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Stripe's $95 billion value heralds the Internet's transition from advertising to e-commerce.

When Tim Berners-Lee and his colleagues created the World Wide Web three decades ago, they left one key component incomplete.

Along with the familiar 404 error, which occurs when a web page is "not found," there is a similar 402 code, meaning "payment required.

According to the creator of the Mozilla web browser, the 402 code was supposed to tell the visitor that they need to pay to view a certain web page. However, this scheme was never implemented. To this day, there is no standardized way to send or receive payments online.

"It's even funny or tragic that in so many decades of the Internet's existence, and given the central importance of being able to generate this kind of ongoing income from the Internet, it has remained unfinished and unfinished," entrepreneur Patrick Collison noted at a Wired event a few years ago.

Collison's digital payments company (Stripe) has been trying to solve this problem for the past decade. Slowly but surely, Stripe has begun to make the complex, ossified payment system simple for its millions of customers.

As a result, Stripe is now worth $95 billion, making it the most expensive private company in Silicon Valley. It's fitting that Stripe now holds that lofty position that Facebook held a decade ago. Stripe's rise comes at a time when the foundation of the Internet economy is shifting from advertising to commerce.

Stripe and similar companies, including Square, Adyen and PayPal, along with Shopify, have created a new online commerce and payment infrastructure that solves the original 402 bug.

The legacy of the lack of a payment layer on the Internet has been the dominance of advertising as a business model for online services like Google and Facebook. But the pull on payments and commerce is simple: it's a much, much bigger market than advertising.

According to media agency Magna, global ad spending fell about 4 percent to $569 billion last year. Digital platforms, of course, fared better than traditional media, rising 8 percent, while offline ad sales fell 21 percent.

The e-commerce market, at nearly $5 billion, is already several times larger than the entire advertising business. While margins may be smaller, e-commerce sales worldwide grew 28 percent last year and now account for 18 percent of the total retail market, according to eMarketer estimates.

Even before the pandemic dramatically increased e-commerce spending, Facebook CEO Mark Zuckerberg began to steer the social network away from its reliance on advertising. Last year, advertising still accounted for 99 percent of Facebook's revenue, but in January 2020, Zuckerberg said the three areas he was "most focused on for the next head of our company" were personal messaging, virtual reality, commerce and payments.

Facebook has since added shopping tabs to Instagram and its other apps, and has begun testing WhatsApp's payment system in Brazil and India. Even the digital currency Diem (formerly Libra) is getting ready to re-launch this year.

Facebook isn't the only one looking for life beyond advertising. Twitter is testing "super followers," a way to charge for bonus content, and TikTok is promoting e-commerce through a partnership with Shopify.

The concept of the "creator economy," as Stripe has become Silicon Valley's most valuable asset, allowing people with online followers to make money from sales or advice, was pioneered in China. In other countries, it has been popularized by Twitch and Patreon, mimicked by YouTube and Facebook, expanded into new areas by Substack newsletters and dozens of other startups.

Stripe's technology is at the core of many of these platforms (Shopify, Instagram, Cameo and Substack are among its customers). So is Collisons' philosophy. The company's stated "mission" to "increase the GDP of the Internet," Patrick Collison says, doesn't mean fighting competitors for the next big customer. "Zero-sum games are bad," he insists. Instead, Collison hopes that by making payments easier and faster, he can stimulate new economic activity.

It will be many years before payments and commerce supplant advertising as the standard form of monetization for Internet companies like Facebook and Twitter. But the infrastructure is slowly taking shape. Web standards documentation still lists the three-hundred-year-old 402 code as "reserved for future use."

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