Server-Side Payments - Bill Gates' Plan to Dominate the Internet

(Sidebar to Jakob Nielsen's column on Microsoft's .Net announcement, June 2000. Added May 2001.)

I may have to acknowledge that Bill Gates is smarter than I am. For sure, he had me hoodwinked for more than a year before I understood the devious nature of his strategy for Internet payments.

I expect micropayments on the Web to be worth $100 billion in ten years. Since the provider of the micropayment service will be able to score at least 1% of the payment stream, this means that it will be a $1B+ business to be the Federal Reserve Bank of the Internet. Amazon is clearly aiming for this business. Why has Microsoft not done so? The lack of action on Microsoft's part is especially puzzling considering that it is the one company in the world that's best positioned to launch a usable micropayment system by integrating it with Windows and IE.

Answer: Bill doesn't care about $1B. That's pocket change to him.

Bill's goal is to protect the $372B that's Microsoft's current market valuation -- and to drive it back up to his "rightful" valuation of $700B as the monopoly provider of the world's software infrastructure.

If Microsoft placed micropayments in the browser, then everybody would be able to build profitable Internet services, no matter what software they were running on the server. Customers would be charged through their browser. This would finally kill off Netscape because the most valuable Internet services would be accessible through IE only. However, Bill doesn't care about Netscape any more. In fact, keeping Netscape alive at a 10% market share is an insurance policy against anti-trust trials, just as keeping Apple alive has been well worth the effort on Bill's part.

Instead, Microsoft is architecting Internet payments to reside on the back-end, as part of its Hailstorm service. When somebody is developing a new service for the Internet, they can only get paid if they use Microsoft's .Net platform. Use any other software, and you won't have an easy way of getting money from your users. The choice is easy: Use Bill's solution and you get a sustainable business model for your website. Use anything else (Linux, Apache, etc.), and you will go out of business for lack of a revenue stream.