Google gets about 98% of its revenue from placing ads on Google sites and partner sites. That business is growing like crazy at the expense of traditional media like newspapers and television, which are seeing serious declines.

So far, Google hasn't really been in the business of creating or delivering content. They index content from others and link to it for free. Sure, they run Blogger and Google Answers, but neither of these produces much revenue.

With the small exception of Google Answers, Google has no consumer revenue stream. Virtually all revenue comes from advertisers and corporate IT departments, while consumer services are free.

But I think this is about to change.

We already know that Google Video will allow content creators to set a price for people to view their work, with Google taking a small percentage. So for the first time since Google Answers, Google will be directly charging consumers for information. As I posted earlier this week, this service looks to be close to opening its doors, perhaps to coincide with the launch of Google Current.

The rumors of Google launching a payment service to compete with Paypal were partially debunked by CEO Eric Schmidt. He acknowledged work on a payments platform, but said it wouldn't compete with Paypal: "We do not intend to offer a person-to-person, stored-value payments system."

There's a lot of content in the "deep web" that Google can't index because the content owners would not receive sufficient compensation from an ad-only model. Yahoo released a service to index some of this pay-per-view material, but it's pretty cumbersome to use. The user is handed off to the content owner's site, where the user must set up an account and pay for the material separately for each source.

Because some information will never be free or ad-supported, if Google is to achieve its mission of making the world's information universally accessible, it follows that Google must provide a way to pay for that information when ads don't cut it.

Imagine setting up a consumer account with Google that is similar to AdWords, allowing you to set a daily or monthly budget for the maximum you're willing to spend. As you search in Google, each link would show whether it is free or premium content, along with a price and a preview snippet. As long as the snippet is relevant and the price is low (5 cents, 10 cents), who would think twice about clicking through?

Each click would accumulate in your consumer account in the same way that clicks on ads accumulate in an advertiser's AdWords account. Google would remit most of the payment (say, 80%) to the content owner, and keep a small amount for itself. The content owner would have an account similar to AdSense, which would summarize activity and provide metrics to help the content owner improve performance.

Presto, Google has a simple, intuitive, and inexpensive way to deliver more content and still compensate the content owner appropriately.

This could open a new world of possibilities. The most obvious application would be for newspapers, which today are generally losing money by exposing their stories for free on their sites. Micropayments enabled by Google could save newspapers from a decade of decline by monetizing their content online.

But what about other media? If the price was low enough (say, 10 cents), and the transaction frictionless, who would bother with illegal MP3 music? Just search and download. If it was that easy and inexpensive, the volume of transactions just might be high enough that record labels could get rid of restrictive DRM schemes that frustrate honest consumers.

You missed the last episode of 24 or Desperate Housewives or The Sopranos or The Daily Show? One click and 99 cents later, and you've got a legal copy without commercials.

Want a video tutorial on flyfishing or a videoblog of the best clubs in Berlin? Click and 50 cents.

Did you see a 3-minute pod on Current about helicopter snowboarding and want to see an extended 60-minute production? Click and 75 cents.

Seems to me this would not only open a new revenue stream for Google that could eclipse adverstising, but would compensate the creators of niche content well enough that the number of quality content sources would rapidly expand.

Good for Google, good for content creators, good for content consumers.

And really good for Google shareholders.

Update June 25, 2005 21:52 PDT: Here's an interview with Paypal's founder, Max Levchin, on what may be happening with the new Google payments system. He speculates about competing with eBay, and enabling payments on Froogle. But article goes on to discuss what Levchin didn't say -- that Google may need the payments service to unlock the deep web:

There's another avenue we didn't discuss in depth: and it's the role of a Google or Yahoo! as a clearing house for rights holders. The really useful stuff is locked up in databases and collections and individual publisher's archives. Google has had a really bruising experience with Google Library, so far. Its preferred strategy of not charging a fee, but putting text ads around the material, doesn't fly. So the question is whether the database holders, like Lexis Nexis, will work with Google or Yahoo!, or prefer to work through other institutions, such as libraries and churches.

That makes more sense to me, and it's a bigger opportunity than just duking it out with eBay over collectibles.