rate is slowing. A true electronic cash solution could start a boom all over again.

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