S3 in Business: 5 – Money in golden buckets

[Complete series]

Last time I described a variant of the Tunesafe business. Instead of requiring a special server at tunesafe.com, there’d be a Tunesafe program on your PC that would let you maintain your iTunes music backups directly on Amazon S3 without having to depend on anyone else. It all sounded perfect but there was the question of how that program would be paid for.

Selling the software

We sell Cardbox. People either buy it straight off or they get a trial licence and upgrade it when their month’s free trial period is over. Cardbox has S3 support built in. We even have a downloadable sample database that implements a photographic archive. I use it myself for all my digital pictures: it stores a 360×480-pixel miniature version inside a Cardbox record that can have as much or as little indexing information as you like, and it stores the original digital JPEG image on S3, for a cost of approximately a quarter of a cent per photograph per year.

But Cardbox is a proper, solid, general-purpose software package, with a 300-page colour handbook and everything, so it makes sense for us to charge money for it, and it makes sense to give away applications like the Photo Archive. Tunesafe is quite different from Cardbox. Without S3, it’s useless. It’s simple, single-purpose, with no printed documentation, and practically invisible in normal use.

If Tunesafe were sold for money (the way Cardbox is), the price would either be too expensive for the customer or too little for anyone to make a living out of it. And the payment comes at the wrong time: at the beginning, when the customer hasn’t yet learnt how much he really needs the product.

The clincher is that an Internet business doesn’t really want paying customers. If you have a million paying customers, that means a million sales invoices to generate and audit and a million separate transactions that may go wrong and require human intervention.

That’s why it’s so attractive when you have a web site that pays for itself through advertising: it means that you have one or two big sources of revenue instead of a lot of little ones… and half the time they even generate your invoices for you, and pay you without being asked.

Not selling the software

Since every Tunesafe customer already has to sign up with Amazon to pay for the storage he uses, why not take advantage of that fact? Here’s where a simple addition to Amazon’s offering would make all the difference.

Let’s think about telephones for a moment. When you make a normal phone call, you pay the phone company the cost of the call. When you call a premium-rate number (900 in the USA, 070, 0870, or 090 in the UK) you pay the phone company quite a lot more. The phone company deducts the cost of the call and passes the rest of the money on to the owner of the number being called. So a lottery information line receiving a thousand calls a day effectively has just one paying transaction per month instead of 30,000: and that one transaction is with the phone company, which rarely argues and always pays its debts on time.

So the proposal is that Amazon S3 should have the equivalent of premium-rate phone lines. Since Amazon calls its fundamental unit of data segregation a “bucket”, the obvious term is “golden buckets”.

A golden bucket works just like any other S3 bucket except that data transfer and data storage are charged at a percentage of the normal rate – 150%, perhaps, or 200%. The customer pays Amazon at the higher rate, Amazon deducts 100% of the normal rate and pays over the rest to the bucket’s sponsor. Knowing Amazon, they’ll probably take a cut of the payment that’s made to the sponsor, just as they do with Amazon Marketplace.

Everyone wins.

• Amazon use their existing payment infrastructure (the user had always been going to pay for a normal bucket anyway) but get a lot more money out of it.
• The customer gets a service he wants without having to pay for the software to access it.
• The sponsor / software supplier gets revenue from just one source, Amazon. It has an incentive to create good software that people will want to carry on using for ever. If someone downloads the software, uses it once and then throws it away, it simply won’t generate the revenue.

I’m suggesting that Amazon should make a change in their S3 service. How much work is there in this for them? Not much. On the technical side everything works just as it always does. The only real work will be on the administrative side: they’ll have to ensure that the customer explicitly knows when he’s signing up for a golden bucket, since they’re more expensive than ordinary ones. They’ll have to ensure that the Tunesafe program can verify that the bucket it’s being asked to use for backups really is a golden one and really is sponsored by tunesafe.com: we don’t want a clever user spoofing the Tunesafe program into offering a free service.

The benefits of this change are huge. Putting this sort of structure in place will enable the creation of a whole class of new Internet businesses with minimal startup costs: it liberates them from the burden of setting up and maintaining invoicing and credit card facilities, just as S3 itself has liberated them from the burden of setting up and maintaining massive storage facilities.

Next time we’ll have a slow interlude, to give Amazon time to digest this proposition.