May 27th, 2008
We got your microtransactions right here
Ever since the Web was spun, nearly 15 years ago now, one story has come around, and around, and around like a bad penny.
A penny here, a penny there. Buy this story, it’s super-cheap. And of course there are always tales of a mysterious land where it all works.
With the merger of SaaS and cloud computing, the subject has drawn new urgency. And Matt Asay blows by the answer today without even knowing he’s passed it, like a BMW going past a fruit stand.
We got your microtransactions right here:
Anyone wanting to see where software is going need only study the railroad. Or, in Google’s case, the billboards along the side of the road. ;-)
Exactly. Google has very high margins. Google gets very little money from each of your clicks. Sometimes, as when you search for microtransactions at Google, it gets nothing.
So what’s the secret?
For Google it’s infinite inventory. Bandwidth, storage and computing are to all intents free goods. You don’t need to profit from every click to make a lot of money.
For ZDNet and other content sites it’s maximizing the ad revenue for every page view without angering the user so that they click away. (What’s the loss ratio from those full-pagers in front of these blog posts, by the way?)
The problem for Microsoft is that it believes its content, in the form of software, is worth more in a microtransaction world than the pennies-per-click which come from advertising.
Maybe it is, but the key to Microsoft’s success, or failure, will lie in the same balancing act we go through every day here. How much money can you extract from each page, and how much do you really need?
There are SaaS services worth paying for, of course. How many can Microsoft create, and what can it get for them? What happens when someone else does the same thing for free?
Can Microsoft become the low-cost provider when the price is often zero?
This is going to be fun.
Dana Blankenhorn has been a business journalist for 30 years, a tech freelancer since 1983. You can follow Dana on Twitter. See his full profile and disclosure of his industry affiliations.
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