Quid Pro Quo Drives E-Commerce Payment Game
In December 1998, smack in the middle of the holiday shopping season, eToys.com was featured in a television ad that trumpeted its wide online selection of Barbie Dolls, board games, and Barney videos. Great visibility, especially considering the online toy distributor didn’t pay for the advertisement: Visa International (www.visa.com) did.
In a deal that’s occurring with greater regularity between electronic commerce and credit card companies, Visa and eToys inked a pact ensuring that Visa was the only credit card accepted by the online toy company.
According to company spokesperson Kelly Nolan, eToys would not comment on the arrangement. Visa was just as coy. "We’re very pleased that more consumers this year are discovering the convenience of shopping online at eToys.com with a Visa card," said Joe Vause, vice president of electronic commerce for Visa.
Tight-lipped or not, there is little doubt that the old quid pro quo marketing game played between retailers and credit card firms is moving online. Under the terms of the eToy agreement -- as well as similar deals with TravelWeb (www.travelweb.com), Reel.com, and other Web retailers -- Visa receives exclusivity as the preferred form of payment on the Web site. Visa also receives prominent branding throughout the site, including fixed signage on eToy’s home page and registration page, as well as at the point of purchase. For its part, eToys, like the others, receives prominent promotions through Visa’s 21,000-member financial institutions, which provide access to the card’s 600 million users worldwide.
Visa is developing into a World Wide Web powerhouse. The company claims that consumers use its cards 52 percent of the time to make Internet purchases. With a flurry of deals, Visa is aiming higher. Liz Silver, senior vice president of advertising at Visa, says "As e-commerce continues to grow, these alliances will serve to accelerate [e-commerce’s] adoption by introducing millions of consumers to the exclusive benefits of shopping online with Visa."
Visa is not alone. MasterCard International (www.mastercard.com) has entered the Web derby with a stable of exclusive deals of its own. A February 1999 deal with Go2Net Inc. (www.go2net.com), a network of branded commercial Internet sites, gives MasterCard payment exclusivity on the Web site’s membership subscription pages, which attract 1 million visitors daily. "We give the credit card company access to all these consumers and they give us credibility," says Mark Peterson, a spokesperson for Go2Net. "MasterCard is a leader in commerce, and we simply feed off of that to help grow our own business."
As part of the deal, MasterCard will not only sponsor the member subscription pages, but the company will also issue a family of credit cards through Fleet Credit Card Services bearing the Go2Net corporate logo, along with some of its most popular Web site brands, including Silicon Investor (www.techstocks.com), MetaCrawler (www.metacrawler.com) and HyperMart (www.hypermart.net).
In a similar deal with 1travel.com inked in January, MasterCard is testing a marketing program where the Web travel site will promote a "Shop Smart" campaign. With Shop Smart, MasterCard is claiming that its credit card handling practices are the "best available on the Web," according to a company statement.
With the e-commerce marketplace expected to soar to about $16 billion by 2002, the giant credit card companies are expected to continue to blanket the Internet with exclusivity deals. With the advent of electronic cash, U.S. electronic checks, and smart cards, credit card companies already have their work cut out for them in protecting their market share. One study by Jupiter Communications (www.jup.com), a New York consulting firm, says the credit card companies' share of e-commerce purchases will drop from 88 percent in 1996 to 51 percent in 2000. E-commerce is a window of opportunity that, as evidenced by the recent spate of Web deals, the credit card industry is looking to keep open as long as it can.