Success with Pennies

Michael Parekh writes in the context of Google’s advertising model where advertisers can bid pennies:

This is one of the first large-scale, real-world empirical validations of something many have argued since the earliest days of internet commercialization over a decade ago. That is the notion that micro-payments in pennies could be very big for commerce on the internet (aka e-commerce). Ten years later, we have yet to making this a reality on the e-commerce side of the web, both on PCs and on wireless devices like cellphones, the success of eBay’s Paypal notwithstanding.

The path to fame and fortune from nickels and dimes is not new in America. Frank Woolworth hit on the formula back in nineteenth century, when he founded the F.W. Woolworth “five and dime” chain of stores. It lead to one of the largest retail fortunes in the land, selling “discounted general merchandise at fixed prices, usually five or ten cents, undercutting the prices of local merchants” (from Wikipedia).

It’s ironic that the value of penny-driven commerce on a large scale is first illustrated on the advertising/marketing front rather than the e-commerce front, as long expected. I daresay it might be equally powerful in the third major form of Internet revenue streams: subscriptions. That is, the notion that one can subscribe to something for pennies over a period may be very powerful for content, commerce, and web services on the internet.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.