Amazon’s Latest Coup: Thinking Small

Google and PayPal have developer software too, but as developer Nick Plante notes on his blog, "FPS is... a potential Google Checkout-killer," and represents "everything that Paypal isn't: well designed, API-centric, and built with developers in mind." Most glaringly, neither PayPal’s nor Google’s API can easily accomodate micropayments; even attempting micropayment functionality produces "an unworkable solution," according to Plante.

If it sounds like Google and PayPal have been caught with their pants down, then it’s worth noting that both services still have major advantages. Google’s is the cheapest service to use, and its biggest advantage is discounted integration with its AdWords service. PayPal’s edge is that it already has over 150 million users worldwide and has extensive telephone-based customer support. Amazon isn’t starting totally from scratch, though; it has almost 70 million customers who already have their payment information on file for retail purchases. But it’s not as cheap as Google, nor as user-friendly as PayPal, and isn’t operable for anyone but skilled developers. Amazon’s seller protection is also vaguely worded and offers less fraud reimbursement than its competitors. If Amazon FPS is to succeed, it will have to be so useful that small business owners will be willing to hire third-party developers to set it up for them. And to go though that trouble might only be worth it for the potential of micropayments. So will Amazon spark a micropayment revolution?

Programming hobbyists net-wide are buzzing with the potential of the system, many intent on stepping up to the challenge. If the API is democratized, it will cause a flourish of growth on the back of micropayment functionality, which stands to greatly benefit bloggers and small-scale Web gurus. Most blog readers, for example, aren’t willing to donate much to their favorite sites; one of the cruelties of the Web is that users expect everything for free. But imagine if a blog could accept a donation of, say, $.05 for a post well written (Amazon allows payments as small as $.01.) Then imagine that readers can automate their donations so that they send along a nickel every couple of weeks; now we’re talking about a reliable source of cash for a happy blogger. Okay, so he can’t quit his day job -- but with the potential to monetize blogs, wares sites and small non-profits, the Net might yet have an untapped niche of profitability.

Of course, many small-time site administrators (like our for-instance blogger) might not have time or inclination to learn Amazon’s more complex system, and FPS could find itself at home exclusively on a smaller number of bigger sites. Both scenarios would mean success for Amazon, but acceptance among the small-time technorati would mean the potential for real game-changing ubiquity. Doubtless, PayPal and Google will wait in the wings, watching how the developers-first model fares before building out their APIs to make features like micropayment truly viable. Unfortunately, Google and Paypal didn't respond to our questions regarding their plans on countering FPS, but with their respective successes in merchant services, there's no doubt that a first-rate copy-cat effort, they could severely vitiate the widespread adoption of FPS. The real question is whether or not Amazon can bring its capital, innovation and brand currency together to rapidly conjure revenue where none has ever existed. If their Long Tail business model (which purports to sell "less of more") is any predictor, Amazon FPS might gain ground quickly enough to proliferate – and completely change Web business as we know it.