Are cards, clubs or clicks best for e-billing?

Content providers must find a flexible method of charging for their online services

Content providers must find a flexible method of charging for their online services

With the collapse of revenues from Internet advertising, companies now view charging for content as a serious business proposition. They are looking for a flexible billing solution that offers a choice of methods, which cater for both small and large amounts, to pay for content.

Understandably customers are leading the drive for a variety of payment mechanisms to choose from. These include straight-to-bill (utilising telecoms provider or utility bills); pay-per-view; and pre-pay. For adoption, and therefore success, the need for choice remains crucial. The holy grail of online billing is to be able to offer payment choice for customers and marketing opportunities for providers.

Now that it is becoming evident that customers are willing to pay for content, content providers need to look at how much they are to charge visitors to view premium content. A happy medium needs to be found which is acceptable to customers and providers alike. For the latter, care must be taken, as the cost of taking payments could massively reduce potential revenue streams or make them completely uneconomic.

An efficient payment solution is essential to content billing success. Also key is the creation of a pricing model enabling users to access the service without being conscious of what they are spending - as happens with standard voice calls.

Here are some of the payment options available:

  • Up-front pricing and payment (for example, subscription) works well for things like fan clubs, where customer loyalty is established. However, many people are put off by the idea of signing up for something over a period of time and this creates a barrier to uptake

  • Paying for content via credit cards can eat into margins, particularly when handling micropayments. A recent move saw US company PayPal, which allows businesses and individuals to send and receive money online, announce that it would start to charge customers for credit card transactions

  • Pricing and billing per megabyte is another option, but the drawback is that customers do not understand what they are getting for their money - after all, how big is a typical e-mail? It is difficult for customers to control their costs, leading to fear of excessive bills

  • Billing straight to a customer's mobile phone bill is the latest payment option available. Analyst Forrester Research predicts that this market will be worth £2.8bn by 2005. The charge for digital content is placed on the consumer's mobile phone bill or is deducted from a prepaid account.

Once the content provider has identified and selected the preferred method for billing for content, it needs to set up and manage the relationship with each payment provider. This can be time-consuming if managed in-house. However, an outsourced billing solution is available whereby the billing provider sets up and manages the service and relationship, acting as a one-stop shop for content providers. This allows content providers to concentrate on their core business.

An additional advantage of the managed service proposition is that providers should supply new facilities as and when the market and technology landscape is appropriate, without significant outlay required from the content provider.

The billing provider should also offer the advantage of managing the entire payment process both seamlessly and securely, from payment request and authorisation through to settlement and customer confirmation, without disrupting the 24-hour, every day of the year operational requirements of the client.

This relatively new industry would do well to bear in mind some of the lessons learnt by the telecoms companies. The payment solution must be commercially viable for content producers and convenient and affordable for consumers.

Pricing models should be simple (per-click or flat rate), but just as telecoms tariffs have become more complex over time, so will tariffs for content services, suggesting that bundling will be a key trend.

Paul Hague is managing director of professional services consultancy iSTRAT

Read more on Operating systems software