A million years ago, in the Internet's Prague Spring of 1995, it seemed likely that a thousand commercial flowers were about to bloom. The inherent flexibility of internet protocols, and their imminent ubiquity, seemed to eliminate age-old barriers to alternative models for payment and exchange. A company called First Virtual Holdings was doing a booming business with an information commerce model that offered a two step automated transaction: the buyer committed to pay if satisfied, then received the all-digital good, and then chose whether or not to pay. (I hope to write about First Virtual, which I co-founded, and why it stopped booming, in future blog entries.)
A million years later, in 2010, we are still exchanging currency for discrete, atomic transactions, primarily using credit card platforms that date to the 1950's. Alternative approaches are discouraged in ways as subtle as the evolution of the PCI standard or as blatant as the German law requiring wifi passwords. An alliance of content providers and payment providers has largely frozen the market in markets.
Today we appear to be in the midst of a major shift to the cloud computing model, for a growing range of applications. This introduces a third major player into any discussion of virtual goods and transaction: a powerful platform owner who can enable in software any kind of market that suits his business model. The cloud platform owners -- the big cloud providers -- are the most powerful economic forces yet to emerge that might actually benefit from innovation in virtual markets.
The Payment-Content Alliance is reflexively hostile to any variations in the mechanisms of the market; it ain't broke, in the sense that it's making them money hand over fist, so they don't want anyone to fix it. But the cloud providers don't need to kowtow to any payment companies; they're already building the back office for the world, so handling payment is practically just a few extra rows in a table. Content is still king, and content owners will be free to choose to ally with the cloud providers for e-commerce "experiments."
So, what kind of experiments will the cloud providers favor? I'm not holding my breath for a lot of daring innovation, but it's a cinch that they'll start with established minor variants, such as subscription models for pools of content, or semi-automated shareware. And, quite probably, that's all it's going to take to see some major shifts in consumer behavior.
Imagine a world in which you don't (to your knowledge) have any music at all that you "own" in the sense of having a rightful copy of the bits on a disk near you. Instead, you're in constant contact with an audio server in the cloud, and whatever you want to listen to, it gets, subject to the package and services you've signed up for.
In such a world, you're getting the music you want, when you want it, with minimal effort. Moreover, you're doing it in a way that makes paying for your music much easier than not paying. If the price point is right, it's a no-brainer.
Once the cloud providers have a critical mass of consumers in this kind of service relationship, it will be a small matter of code for them to offer a wide variety of variants on the purchase process and the commerce relationship. Cloud providers will want to offer any that make money. What's needed? Experimental studies and proof of provider profitability in alternative commerce models.
How does cloud computing change virtual goods? -- Weakens concept of ownership. Own and Rent are points on a spectrum. -- Weakens locality, some local economies -- Weakens proprietary formats -- Strengthens interchange standards -- Strengthens compliance with licencing terms -- Strengthens enforcement of licensing terms