Between the Lines

Larry Dignan, Sam Diaz, Andrew Nusca

Barry Diller: The Internet 'Absolutely' Will Become a 'Paid System'. Time Projection: Within 5 Years

By Tom Steinert-Threlkeld | June 10, 2009, 12:04pm PDT

Summary

The days of the free Internet will draw to a close over the next five years, according to the chairman and chief executive of IAC, the interactive services company which operates a collection of more than 30 Internet sites which produce $1.5 billion a year in revenue.
The only missing link, according to Barry Diller, who [...]

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Billing, IAC/InterActive Corp., Billing System, Internet, Tom Steinert-Threlkeld

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The only missing link, according to Barry Diller, who cut his teeth building up over-the-air and cable TV networks: a good billing system, akin to Amazon’s “one-click” button or the Apple iPhone’s slick downloading of paid applications.

“I absolutely believe the Internet is passing from its free days into a paid system. Inevitably, I promise you, it will be paid,” Diller said in a keynote discussion opening up the Advertising 2.0 conference held at his company’s futuristic glass building alongside the Hudson River in Manhattan. “Not every single thing, but anything of value. “

The fact that content and services on the Internet so far have been largely supplied for no charge is “an accident of historical moment that will be corrected,” he said, in an era of “creative chaos” that will span the next three to five years.

So far, news, content and service suppliers were “afraid of not being dinosaurs and slapped everything up on the Internet for free,’’ he said, in an interchange with BusinessWeek media columnist Jon Fine.

But, that will be change. The New York Times, for instance, likely will have to go beyond the “pay wall” in order to cover the cost of its worldwide reporting corps, even if it means having 1, 2 or 3 million paid subscribers, instead of 20 million unique visitors a month. And people will pay – if it is quality they’re buying.

“People have paid for content,’’ he said. “They always have.”

IAC’s Match.com, a dating service, already charges subscription fees. IAC also operates Ask.com, the search service, UrbanSpoon, one of those iPhone apps, Citysearch, a local information service, and The Daily Beast, a content site headed by former New Yorker editor Tina Brown.

Inevitably, Diller said, the “base model” of the Internet will be paid, at the end of the chaos. The forms will include not just subscriptions and individual one-time purchases, but rapid-fire micropayments and other mechanisms.

The early examples: Amazon’s “one-click” system, where a customer enters billing address and credit card information in advance. Then, a button on the screen for a shopping cart is pressed once and the purchase or purchases associated with that cart are confirmed, billed, paid for and delivered.

Similarly, with the App Store for Apple’s iPhone handheld computing and communication devices, “the real trick and key is the billing system and the way of doing it is absolutely a blink,’’ he said.

The right billing system, broadly applied, would remove “one of the greatest bars of buying anything” which “is the steps it takes” to complete a purchase.

The entire Internet, in effect, would become an app – or content – store.

“That little thing – that in fact that you scroll it, you do it, it comes, everything else is taken care of, is the answer to what’s going to happen on the Internet, when in fact, you get the applicability of that broadly across the Internet,” Diller said. “It’s absolutely going to happen.”

And given the movement of ad and subscription revenue to the Internet, “people who manufacture that content will have no alternative,” he said.

The biggest disruptor? When broadband pipes to the Internet are connected to large screens in living rooms around the world and users are interacting with its increasingly video-based content with a remote control.

At that point, television, radio and prior media founded on scarcity, like limited spectrum whose use is overseen by governments, “will be run over by this much more open, much much less controlled (medium) that is not based on scarcity, but based on unbelievable plenty,” Diller said

Tom Steinert-Threlkeld is editor-in-chief of Securities Industry News, as well as a long-time media, technology and business journalist.

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News Flash: It has ALWAYS been a PAID system

Saying it will become a paid system in 5 years is basically living in a delusional bubble. It has been a paid system from the start.

Everyone pays for the Internet already. We pay for the speed of the connection. Some pay email providers. Some pay for online storage. Some pay by buying products online. Some pay for rare and valuable information or to receive specific publications. We also pay with the attention we give to advertisements on our favorite sites. We pay with the time we waste sorting through all the spam we get from advertisers.

Why doesn't it surprise me that it's an old fart saying how people have always paid for content and will continue? People have always been able to listen to the radio and watch television for FREE, too. That swings both ways and means nothing.

That sort of ancient-mindset is why the recording industry is having so much trouble these days. It reeks of the mindset of control freaks from a 50's industry like the RIAA or MPAA. Start charging for or somehow limiting the content people already get for free and you will go bankrupt unless you can add enough value to justify the charges.

These days people want more from content. These days the REAL product you need to sell is improved quality of life. How will your content make my life better? How will it save me time? How will it smooth out my daily routine? Focus on that instead of how much you can squeeze out of somebody because of X bytes of your bandwidth they used.

What people might pay for is value-added and highly-targeted content available on their own schedule. If you want an example of the RIGHT way to get people to pay for a content service, look at what TIVO did for TV or NetFlix with instant Internet streaming. Even digital music purchased through iTunes is an example of how to sell content to a busy, overstressed public. Charging by the megabyte will only piss them off by giving them one more thing to count and worry about. Make it simple. Make it transparent. Make it worry free. Make our lives better. Then we'll talk.
BillDem

06/10/2009 12:28 PM
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yep

I was reading and reading, looking for the end so I could post the same comment. You are right. For what we pay for broadband, nothing is free. Strictly speaking of the services offered online, the comment in this article is correct, less people will pay for a particular service, like the Journal, but they will pay for quality. I think the Journal can pull this off. The disconnect will come with frivolous stuff, like Facebook and Twitter. People, by and large, will absolutely not pay for a service that is fun, but we can otherwise do without.
djmik

06/10/2009 12:37 PM
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Barry Barry Barry

I think what Barry is saying (and correct me if I'm wrong) is that we will have to pay for virtually every site we visit. Ain't gonna do it.
Teedoff

06/11/2009 10:32 AM
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HORAY!!!

If he wants to eliminate the great majority of internet users who will never use a subscribtion or pay service, it will be his business that will dissapear. In a recession internet subscriptions are a disposable luxury no matter what the quality is. Theres also the matter of those who can not pay. Barry is obviously ignorrant that under 18's fuel the social networking profits, and they legally can not use a billing system. IAC is responsible for irritating websites like PopularScreenSavers and Smiley Central. I say good riddence! GM went bust because it grew too fast and became too big and unsturdy. Companies like this will find their free counter parts will rise even further beyond them and they will get left behind. Anyone sujesting such a billing system is saying they don't want visitors. Not a problem, we didn't really want to visit anyway.
webmessia

06/12/2009 01:12 AM
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Scum

IAC is one of the robber-baron internet bottom feeders, right up there with Doubleclick...
So consider the source when reading such drivel. Or be one of the sheep they depend on, your choice... Death to internet scum!
John N.

07/01/2009 08:27 PM
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I also....

Ain't gonna do it!
maggietoo9

07/06/2009 03:30 PM
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Not true think cents not dollars

Premium content page five cents?... click.

10,000 hits later writer makes 500$ per article.
nate12680

06/11/2009 10:51 AM
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Ariel

Hey, That seems a good idea!
LiteSoul

06/11/2009 11:17 AM
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That's all well and good...

If you've got a credit/debit card in the black, and can spare a few
dollars every time you go online. What about the developing world?
We've spent all this money in R&D building cheap netbooks for them,
now we're going to say "Sorry you can only read this if you can spare
five cents"? The money quickly adds up, and only a small minority of
those from poorer countries would be able to tap into the content.

It's a fine model (Barry Diller's - this isn't a personal attack on you,
nate) if your aim is to reassert the two-tier nature of the global
economy, but if - as I've always been led to believe - we're actually
trying to atone for the sins of our forefathers and create a more equal
world, this can't be seen as anything other than a regressive and self-
serving plan concocted by greedy fat cats with no thought for the
harm it does those who can't pay.

Content provision needs some kind of subsidy, no-one can deny that
- but it can't be an all-or-nothing brick wall that favours those with
disposable income and marginalises those without. That flies in the
face of the entire point of mass-publication, which has educated and
entertained the less-affluent since its inception via the printing press.

I sincerely hope Diller's blowing bubbles from a place where the sun
doesn't shine. More paypal-style 'donate' buttons (and more self-
regulation from the readers/downloaders/users), and less fixed fees,
please.
bishofthedump

06/11/2009 11:55 AM
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I'll click the free page

I definately see a "If I had a penny for every time" model, but so long as there is a free alternative, Ill click that...

Im thinking that the basic fallacy with the " charge like the app store idea" is that there is no apple oversite to approve/deny websites.

Really Id guess the current system is pretty much how it is going to stay.

But its been fun considering options and future trends.
nate12680

06/11/2009 04:46 PM
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Amen!

I am in total agreement. Check out my earlier response.

Dr. Chris
cpodman

06/16/2009 01:18 PM
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$500

Or, $500, anyway, by that math (Five cents times 10,000). TST
Tom Steinert-Threlkeld

06/16/2009 12:08 PM
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True!

Considering most "news articles" are just posts off the AP newswire with a slightly different wording from site to site why would you pay for several news subscriptions? If they provide content no one else does is the only way and very few news sites can say that.
LiquidLearner

06/10/2009 04:32 PM
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No, but it's more pernicious and dangerous than that.

No you wouldn't pay for several subscriptions but it is more pernicious and dangerous than that.

Whilst these secondary news services continue to regurgitate a primary new source, they are at least news services. Close them down and you eventually only have one.

Media outlets that concentrate news and information from very few sources are now a major impediment to the proper and accurate dissemination of that news.

Further contraction of media outlets--more concentration of the media into one voice--would be dire. Even with well-meaning proprietors/owners, there would always be the potential for Orwellian type control over information.

In any free society, even the potential for such a scenario would be totally unacceptable. It would be dangerous for our democracies and even more so for the citizens that constitute them.
Irritated_User

06/12/2009 11:29 AM
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More than a few web sites are making money wihtout charging visitors.

They make money off adds. The more visits they get the more clicks on adds they get and some like this site are sending me news in return for looking at adds. I don't click on an add very often but if I'm interested I have.
deowll

06/12/2009 01:44 PM
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