With micropayments and transaction platforms a buzzworthy sector of the Web right now, it's no surprise that Google would want to get in on the game.
But Mountain View's pitch is a little bit different: the payment platform it plans to build, according to Harvard's Nieman Journalism Lab, is geared toward newspapers that want to charge for digital content.
Google's plans are detailed in a document the company sent to the Newspaper Association for America. The document, a response to a query from the association, also requested more information pertaining to paid-content models.
"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," explained the document (PDF) posted Wednesday by Nieman Lab. "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."
This is interesting, as Nieman Lab points out, because Google's plan aggregates payments into a bundle for processing, something that could potentially quell publisher concerns about transaction fees. The plan is very preliminary, obviously.
"The Newspaper Association of America asked Google to submit some ideas for how its members could use technology to generate more revenue from their digital content, and we shared some of those ideas in this proposal," according to a statement Wednesday from Google's PR department to Nieman Lab. "It's consistent with Google's effort to help publishers reach bigger audiences, better engage their readers and make more money."
Google's Checkout product, the online transaction service that would likely be the base for a micropayment system, has been around for a few years now. But it hasn't made a huge dent in far bigger competitor PayPal, and it's also been experiencing some big problems, as my colleague Tom Krazit reported Thursday.
It ought to be pointed out, of course, that Google has been the target of harsh criticism from the newspaper industry (as well as other sectors of the publishing business) for profiting from third-party content. Wall Street Journal editor Robert Thomson went so far as to call online news aggregators (not mentioning Google by name) "parasites or tech tapeworms."
Meanwhile, the payment platform that's been getting the most scrutiny and interest in the tech press these days has been, of course, Facebook's "credits" system. But while Facebook's pitch thus far has been toward nonprofits looking for small donations and game developers selling virtual goods, it's still impossible to discount the fact that Google's micropayments move could be aimed at staking a claim in the same territory.
Note: This post was expanded at 7:09 a.m. PDT. And on Friday morning, the Associated Press reported that Google was one of several tech companies, including IBM, Microsoft, and Oracle--that responded to the Newspaper Association of America request, though the AP story offered no details on those other companies' responses.
The Wall Street Journal is expected to begin charging nonsubscribers micropayments for access to individual articles, according to a report Sunday in The Financial Times.
Robert Thomson, editor-in-chief of Dow Jones and managing editor of the Journal, told The Financial Times that "a sophisticated micropayments service" will launch this autumn. The system would charge small fees to occasional users who may not be willing to pay more than $100 a year for a subscription to WSJ.com, Thomson said.
The Journal is one of the few large daily newspapers still managing to charge for online content. The New York Times abandoned a two-year experiment with the Web-subscription model in 2007, suggesting that the company's projections for subscriber revenue were small compared with advertising sales.
Word of the payment model emerges as the newspaper industry is undergoing a dramatic contraction. As readers have increasingly gone online for their news, newspapers have suffered declining subscriber numbers and lower advertising revenue. Many newspapers have cut jobs, and some have warned that they may face closure soon if they can't make further cuts or find buyers for their operations.
That climate has publishers scrambling for new revenue models. New York newspaper Newsday announced in February that it plans to begin charging online readers for access to its content.
Publishers are also taking aim at search engines and news aggregators. Last week, Google defended itself on charges that it is profiting from content produced by newspaper executives, magazine publishers, and the Associated Press.
During a Senate hearing, Google Vice President Marissa Mayer said, "Google News and Google search provide a valuable free service to online newspapers specifically by sending interested readers to their sites at a rate of more than 1 billion clicks per month. Newspapers use that Web traffic to increase their readership and generate additional revenue."
So far, YouTube has been a free, advertising-supported service, but Google plans to build payment mechanisms into its video-sharing site.
"With respect to how it'll get monetized, our first priority is on the advertising side. We do expect over time to see micropayments and other forms of subscription models coming as well," said Google Chief Executive Eric Schmidt after the company reported first-quarter profits Thursday. "We'll be announcing additional things in that area literally very, very soon."
The change in tactics will mark a new era for Google's attempt to make money from YouTube. The service is tremendously popular, but also tremendously expensive to operate, and Google has been working hard for months to come up with a more successful financial formula for sharing video.
Schmidt's words came at the same time Google is signing a partnership to show Sony Pictures' full-length movies and build a section of YouTube devoted to professionally made content.
Google has had fractious relations with companies that produce video, but that's changing now, Schmidt said. "We are making very good progress now with small, medium, and even large-scale studios," he said.
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