Walter Isaacson, author of Steve Jobs’s biography, is out with a new book on tech luminaries. In an excerpt provided to VentureBeat, Isaacson describes how the web’s founders ultimately failed to build a payment model that might have saved the beleaguered news industry.
“At Time Inc., we initially planned to charge a small fee or subscription, but Madison Avenue ad buyers were so enthralled by the new medium that they flocked to our building offering to buy the banner ads we had developed for our sites. Thus we and other journalism enterprises decided that it was best to make our content free and garner as many eyeballs as we could for eager advertisers,” recalls Isaacson, the former managing editor of Time magazine.
“It turned out not to be a sustainable business model,” he concludes. World Wide Web creator Tim Berners-Lee and legendary investor Marc Andreesen had envisioned a micro-payments model that would have seamlessly allowed users to pay for content. But it never happened.
The result was a drop in ad revenue that makes a double black diamond ski sloop look like a bunny hill
The full book, The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution, comes out October 7, 2014.
Read an excerpt below:
As the Web was taking off in 1993, I was the editor of new media for Time Inc., in charge of the magazine company’s Internet strategy. In previous years, we had made deals with the dialup online services, such as AOL, CompuServe, and Prodigy. We supplied our content, marketed their services to our subscribers, and moderated chat rooms and bulletin boards that built up communities of members. For that, we were able to command between one and two million dollars in annual royalties.
When the gates and onramps to the Internet were thrown open for public use in 1993, it became an alternative to these proprietary online services. At the April 1994 National Magazine Awards lunch, I had a conversation with Louis Rossetto, the editor/founder of Wired, about which of the emerging Internet protocols and finding tools – Gopher, Archie, FTP, the Web – might be best to use. He suggested that the best option was the Web, because of the neat graphic capabilities being built into browsers such as Mosaic. In October 1994, both HotWired and a collection of Time Inc. Websites launched.
At Time Inc., we initially planned to charge a small fee or subscription, but Madison Avenue ad buyers were so enthralled by the new medium that they flocked to our building offering to buy the banner ads we had developed for our sites. Thus we and other journalism enterprises decided that it was best to make our content free and garner as many eyeballs as we could for eager advertisers.
It turned out not to be a sustainable business model. The number of websites – and thus the supply of slots for ads – went up exponentially every few months. But the total amount of advertising dollars remained relatively flat. That meant advertising rates eventually tumbled. By then consumers had been conditioned to believe that content should be free. It took two decades to start trying to put that genie back in the bottle.
Tim Berners-Lee tried, in the late 1990s, to develop a micropayments system for the Web through the World Wide Web Consortium (W3C), which he headed. The idea was to devise a way to embed in a Web page the information needed to handle a small payment, which would allow different “electronic wallet” services to be created by banks or entrepreneurs. It was never implemented, partly because of the changing complexity of banking regulations. “When we started, the first thing we tried to do was enable small payments to people who posted content,” Marc Andreessen, who co-created the Mosaic browser, recalled. “But we didn’t have the resources to implement that. The credit card systems and banking system made it impossible. We tried hard, but it was so painful to deal with those guys. It was cosmically painful.”
If a system for metering or paying for content had been devised, the entire business of publishing and journalism and blogging would have turned out differently. Producers of digital content could have been compensated in an easy, frictionless manner, permitting a variety of revenue models, including ones that did not depend on being beholden solely to advertisers. Instead, the Web became a realm where aggregators could make more money than content producers. Journalists at both big media companies and little blogging sites had fewer options for getting paid.
In 2013, Berners-Lee began reviving some of the activities of the W3C’s Micropayments Markup Working Group. “We are looking at micropayment protocols again,” he said. “It would make the Web a very different place. It might be really enabling. Certainly the ability to pay for a good article or song could support more people who write things or make music.”
Andreessen said he hoped that Bitcoin, a digital currency and peer-to-peer payment system created in 2009, might turn out to be a model for better payment systems. “If I had a time machine and could go back to 1993, one thing I’d do for sure would be to build in Bitcoin or some similar form of cryptocurrency.”
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