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Weekly Column

Let's Get Small: The Idea of Ideas and One Reader's Thought on How the Web Might Pay for Itself

Status: [CLOSED]
By Robert X. Cringely
bob@cringely.com

This column gets more than a fair share of new ideas each week. They come from programmers and school kids and even the occasional Mommy, and are a testament to the entrepreneurial spirit of the Internet. Many ideas, like one from the guy who wanted to use an electric fan to blow against a windmill and generate power, are well intentioned but downright silly. Fortunately, I stand ready at all hours of the day and night to enforce the laws of physics. I have often thought of writing a column that would simply list the ideas that people have shared with me in the preceding day or week. They are staggering in their breadth. But I don't do it, Ethyl, because almost every inventor wants me to keep his secret.

There are, however, ideas that people want to be shared — ideas they are giving to the world — and I'll spit out one of those in a moment, but first let's talk a bit about the whole idea of ideas, and some broad guidelines for what does and doesn't work.

I write about technology and business, so most of the ideas that people bring to me are for using technology in some way to do business. Some of the inventors want to get famous, but nearly all of them want to get rich. A year ago, every other idea was some way to get one million or 10 million Internet users doing SOMETHING all with the hope that maybe a few banner ads could pay for it all and make the inventor rich. That's a model I am eager to see die. Even today there are too many ideas aimed at getting venture funding without much regard to why venture capitalists ought to provide funds. What's in it for the VCs?

From a technical standpoint, one of the most significant rules of what not to propose was exemplified by the Russian �migr� engineer I met one day in Brooklyn. He had a very clever proposal for a way to speed digital computations by about 25 to 30 percent. The only problem with his technique was that it required the elimination of every high level programming language ever written. In fact it required a rework of pretty much every computer from the transistors on up, which is just too much to ask for a lousy 25 to 30 percent improvement. I tried to explain that in the time it would take to implement his stuff — even if the world was remotely interested in implementing — enough time would probably pass for traditional hardware and software to improve the same 25 to 30 percent or even more. This led to Cringely's Fifth Law of Technology, that people will a adopt a new technology at almost any cost if it improves performance by 100 times and they'll adopt it at some cost if it improves performance by 10 times, but if the payback is less than 10X, the technology has to be free or it will die.

Many ideas aren't based so much in technology as in the whole idea of getting rich. Here, too, there is a tendency to ask too much from the rest of us. People are lazy. Whole industries are lazy. So don't expect us to walk across a road, remember your name, or do much of anything as consumers to make your idea fly if it doesn't involve sex or the successful avoidance of labor. People will do a lot to do less, but hardly anything to do more — unless, of course, hormones are involved.

As a rule, capital is hard to get, too. Forget the Good Old Days of one to two years ago when newspaper stories suggested that any idiot who could walk down Sand Hill Road could get venture funding. Those Good Old Days never existed. There are at any moment in Silicon Valley about 10,000 business plans in circulation, looking for money. Of those about 300 will be funded. So I think it is much better to come up with ideas that don't cost much money to implement. Cheaper is better because if the money part can be eliminated, then your idea actually has a hope of succeeding or failing on its own merits.

My hero is John McAfee, inventor of the anti-virus program. He built a company without funds, without hired labor, without manufacturing, without a distribution system, without strategic partners, by inventing something simple that made people feel safer. He gave it away for free, then one day, when there were enough addicted users signed-up, suddenly started charging for updates. His value was the installed base and the virus signature format — that's it. When he finally did take venture capital, McAfee Associates already had three employees and $15 million in cash. The only reason for the VC money was to start the company moving toward an IPO. Eighteen months later, John was out of the business with $210 million.

Of course, he ruined it for the Internet generation, because McAfee taught that it was better to have users, than profits and that it could all turn around once the money switch was pulled. Only Internet companies had a hard time coming up with comparable services that people would pay for. But I think McAfee's model is still the one to follow — all software, no manufacturing, no distribution, simple but useful — addictive, even.

The best ideas are simple and solve a crying need. The idea I like this week comes from Vik Rubenfeld, a reader and software guy who now does his programming in a different industry — television. Vik was co-creator of the CBS-TV series "Early Edition." And his idea is for a simple new way to handle micropayments.

Micropayments are at the heart of the current Internet dilemma. Internet users have plenty of money and would certainly be willing to use some of that money to pay for their Web surfing experience. They just don't want to pay very much. At present our Web surfing dollars go to the companies that make our computers, supply our Internet service, and keep the lights on. We buy stuff on the Net, but very little of what we buy is the Net experience, itself. We are loath to pay for content. Yet without some payment for content — even just a little payment — all that you can find is junk like this column. Banner ads don't pay enough to cover the development of real quality content. So wouldn't it be great if every reader just dropped a penny in the cup? That would be a micropayment.

But the problem with micropayments is the administrative overhead. If it costs at least 10 cents to handle payment processing (I just made that number up to make a point), then it simply isn't worthwhile to charge less than 10 cents for anything. And it probably doesn't make practical sense to charge less than 30 or 40 cents if people really intend to make profits. That pretty much kills the micropayment concept — or has until Vik came along.

There are lots of micropayment schemes and ideas floating around the Net, and most of them involve some way to cut down that per-transaction administrative cost so suddenly an author could charge a tenth of a cent, people could pay a tenth of a cent, and actual money would be made. But Vik's idea is much simpler. He just assumes that payment overhead will remain constant and too high for any of those other schemes to work. People will ultimately pay with credit cards or from their bank accounts and not in some new form of minicurrency. The trick is to aggregate payments in such a way to make transactions larger, not smaller, and to make fewer transactions, not more.

Vik's an old database guy, and he knows that the real overhead comes not from tracking the transaction but from moving the money. So his plan is for a system that tracks every transaction but only occasionally moves money. It's a clever variation on the way ASCAP and BMI pay royalties to music composers and relies on the Web's inherent ability to gather its own usage statistics.

"Since the ad model for making money on the Internet isn't working at the moment, micropayments (where every user is charged some fraction of a penny, like a tenth or a hundredth of a penny) for every page view, would probably produce a fortune for people providing Web content," says Vik. "The argument against it has always been that it costs VISA 25 cents to bill someone, so there's no way to bill for micropayments. But surely there are ways to address this. For example, (what if) no individual is billed until he owes at least $10 (regardless of how many sites this money is to be divided between), and then whomever collects the payments aggregates everybody's payments and sends out checks to the different Web sites. Wouldn't this be a way to make micropayments work?"

Yes, Vik, I think it might.

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