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Wednesday, May 02, 2007

Micropayments After All: S3, iTunes, Adsense and more

I work for JackBe as the Product Marketing Manager and this post caught my eye. Internally, we have talked for awile about use cases for our Presto Enterprise Web 2.0 Edge server component. I think this case is one. Edge lowers the transactional cost of entry barrier making micropayments that much more a reality. Edge allows enterprises to finally expose valuable intellectual property previously trapped behind the firewall for governed consumption by employees, end customers, or partners.

Tim O'Reilly

Micropayments After All: S3, iTunes, Adsense and more

Andrew Savikas made an interesting comment on the Radar backchannel that seemed sharing more widely:

I remember a few years ago when there was a ton of buzz about micropayments being the future of ecommerce, followed by a backlash on how micropayments were a horrible idea, and would never overcome the transactional costs. In the meantime, iTunes and S3 (among others) have quietly been building great businesses on top of micropayments -- I think one important difference is that originally people thought of micropayments as paying small amounts to many different people, vs. paying incrementally to the same person/business.

Andrew's comment was sparked by Amazon's announcement of new S3 pricing:

With Amazon S3 recently celebrating its one year birthday, we took an in-depth look at how developers were using the service, and explored whether there were opportunities to further lower costs for our customers. The primary area our customers had asked us to investigate was whether we could charge less for bandwidth....

Sara Milstein noted that Google Adsense could also be conceived of as a micropayments system, this one in the more traditional sense of allocating small payments to many players. And of course, Amazon's Associates program is also a micropayments system, as are many cell phone billing systems. How many others of these are there out there? If you use micropayments in your site or application, let us know.

Amazon's full pricing announcement sent out in email appears below.

This is a note to inform you about some changes we're making to our pricing, effective June 1, 2007.

With Amazon S3 recently celebrating its one year birthday, we took an in-depth look at how developers were using the service, and explored whether there were opportunities to further lower costs for our customers. The primary area our customers had asked us to investigate was whether we could charge less for bandwidth.

There are two primary costs associated with uploading and downloading files: the cost of the bandwidth itself, and the fixed cost of processing a request. Consistent with our cost-following pricing philosophy, we determined that the best solution for our customers, overall, is to equitably charge for the resources being used - and therefore disaggregate request costs from bandwidth costs.

Making this change will allow us to offer lower bandwidth rates for all of our customers. In addition, we're implementing volume pricing for bandwidth, so that as our customers' businesses grow and help us achieve further economies of scale, they benefit by receiving even lower bandwidth rates. Finally, this means that we will be introducing a small request-based charge for each time a request is made to the service. Below are the details of the new pricing plan (also available at http://aws.amazon.com/s3):

Current bandwidth price (through May 31, 2007)
$0.20 / GB - uploaded
$0.20 / GB - downloaded

New bandwidth price (effective June 1, 2007)
$0.10 per GB - all data uploaded

$0.18 per GB - first 10 TB / month data downloaded
$0.16 per GB - next 40 TB / month data downloaded
$0.13 per GB - data downloaded / month over 50 TB
Data transferred between Amazon S3 and Amazon EC2 will remain free of charge

New request-based price (effective June 1, 2007)
$0.01 per 1,000 PUT or LIST requests
$0.01 per 10,000 GET and all other requests*
* No charge for delete requests

Storage will continue to be charged at $0.15 / GB-month used.

The end result is an overall price reduction for the vast majority of our customers. If this new pricing had been applied to customers' March 2007 usage, 75% of Amazon S3 customers would have seen their bill decrease, while an additional 11% would have seen an increase of less than 10%. Only 14% of customers would have experienced an increase of greater than 10%.

We don't anticipate making further structural changes to Amazon S3 pricing in the future, but we will continue to look for ways to drive down costs and pass the savings on to you.

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