INTERNET Micropayments are big again

Companies try to make money with commissions on tiny Internet sales.
NEW YORK (AP) -- An idea that seemingly evaporated along with dot-com mania is back: that the Internet would realize its full grass-roots potential if Web surfers could pay small amounts for tidbits of online content.
Several companies are again betting they can mine gold from ferrying around such "micropayments." Even credit-card giant Visa USA is exploring the prospect.
Boosters believe people could sell countless new creations on the Internet -- from essays to advice -- if only mechanisms existed to facilitate small payments. For authors of popular content, all those pennies would add up.
The problem, as things currently stand: transaction costs make most credit-card sales under $1 all but pointless.
By giving independent content providers an efficient way to collect money, micropayments could widen the Web's pool of things to see, hear and do, keeping the Internet from being dominated by media giants and other brand-name companies.
"We like to characterize ourselves as e-commerce for the rest of us," says Kurt Huang, co-founder of BitPass Inc., which carries small payments to 100 Web sites and plans to emerge from test mode in December.
Earlier failures
Today's micropayment advocates say earlier attempts failed not just because they were cumbersome and lacked sufficient government and financial industry support. People preferred what was familiar, namely credit cards.
As well, bountiful advertising money and venture capital inflated the Web with so much free content in the late 1990s that there wasn't much point in charging 25 cents to view a comic strip.
With free stuff now fading, much more online material is available only by subscription.
"Times have definitely changed," said Ron Rivest, a prominent Massachusetts Institute of Technology encryption researcher who co-founded micropayment provider Peppercoin Inc. in 2001. "I think the market is ready."
Broadband connections
There also are far more broadband Internet connections today, meaning more people might be interested in buying bandwidth-intensive digital content a la carte. Witness the quick popularity of new online music services like Apple's iTunes, which charges 99 cents per song.
Those sites aren't using any special micropayment formula -- users often buy more than one song and establish prepaid accounts with a credit card.
But if competition pushes prices lower, and more individual artists want to sell tracks at their own Web sites, micropayment providers say they would be ideal helpers because they can track royalties and handle customer service.
Eyeing such possibilities, Visa recently began exploring whether it ought to facilitate micropayments, too.
"While this segment is still small, we want to keep our eye on it," spokeswoman Randa Ghnaim said.
Payment method
Micropayment carriers are using different technologies to collect, transfer and authenticate payments.
PaymentOne Corp., for example, lets consumers make several small purchases online and pay for them on their local phone bills.
BitPass and Peppercoin invite Web surfers to set up an account with as little as $3, which is charged to a credit card or PayPal, the popular Internet money-exchange service. A user's online micropayments are deducted from that larger amount, without the hassle of entering credit card information each time.
Here's the advantage for content providers: If you wanted to sell a poem for 20 cents, you wouldn't accept Visa or MasterCard because the fees involved would drain most, if not all, of your 20 cents. Similarly, PayPal takes 2.9 percent of a sale plus 30 cents, so selling your 20-cent poem would be a dream deferred.
But with a micropayment carrier, you could expect to give up 15 percent. Your 20-cent poem would bring in a healthy 17 cents. And micropayment providers can make life easier by paying you $17 for every 100 poems, instead of 17 cents after each sale.