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Amazon Micro-payments
Thoughts on successful e-commerce models for your website

Wednesday 31st October 2001

An interesting discussion that may help you focus on emerging trends for your website.

The last few months have witnessed a bloodbath in tech stocks coupled with a frantic re-definition of the web and of every player in it (as far as content is concerned).

This effort is three pronged:

Some companies are gambling on content distribution and the possession of the attendant digital infrastructure. MightyWords, for example, stealthily transformed itself from a "free-for-all-everyone-welcome" e-publisher to a distribution channel of choice works (mainly by midlist authors). It now aims to feed its content to content-starved web sites. In the process, it shed thousands of unfortunate authors who did not meet its (never stated) sales criteria.

Others bet the farm on content creation and packaging. invaded the digital publishing and POD (Print on Demand) businesses in a series of lightning purchases. It is now the largest e-book store by a wide margin.


But Amazon seemed to have got it right once more. The webís own virtual mall and the former darling of Wall Street has diversified into micropayments.

The Internet started as a free medium for free spirits. E-commerce was once considered a dirty word. Web surfers became used to free content. Hence the (very low) glass ceiling on the price of content made available through the web - and the need to charge customers less than 1 US dollars to a few dollars per transaction ("micro-payments"). Various service providers (such as Pay-Pal) emerged, none became sufficiently dominant and all-pervasive to constitute a standard. Web merchantsí ability to accept micropayments is crucial. E-commerce (let alone m-commerce) will never take off without it.

Enter Amazon. Its "Honour System" is licenced to third party web sites (such as and SatireWire). It allows people to donate money or effect micro-payments, apparently through its patented one-click system. As far as the web sites are concerned, there are two major drawbacks: all donations and payments are refundable within 30 days and Amazon charges them 15 cents per transaction plus 15(!) percent. By far the worst deal in town.

So, why the fuss?

Because of Amazonís customer list. This development emphasizes the growing realization that oneís list of customers - properly data mined - is the greatest asset, greater even than original content and more important than distribution channels and digital right management or asset management applications. Merchants are willing to pay for access to this ever expanding virtual neighbourhood (even if they are not made privy to the customer information collected by Amazon).

The Honour System looks suspiciously similar to the payment system designed by Amazon for Stephen Kingís serialized e-novel, "The Plant". Interesting to note how the needs of authors and publishers are now in the driverís seat, helping to spur along innovations in business methods.


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