In a response this week to a questionnaire from the Newspaper Association of America earlier this week, obtained by Harvard University journalist Zachary M. Seward (PDF available here), Google told newspaper publishers it is implementing an infrastructure extension to its Google Checkout service, for implementation sometime within the next 12 months, that may enable news sites and other publishers whose content is located via Google to receive payment for that content from users.
It’s being called a “micropayment model,” and it’s similar in concept to the one being proposed by the Journalism Online coalition, which is led by former executives from Dow Jones and The Wall Street Journal, and endorsed by their parent company News Corp. And like the Journalism Online model, publishers may make their products more attractive by coalescing and offering them in bundles, according to the most rational interpretation of Google’s questionnaire response.
“While currently in the early planning stages, micropayments will be a payment vehicle available to both Google and non-Google properties within the next year,” the response reads. “The idea is to allow viable payments of a penny to several dollars by aggregating purchases across merchants and over time. Google will mitigate the risk of non-payment by assigning credit limits based on past purchasing behavior and having credit card instruments on file for those with higher credit limits and using our proprietary risk engines to track abuse or fraud. Merchant integration will be extremely simple.”
In characteristic Google fashion, this description is explicitly vague. It does appear to indicate that it’s developing a way for users to create accounts whereby they specify how much they’re willing to pay, and mitigate that willingness against the availability and relative cost of content from publishers or publisher groups. It’s a system that sounds a lot like the dynamic market Google created for AdSense, where advertisers set limits on how much they can or will pay, which in turn sets caps on the visibility of their ads in conjunction with Web searches.
Imagine a system, for instance, where a “Google subscriber” creates an account specifying how much he’s willing to pay per billing period for premium content — say, . Premium content may only appear through Google — or Google Checkout buttons may only appear in the context of publishers’ own sites — if and when that content is affordable to the subscriber.
The “merchant integration” system to which Google refers is its own Merchant Center, which is currently used in Google Checkout and which it now says will receive a complete overhaul for early next year. After that time, Google will begin deploying its micropayment platform, though this time it did not refer to a beta period or any kind of trial run.
Google later said it would be happy to host the published premium content itself — that’s no problem. It can recoup the costs by taking a percentage of the profits from each micro-sale. “Current models on revenue sharing for the selling of content typically involve a percentage of each sale to Google in order to cover maintenance, bandwidth, processing charges, and profit margin. The Android Marketplace is the most prominent example of this model. The revenue split is comparable to Apple’s models on iTunes and AppStore and consonant with experiments being currently conducted on YouTube,” the questionnaire response reads.
In perhaps the most revealing statement of all with regard to Google’s business philosophy — right up front, marked “Vision Statement,” the company said this: “Google believes that an open web benefits all users and publishers. However, ‘open’ need not mean free. We believe that content on the Internet can thrive supported by multiple business models — including content available only via subscription. While we believe that advertising will likely remain the main source of revenue for most news content, a paid model can serve as an important source of additional revenue. In addition, a successful paid content model can enhance advertising opportunities, rather than replace them.”
The company’s statements to the newspaper industry are especially interesting, coming a month and a half after its CEO Eric Schmidt took a public stand in opposition to the Associated Press’ stated mission of tracking down Web sites that use AP content without payment or authorization. Calling himself “one of the last people who really, really loves newspapers,” Schmidt said that while Google currently pays the AP to distribute its content, that’s not really the way the distribution cycle should work. In a perfect world, he said, Google should make it easier for newspapers to receive payment for their content, rather than implement protections to make sure it doesn’t get spread.
For its part, the Journalism Online consortium also responded to the NAA’s questionnaire (PDF available here). Unlike Google, JOL devoted more column-inches to the qualifications of its senior executives, though it did go into explicit detail about one possible business model for online newspaper publishers. If a publisher were to offer its 20 million online viewers a choice of a annual subscription rate, a .50 monthly rate, or 25¢ per article for up to six articles per month, JOL believes a publisher could reap .6 million in online revenues in the first year of publication, and million in the second year, after cost of sales. This is taking into account JOL’s commission fee of 20% of the net proceeds, after 3% fee for credit card processing.
JOL said its software platform should be ready for initial rollout during Q1 2010.