Save Your Pennies, E-Shoppers!

I know several savvy shoppers who use Amazon.com just for the customer reviews of products, which turns out to be a good news/bad news proposition for the King of all E-tailers.

What's good? Well, the company is providing a killer service by compiling those reviews. However, the bad news is that many of those same people often buy elsewhere after reading them.

So Amazon gives away that information and gets no sale. Sure, some goodwill is built up, but guess what? All the goodwill in the world won't pay the bills or convince analysts to upgrade your bottomed-out stock.

Now, what if that information cost a penny to view? Or even half a penny? Good question, but not the one that should be asked.

Seems to me the real question is, doesn't all the recent attention paid to such "micropayments" indicate that the e-commerce model we all know and love could be deeply flawed?

Woe to the industry that needs to pass the hat for pennies to stay in business.

A Penny a Day

The great part about the micropayment proposition is that it can be applied across the Web, from the New York Times' free site -- where a surfer can read the day's paper gratis while others pay at newsstands for the exact same product in paper form -- to search engines like Ask Jeeves that actually can find good information on the Web.

But let's leave the content sites aside for a moment. The value proposition is different there. The question is whether e-commerce companies can add to their revenue streams this way. And the answer had better be no.

Slow Starter

Now, micropayments haven't exactly crashed onto the scene. A report by consulting firm Young & Rubicam, called "10 Trends for 2000," cited them as the "prevailing business model for selling" information online by the end of this year.

Not quite. But this idea may gain a whole lot of momentum in 2001, thanks to the profit-seekers and a maturing infrastructure being provided by players like Compaq, which offers MilliCents, and IBM (NYSE: IBM), which has unveiled Micro Payments.

Don't be fooled -- pennies add up. Only Amazon knows for sure, but it's likely that thousands of people a day click on those customer reviews. Extra revenue every single day for doing nothing more than setting up the collection system? Seems like a pretty sound way to go.

And if a company can add a stream of payments for information to a river already flowing with advertising revenue and e-commerce income, it may have a stronger business model all the way around.

Rough Road

But the transition from free to for-fee is not going to be an easy one. And the real question has to be whether it would even be worth it all to make that trip. What are the costs?

Well, the aforementioned goodwill for one. If the Web had grown up as a pay-as-you-go world, no one would bat an eyelash at micropayments.

Okay, but it didn't. In fact, everything about the Internet -- except the process of gaining access, which has proven to be something that you just can't give away without losing your shirt and pants -- is free. The philosophy of the Web is free.

Value Proposition

So there will be culture shock, at least initially. Companies that feel confident they can ride out that initial blast of rebellion may be the first to go this route. But even they will be making a grave mistake.

Let's face it, there are things that are commodities, and things that are free. Back to the Amazon example: That information is used so much because it is right there, waiting to be used, for no charge. Start putting a tollbooth between users and that customer input, and you upset the entire dynamic.

After all, e-tailers don't have stores where customers can get out of the rain or try on clothes in a mirror. These disadvantages have to be made up elsewhere. The added value an e-tailer offers is really aimed at making up that difference. In other words, it's not really added at all.

But this isn't just a cry for keeping the Web free, though that would be nice. It's a plea for not giving up on the basic underlying business model of e-commerce: "Company A" sells "Shopper X" something, and collects money.

If "Company A" has to entice that shopper with some added features, that is part of the cost of doing business. If that added cost doesn't fit into the profitability matrix, then it's time to re-examine the basic assumption that has brought us to this point.

Trying to balance the books on the backs of customers by charging them to click through is a certain recipe for disaster.

What do you think? Let's talk about it.