Internet based billing is not simply about sending money from one party to another. The transaction allows for a rich stream of data to be collected, which is useful for companies. This is leading to software changes as well.
Simply put, billing is not just collecting money and the way that billing has evolved in the Internet age has shifted as well. Internet monetization was initially driven by one-time revenue (classic e-commerce systems). The second wave included a growth in subscription businesses (based on software-as-a-service models). The most recent changes are seeing billing as not simply about money transactions but also as a means of gathering detailed data. Such data can be used, for example, for improving products, reacting to prices, and for connecting prices directly with outcome.
Leading on from this is likely that the next few years will see a growth in metered billing. This is reflected in a cultural change. Rather than someone purchasing an Internet product, such as software and assuming they own it, there is a shift taking place with both businesses and consumers towards paying for access for resources.
In turn, this is driving businesses that provide software to change their pricing and billing models, as well as altering their revenue streams. According to Mike Trotzke, who is the CEO of communications company Cheddar: “Users and clients are connecting consumption and even outcomes to billing.” Mike Trotzke made is comments to Digital Journal.
He adds, citing an analogy: “I like to compare it to paying for bottled water for a water cooler, versus paying for exactly what water comes out of a tap. With the cooler, you pay to have the same number of big jugs of water hauled into your office or home every month, no matter how much you actually drink.”
“Too many developers are stuck on a fixed quantity, fixed price model like the water cooler. They may not realize what they’re really looking is a way to meter usage and bill for it.”
Cheddar has developed systems for both methods based on its application programming interface, and this makes adopting the metered approaches more feasible. The big advantage of companies is that it will allow them to transform how the pricing of their products works.
As an example, Textmarks, an SMS messaging service for businesses and nonprofit provides a basic subscription plan for users, with a metered model for additional services or volume such as the number of messages and keywords. In addition, several software-as-a-service platforms make use of usage tracking and metering. Information can be used to determine what customers consider highly valuable in terms of a company’s product, allowing a company to modify its prices accordingly.