Internet Micro-Payments for “Valued” Content? I don’t buy it.

Barry Diller has made billions off of the Internet. So when he said that all Internet content of value would be “paid” content within five years I thought I would agree. But I just can’t buy his idea of micro-payments for all types of valuable content (content = information). First off, I have to state that I’m damn impressed by the amount of money that Mr. Diller generates each and every minute on the Internet (his firm, IAC, uses around 30 sites, such as Ticketmaster,, Citysearch, and LendingTree, to generate over $1.5Billion a year). With that type of street cred, it’s hard to argue with him. And yet, I can’t help but disagree with his statements that “everything of any value” on the Internet would be fee-based within 5 years (you can read a good summary here on Jon Fine’s blog at BusinessWeek).

No, he isn’t wrong about his core statement – I agree that “most” valuable content will be fee-based. But I think he goes astray with his timeline (5 years) and the notion that micro-payments are going to be required for value-added Internet content.

Follow me with this (I’m taking a leap of faith here):

1. I do not believe that there is that much “valuable” content on the Internet today (as a % of total content). Sure, there is a tremendous amount of “interesting” content out there (ranging from news to blogs to information services), but not much of it is really “can’t live without” stuff – it lacks the research or analytical content/commentary to add value. A CNN (or any) news feed is of interest, but “analysis” of the news – what it really means to me, my family or my business – is of real value.

2. I think that much of the really valuable content on the Internet is already being paid for (interestingly, Barry’s $1.5B is not a particularly good example, and I don’t see consumers ever paying to use as it exists today). Look at sites like the Wall Street Journal ($1.99/month), or the litany of research and analytical/commentary sites that have successfully migrated their subscribers from “hardcopy” business models to “Internet subscription” business models. Even “interesting” information often comes with a price (in the form of advertisements). [There will always be some type of subsidized content at a reduced cost – look at the Fox News CableTV/Internet blend for a good example]

3. The Internet is overloaded with “not valuable” content, and it is only going to get worse before it gets better. As much as I like the extremely varied content available online, there is simply too much of it out there today, and much of it is repetitive news-based information that varies little from site to site (suppose 90% of all news is repeated on 90% of all sites with only about 10% added value). At some point, people will be more inclined to pay for content that they consider “quality” or reliable. [Before anybody jumps here, let me state that focused blogs and community sites like Wikipedia will continue to be one of the best no-pay values on the ‘Net]

4. Valued information and information applications will merge even further. To really make information valuable, you need to be able to apply it in an actionable manner, and that means having an application that makes the data usable (and re-usable). E-Trade, MotleyFool and are good examples here.

5. Micro-payments are like the Holy Grail (they are better in a Monty Python movie than in reality). There are many who argue that micro-payments (between 1 and 10 cents) are the next logical step, citing the 99 cent availability of music via sites like iTunes. However, payments at iTunes are essentially a restructuring of the purchase process for a CD, allowing the consumer to purchase individual pieces of the CD (#tracks * .99 = cost of full CD) – a model that I just don’t see translating to the news or journalism markets where people would micro-pay to read individual articles). Plus, the music that we purchase is tangible (we save it and listen to it over and over again, something you can’t always say about a reading a news story).

So what is the answer?

Valuable content is already being paid for today, and that isn’t going to change any time soon. We might find that the price we are willing to pay is a good bit lower than sites would like to charge (and those sites that cannot live with that fact won’t live long). But I don’t think that micro-payments (which will continue to evolve and be a part of future payment systems, especially for tangible goods like music) are the ultimate answer or even necessary at this point. Rather, I believe that low-cost “micro” subscriptions will likely be the rule for most “non-music/video/commodity” content. I would even rank low-cost multi-site or limited-view subscriptions as more likely than micro-payments.

So Barry, you are right, most of the “valued” content on the Internet will be paid for. We just won’t have to wait 5 years and I don’t think that micro-payments will beat out micro-subscriptions for this type of content.