Posted on 11/11/2001 8:20:33 AM PST by Leroy S. Mort
The Web is an amazing and remarkable phenomena that has changed the way we think about information, publishing, commerce and computers. Most importantly, the Web has had a huge effect on every individual's ability to distribute information to the world. Prior to the Web, there really was no way for an individual to reach a worldwide audience. Today, with the Web, worldwide publishing is simple and instantaneous. Anyone with a computer can publish anything they want, and the entire world can see it a few seconds later. There is tremendous creativity and thousands of new ideas. The possibilities for content and services that the Web can offer seem endless.
While it is extremely easy for any individual or business to publish material on today's Web, one thing is currently missing -- there is no easy way to make money from those Web sites. Three years ago, there were two schools of thought on Web business models:
Today, there are very few good business models that work on the Web, and this deficit has a significant effect. The Web is becoming somewhat like a desert. There are some survivors -- Ebay, Yahoo, Amazon and so on -- but nothing new is germinating in any significant way.
What if it were possible to change things? What if we created a business model for the Web that worked? In other words, what if we could find an easy general way for Web sites to get paid for their content and services? If we could figure that out, new Web sites would surge from the desert floor like an explosion. We would have millions of Web sites producing every sort of content and electronic service that you can imagine. There would also be millions of jobs created in an electronic economy that we only see the barest outline of today.
In this edition of HowStuffWorks, we will discuss the "penny per page" idea, a potential business model for the Web that would allow Web sites to receive direct payment for their content.
This idea is being published here so that people in the Web Community can see the current problem, see the effects it is having, and discuss possible solutions. The "penny per page" idea described in this article is one easy solution that would have a gigantic positive effect on the Web -- it would transform the Web and change the lives of many people in just a few years. However, even if this idea is never adopted, the discussion will be extremely productive.
The Challenge Facing the Web
How can we build a successful electronic economy on the Web?
Originally it was thought that advertising would support free Web sites in the same way that advertising supports free TV stations and free radio stations. Almost all commercial Web sites therefore adopted the "free content with paid advertising" model. Unfortunately, this business model ended up being completely wrong for the Web, and a huge number of sites went out of business by using this model.
The reason that advertising does not work on the Web is because the Web is nothing like TV or radio. TV and radio are linear, and with a linear medium you can force the viewer/listener to pay attention to an ad that interrupts the program. The Web is nothing like that. Instead, the Web is much more like a book or a magazine. People come to the Web primarily to read and see pictures, and they can flip to a new page or to a completely different site whenever they feel like it.
When you go to the book store, you never see free books. It is also very rare to find books containing advertising. Instead, people pay directly for the information that books contain because the information is valuable to them.
The challenge facing the Web today is that the Web is using the wrong business model. The Web needs to adopt a new business model in order to be successful -- in order to reach its full potential. The Web's revenue model needs to involve payment like the book revenue model, but it also needs to accomodate the completely infinite and fluid nature of the Web.
A Penny Per Page
The proposed mechanism for creating an easy, sustainable revenue model for all Web sites has a very simple name: It's called a penny per page.
Here's how it would work. Let's say you go to Google to do a search, or to CNN to read about Afghanistan, or to Amazon to buy a book. Whenever a person looks at any Web page, that viewer will pay a penny. The Web site will receive the penny. It is that simple.
With a penny per page, in five years we would see incredible changes. Here are three examples:
Example 1: A search engine
Google.com gets about 100 million page impressions per day right now. With a penny per page, Google would make $1 million a day, or something like $350 million per year.
Without a penny per page, Google will still improve, but at a dramatically slower pace. There needs to be money to support the development of new features, and right now the money is not there in any significant way. So it's a trade-off: "Free" is probably one of the most beloved words in the English language; but by not paying Google when we use it, we're effectively denying ourselves the increased benefits that our payments would bring about.
Example 2: Any content Web site
Imagine what a penny per page would do to:
Example 3: Any Expert
Imagine a person who has an area of expertise. The person might know anything, from financial analysis to model railroad landscape design to electric guitar repair -- it doesn't really matter. Right now, the person has two options:
With a penny per page, millions of people around the world would be able to publish information AND make money. Conventional publishers would also have a reason to bring existing books over to the Web. The pool of information on the Web will explode.
[* A very common question -- why does the author of a book get only 10%? It is not because publishers are "evil" or "greedy", but instead because of the way book publishing works. To edit, lay out, print (thousands of copies), warehouse, market and distribute a book, the minimum amount a publisher will spend is approximately $100,000. Many books cost much more than that to arrive on the bookstore shelf. That is a very steep cost of entry per title.
Out of every 10 books published, as a general rule, less than half are able to dig themselves out of the $100,000 hole. The publisher eats all of those costs and still pays royalties, in the hope that several books out of every 10 will make a profit. After all of the costs are taken into account, all that's left is about 10% to pay to the authors and still maintain a profitable publishing business.]
Resonance
There are many, many Web sites that started out as a hobby and then made it big. What made them big is a process called resonance. When a Web site resonates, it can grow a very large audience very quickly. Resonance comes from normal human behavior. People tend to do two things when they find a Web site they like: They tend to come back, and they tend to tell their friends. The retention and expansion of audience is resonance.
Napster, of course, is the poster child for resonance. When people found Napster there was a huge probability that they'd come back, and a huge probability that they'd tell their friends and that their friends would come back. So Napster went from zero to 50 million visitors per month in something like six months.
The Web allows any individual or business on the planet to create a Web site and reach a worldwide audience. Anyone can create something, upload it to the Web, and the entire world can see it. Any 10-year-old can learn the technology, and anyone with a computer has the tools, so there is no barrier to entry. At no time in the history of the world has there been this sort of freedom of speech or this sort of worldwide voice for this many individuals. The access and potential is virtually unlimited; resonance then picks the winners.
The Web allows true individual publishing and planet-spanning distribution. What is missing right now is any way for an individual or business to derive value from an innovative Web idea. With a penny per page, we would have a self-propagating combination of business and creativity: instant publishing with instant revenue for any individual who can access the Web.
Under the penny-per-page model, millions of businesses and individuals can try millions of ideas, and if they are successful they will directly and immediately benefit. They do not have to seek venture capital. They do not have to experiment with and invent convoluted business models. They do not have to hire large sales forces to sell ads.
What this means is that the richness and diversity of content and services on the Web will explode. In the process, individual people and businesses will, for the first time, be able to directly benefit from their work. A person with a great idea will be able to make a significant amount of money almost instantly because of resonance.
Changing the Culture
What will people think about the idea of paying a penny per page? Won't people complain about having to pay for the Web?
Anyone who accesses the Web from home pays a monthly fee to an ISP for the privilege. An AOL account is typical, and it costs about $20 a month. MSN and Earthlink are about the same. People in the United States are already paying for the Web; but the Web sites -- the reason people log on in the first place -- get none of it.
Will people complain about paying slightly more per month under the penny per page model? Right now people pay for cable TV, newspapers, magazines, telephone calls, directory assistance, video tapes, movie tickets, DVDs, pay-per-view, CDs, books, ring tones, 900 services, college courses...
The fact that they don't pay for Web content is a historic anomaly. The benefits to be reaped by paying a very small amount of money for Web content are gigantic. Right now, people are actively denying themselves many of the most amazing things that the Web could provide because of the "totally free" World Wide Web.
One of the reasons for choosing a simple approach like a penny per page is because it is such a small amount of money. If the "Give a Penny, Take a Penny" phenomenon is any indication, people don't seem to care about their pennies at all. Imagine what it would be like to actually get some value out of a penny. Here are four examples to illustrate the point:
It's also not going to add up to very much per month. People who log on to check stock prices, look up the weather, read the top news stories and so on might look at 25 or 50 pages a day. They would pay something between $5 and $15 per month for Web content. But let's also take the worst case scenario. Let's say that you sat in front of your computer 8 hours a day and looked at a new page every two minutes without interruption 20 days per month. That would cost $48 for the month. That is the worst case scenario, and it is unlikely anyone is going to do that. The cost will be minimal for just about everyone.
Getting Started
What is the best way to implement a penny per page? There are three possibilities:
Having the ISPs handle billing would probably be the easiest approach if the ISPs can create a common, fair and uniform model for all customers.
The traditional way to get anything done on the Internet is for the Internet community, in the form of existing standards organizations, to create a standard which is then implemented on a non-profit basis. Alternatively, the top 1,000 or so Web sites, working in unison, could do it. Here's how it could be done:
The sites need to work together. If some sites switch and others don't, you will get the same problem that happens now when a site decides to unilaterally charge for its content. If there is not a uniform and super-simple billing model (so that users get one simple, easy-to-understand bill), the thing just won't work.
That corporation will be able to charge a handling fee on the penny that each page receives. That handling fee should be capped at something like five percent.
The whole process needs to be incredibly simple -- something like the process that lets money flow to sellers at Ebay or Half.com.
An unbiased system likethis with no middlemen would have huge benefits in terms of innovation.
Q & A
Is a penny per page the right amount?
The penny per page approach is extremely easy for everyone to understand. A penny per page does not present a large barrier to the payer, and it pays a nice amount to the Web site. It could be argued that half a penny would work, and so would two pennies. The Internet community can play around with the numbers and decide, and it will likely end up somewhere very close to a penny.
Is charging by the page impression the right unit? Why not charge by the byte?
If you pick bytes, then you will see people bloating images and doing all sorts of other crazy things to inflate their pages.
Won't Web sites chop up their content into a zillion pages if they get a penny per page?
Probably not. Banner ads have already caused as much chopping as we will ever see. If sites chop things up too much, they won't resonate and they'll die out.
Why should pricing be uniform? Shouldn't each site be able to set how much it charges per page?
Maybe, but it complicates things. Say you are looking at a list of pages in Google and you want to click on one. Before you click on it, you have to remember to look closely to make sure that the Web site is not going to charge $100 per page instead of a penny per page. If it's a uniform pricing model, then Iou can click on any page without worrying about it, just like you do today.
What do we do about streaming audio and video, and things like MP3 files?
Streaming video is unique because it consumes significant bandwidth. A 10-minute streaming video at 300Kbps consumes upwards of 20 megabytes of bandwidth and might cost the Web site 10 to 20 cents to send it to the viewer. A pay-per-view model might be the right approach. Or maybe it's a dime per stream. With MP3 files, if artists automatically and directly received a dime every time someone downloaded one of their songs, it would create an unbelievable musical revolution.
What would prevent a site from having a page that pops up 100 new pages when you land on it to ream the unsuspecting visitor out of a dollar?
The billing mechanism should track for and eliminate charges for that, as well as for pages that auto-refresh themselves, error and non-existant pages, pages arrived at by pressing the back button, duplicate pages and so on.
People in the U.S. tend to prefer a flat-rate model to a pay-per-unit model. Could there be a flat-rate model with penny per page?
Probably the easiest way to implement a flat-rate model would be to create a cap. Let's say that the monthly cap were $20 per month. Everyone would know that if they looked at more than 2,000 pages per month, they would pay no more than $20 per month. If they looked at less than 2,000, they would pay only for the pages viewed. For people who hit the cap, the billing model would simply divide the $20 paid by the customer by the number of pages viewed and pay the sites whatever amount that turned out to be per page.
Time for Change
But the biggest difference it would have made is in the number of new Web sites that would appear on the Web. Right now, the number of ideas being implemented is severely constrained because there is no way to make money off of most of them.
The thing to keep in mind during the possible transition is this: Would it be worth a penny to you to look up a phone number you need? Would it be worth a penny to you to get a map to your destination? Would it be worth a penny to you to get the answer to a particular question? A penny is an incredible bargain. The fact that none of us is paying that penny right now is putting a huge damper on Web innovation. A penny per page will bring consistent revenue to the Web, and the change that it will bring will amaze all of us.
Let's say that you sat in front of your computer 8 hours a day and looked at a new page every two minutes without interruption 20 days per month. That would cost $48 for the month.
This is where the argument fails, but JimRob becomes a rich man. ;-)
I pay for the connection, and the ISP pays to be on the web...
Anything else is up to the free market
Geee. I like it the way it is. Open. Free. Creative.
The key for the web to 'find itself' is to protect the freedom of the information providers -- if someone wants to give away content -- there should be no middle men. If someone wants to charge a subscription, fine let them, but that would need to be pre arranged to avoid nuisence charges.
I pay my ISP grudgingly, and I know it's high for the service I get.
I won't pay even a penny to look at a web page.
I propose that anyone who writes anything as illiterate as this be banished from the internet for life, on the first offense. That would bring about vast improvements.
Guys like the one who wrote this incredibly stupid article never understood the web and never will.
Let 'em charge a penny a page. Some people will stay but the hobbiests, the creative people will just go back to what they did before. That is using phone lines, or whatever means they can develop, to link up their individual computers. Kinda like the old FIDOnet.
Eventually people would migrate to the new, free web.
The web was based on the free exchenge of information. No one will ever change that.
BTW I work with a fellow who is fairly intellegent in a isolated, chauvanistic sorta way. Despite that he can barely understand computers much les the internet.
He has always viewed it as a way to make money. He can't concieve of anything being free. In fact he resents it.
At on epoint he was trying to talk me into building him his own website called "Hank's Pleasure Palace".
I'm NOT kidding! His concept was this, "There you are harried and hassled from spending maybe an hour or two in front of the computer and on the confusing internet. Where do you go to get relief? Hank's Pleasure Palace! Every day I'll post an inspirational, motivational message along with maybe a nice relaxing picture, maybe a lake or landscape."
"And we'll CHARGE people to look at the pages! Maybe 30 bucks a month! Heck those crazy people who use computers and are on the internet will pay for anything! Look how much money they waste on the silly stuff as it is!"
I'm completely serious about his plan!
Meanwhile every day I have to listen to him complain about how newpapers are better than the web, and how internet use is declining. And also everyday I have to set up the computer and internet sites for him to use, because he can't understand having several windows open or how to navigate the web. The "back" button is a total mystery to him. He swears Bill Gates is Satan and is out to get him personally.
Of course when the web goes down or there's a computer problem he's the first to complain because he can't access it.
Did I mention this buffoon is the NEWS ANCHOR AT OUR RADIO STATION AND WAS A NEWS ANCHOR FOR YEARS ON TV!
Kinda says something about the media doesn't it!
prisoner6
"Penny per page" will become "Penny per cookie"
If we did "Penny per Page" then I have already spent $1.25 this morning. If we do "Penny per cookie (the ads are pages also - grin)" then I've spent $5.65
Ah, but Google does not "own" those pages in the first place. And that opens up another can or worms.
But I bet we do see the day when we have to subscribe to any newspaper online. Too many people can't read any more, and I would imagine that most of those who CAN read are online.
Page per view charges would impede cheap and easy access to information, thereby reducing business productivity, and the rate incremental economic growth.
Let the free market decide how money is made on the Web.
dittos
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