Published October 30, 1998

Three Microcommerce Business Models

The use of microcommerce systems, which allow vendors to sell low-ticket items at a profit, will not only change the way electronic business transactions are conducted, but will allow for value-added content and provide new business models for online vendors.

According to Russ Jones, director of marketing for MilliCent, Digital Equipment Corporation's microcommerce system, such systems "are all trying to solve the same basic problem: How do you casually pass value between people who surf the Web and people who provide content?"

Unbundling Allows for Small Amounts of Content to Become Profitable

Jones believes that microcommerce "is going to open up new types of content that are on the Internet now. We don't see MilliCent replacing things like advertising. We've designed the system in such a way that it can be smoothly added to an existing Web site to be used with advertising and free content."

Due to low transaction costs, microcommerce allows vendors to unbundle electronic content and sell it profitably in small units over the Internet. Smaller profit margins allow greater flexibility, especially in the publishing, software and online gaming industries.

Publishers: New Subscription, Per-story and Archive Models

Publishers have been particularly constrained by current e-business models. With a microcommerce system, they can profitably provide subscription access by the month, week, day, hour or even minute. They can simultaneously offer subscriptions for only certain features, sections, or columns, as well as charging per click for other items.

Microcommerce can encourage publishers to offer previously unavailable content, such as archived issues. According to Jones, a publisher "might have seven years of archives that aren't available on their Web site because they don't want to give it away free." With microcommerce, they can now sell these articles or issues on a per-click basis.

New advertising models are opened up for online publishers, as well. Readers can choose between an advertising-free "premium" subscription or a cheaper subscription with advertisements. Advertisers can sponsor contests giving respondents the chance to win a free subscription, or can "pay" readers who look at ads with tokens that can be redeemed for additional content with that publisher.

Software Vendors: Updates, Templates and Subscriptions Become Available

Software developers could offer small unbundled components, such as updates, patches, templates, dictionaries, Java applets and ActiveX components at a profit, instead of giving them away free or waiting to sell them after several are collected in expensive mass packaging.

Revenue models available to software developers and distributors can be combined in any number of ways. Developers can sell subscriptions to regularly updated applications or applets or offer tiered levels of service, giving upscale users preferred access and download priority. Basic users would be charged a lower fee for regular access. Advertisers can offer rebates to users who view ads posted on developers' sites, and developers can give out "loyalty points" to frequent customers.

Online Game Providers: Metered Access, Extra Features and Matching Players

Microcommerce allows online game providers to charge pennies, nickels or dimes for metered access. Single-user games can charge different rates for different skill levels, while rewarding players with electronic cash, additional playing time or access to special features. Game vendors can even sell extra "goodies" in action games, such as more fuel, a weapons upgrade or protective shields.

In the multi-user game market, other revenue options become available. Users could pay a small fee to be matched up with players with a similar skill level, and highly skilled players could sell challenges to others to play for a set period of time. In head-to-head competition, the losing player could be charged while the winner is not.