Business on the Internet: Opportunity or Black Hole?
Hilton On the Park, Melbourne, October 4, 1995
By Jason Romney, Information Media & Communication Group
http://www.mira.net.au/netlaw95
Questions:
Who has a PPP or SLIP connection to the Net?
Who is involved in a business with a World Wide Web presence?
Who has written their own HTML for a homepage?
Who has created Web pages with audio and video?
Who has made money out of the Internet?
Geographics and Demographics
How does Internet marketing and distribution differ from conventional
business procedures?
You might say that the conventional questions posed in this area -
questions such as "What type of people are Internet users?" "Where are they
located?" and "Are they buyers or lookers?" - are crucial to any well
thought through business initiative.
But before answering these questions (because NOT answering them will
undoubtedly strike you as an inexcusable cop out) I think we should ask
whether they are still that important when it comes to on-line business.
In conventional business, the cost of marketing and product distribution is
steep. This means advertising campaigns must proceed from the best possible
idea of the types of people who constitute the potential market. Once the
target group has been established, appropriate publications can be chosen
and expensive campaigns devised and mounted.
However, if you choose to market on the World Wide Web instead of an
expensive television, radio or newspaper commercial, advertising costs are
cut dramatically. Your advertisement is continously available rather than
metered in short bursts.
You can readily afford to produce a wide spectrum of pitches to audience
groups that may be well outside the niches which might, at first
consideration, seem the most appropriate targets.
Is it thus still important to know what type of people are Internet users
and how many there are?
What is the range of available statistics?
If you say yes, you are likely to be very dissatisfied. The truth is, it is
exceedingly difficult to come up with concrete figures because thousands of
individual users can be hidden behind, say, a single corporate domain name.
That's why you have probably seen statistics ranging up to 50 million
connected people.
The only thing of which we can be confident is that the numbers are growing
quickly:
Authoritative commentators such as MIT's Nicholas Negroponte predict one
billion people will be on-line by the year 2000.
Win Treese's widely distributed Internet Index reported last month that at
current growth rates, everyone on earth will be connected by the year 2004.
At the vast Live '95 consumer electronics show I attended in London last
week, British Telecom and the Demon Internet provider were trumpeting the
figure that a new user joins the Internet every 10 minutes.
Even on existing figures, usage statistics can be astonishing.
As of last June, there were 58,012 home pages on the Net, with on-line
entrepreneurs launching over 400 new pages every day (On-Line Business
Today, 30 June, 1995).
The number of different users searching the Yahoo database between May 1 and
7 this year, for example, was 1.4 million.
Yahoo now lists 31,938 entries under its Business and Economy sub-directory
of WWW sites (On-Line Business Today, September 25, 1995).
Even the most conservative estimates are still impressive.
One survey for O'Reilly & Associates last month suggested the number of
Internet users in the US alone is 5.8 million (in addition to the 3.9
million estimated to be commercial online service users). This is rather
less than the usual 15 million figure but still enormous. (Investor's
Business Daily 28 September 1995 - Edupage)
What do you really need to know about these statistics?
I think the key point is that we are in the final countdown period to some
even more dramatic growth.
We are now at a time in the development of the Internet as a business
vehicle where an automatic, built-in on-ramp has only just been made
available in the Windows 95 operating system. MSN is reported to have
attracted 190,000 subscribers in its first week alone.
We are now at a time just before the Netscape commerce server technology
has its final flaws eliminated.
We are now at a time just prior to the emergence of reliable, widely used
digital cash and on-line banking.
Over the next year or so, when these goals are truly realised, won't all
the present statistics be blown out of the water? I think they will be. And
I think the fact that you have come to hear the speakers today probably
suggests you share this view.
But assuming we do still want to ask this question - What type of people
are Internet users and how many are there? - the Investor's Business Daily
survey I mentioned earlier indicated that:
67% of Internet users are male,
more than half are between the ages of 18 and 34, and
about half work for companies with more than 1,000 employees.
It also showed the median household income of such people falls in the
$US50,000-75,000 range.
In other words, and this is really the key point: Internet users are
potentially very good consumers.
Even if you are sceptically disposed towards such statistics, again, I put
it to you that exact data in this regard doesn't really matter because the
situation is changing so quickly. When a high-speed Internet connection is
commonly delivered via cable TV lines and computers are married with
televisions into a single, seamless entertainment and business vehicle,
surely these figures, already attractive, will become even better for business.
I think you can be confident that the majority of Internet users are, and
will remain:
affluent consumers,
positively disposed towards the convenient acquisition of information
and inclined to purchase products through on-line channels.
What is known about on-line purchasing patterns? Are they buyers or lookers?
http://www.umich.edu/~sgupta/hermes/
I think this is a more important question than where the on-line consumer
is located. The latter issue can always be accommodated either directly
on-line or by hooking up with a good mail order outfit.
Statistics give some reassurance that more people are spending money on the
Internet. For example, per capita spending on the Web is up 35% compared to
six months ago, with another 70% increase expected in the next six months
(according to the HERMES project).
But it is clear that some major changes in the outlook of netsurfers must
occur before the majority of lookers truly become buyers. What's more, the
Hermes survey suggested that whereas Web sites providing "commercial
information about products and services" are among the most commonly
visited, shopping is dead last as a primary motivation for using the Web
(Edupage, September 7, 1995).
The bottom line seems to be that simply providing a different way of doing
the same old thing will not lead to success in the on-line market.
Dataquest's Principal Analyst of On-line Strategies, Allen Weiner, says
consumers want not just convenience, but also, crucially, a pleasurable
shopping experience. It's really hardly surprising.
Now, you can see Dataquest's thesis developed in more detail by paying them
$US1,495 for their report: "Internet Users: Who They Are, What They Want".
(Just call Dataquest's Tom McCall on 0011 1 408 437 8312 or e-mail to
tmccall@dataquest.com). Alternatively, you can stick around for my ideas on
the subject which I'll present to you shortly.
Can we really make any valid and useful generalisations about likely future
trends?
http://ptech.wsj.com/html2/
Walter Mossberg of the Wall Street Journal predicted in a column last June
that we are entering a competitive "icon marketplace".
In this "icon marketplace", web publishers will battle to get icons
representing their sites in front of the most users.
He said:
"[The Web publishers] will be trying to get big services that connect people
to the Internet...to prominently display and promote icons that let users
jump right to their home pages. In this icon marketplace, I suspect money
will change hands in unexpected, complicated ways. Some publishers will pay
to get their icons featured, while others will be paid by the big services
who want prestige brands to offer their members. Payments may be geared to
how many people reach the site via various gateways, or special deals may be
cut that eliminate or reduce subscription charges for members of certain
services. In other cases, ad revenues will be key, and complex formulas may
evolve for splitting those proceeds. However it evolves, only the most
creative and compelling sites will thrive."
I think cutting those creative deals will be one of the biggest growth
areas of on-line commerce in the year to come.
http://www.worlds.net/
Looking a little further ahead, I think one recent development that points
the way to how on-line shopping can work successfully is by an American
company called Worlds Inc.
They produce what they call `social computing applications' and their
flagship product (at present available free over the Internet) is called
Worlds Chat. When you fire it up, Worlds Chat creates `shared virtual
environments' in which all users are joined through the Internet and able to
communicate and interact in fully navigable 3-D spaces with other real people.
Communication through the actual Worlds Chat program is in the form of
keyboarded conversations. However, if you use another program such as the
Internet Phone in conjunction with Worlds Chat you can talk with other
people just as you would on a normal telephone.
Worlds Inc claims this is a radical leap from menu-driven, icon-based
interfaces. And they're right. Users are represented in these shared
environments by `Digital Actors' or `avatars'. At any one point you can be
surrounded by a whole crowd of real people on the Internet logged in at that
moment, all moving and interacting as in real life. The forum is a richly
colored and varied environment with ease and speed of movement, at least,
similar to that in the cult game, Doom.
These interactions promote an unprecedented sense of community and
individual identity. This is the kind of "atmosphere" which I think will
make on-line shopping an attractive and well-populated activity.
But creating this atmosphere will require that entrepreneurs develop an
ability to merge technological opportunity with that elusive sense of
playful, shared experience that makes people so love things like shopping in
real life.
Web site effectiveness, hits and generating new business
Contempt for electronic brochures: is it warranted?
I really don't think there is much use boring the on-line community with
empty promotional sites. If this is all you intend, and law firms, I might
add, are particular culprits, a Web project will likely offer marginal returns.
Do promotional corporate web sites really generate new business?
I think that new business generated by a Web site comes in direct
proportion to the effort made to accommodate the desires of visitors. That
accommodation can only occur if you know what your visitors are doing. And
that is where the compilation of Web site statistics is crucial.
What type of statistics are really useful to have?
Up until now, the number of "hits" has been the primary benchmark for
judging the popularity of a Web site. A hit is where a given page, or object
on a Web page, is retrieved by a browser.
This information has been obtained from the httpd logs maintained by
Internet gateway providers and presented to customers with varying degrees
of user-friendliness.
Hits have been considered essential to sell Web pages because they
represent the hard data which convinces clients to make investments in areas
such as Web advertising. Once your hit information is neatly tabulated,
advertisers can "cost-justify" sponsorship banners. And no less importantly,
Web site administrators can work out advertising rates and other revenue
generating strategies.
How reliable are the statistics?
Most people now recognise that a "hit" can be a misleading criterion for
measuring Web site success. Just one of many reasons to account for this is
that when a human browser clicks from hot spot to hot spot to view different
parts of a Web site, each click is counted as a hit. Hits, that is, do not
count people.
HotWired, the on-line part of Wired magazine, readily concedes that its
600,000 daily hits really only represent about 6,000 people. Indeed, they
concede there may be even fewer visitors than this if the same people are
visiting more than once a day (Wall Street Journal 21 June, 1995)
What can you do to improve reliability?
http://www.ipro.com
For the advertisers you will want to attract to your Web site, demographic
feedback must reflect more than merely the domain names routinely served up
by httpd logs. As yet there is no commonly accepted standard to measure the
impact of World Wide Web advertising in terms of:
the number of users who see an advertisement
the characteristics of those users
the amount of exposure those users get to the advertisement; and
the number of users who actually act upon the advertisment.
There are, however, now American firms such as I/PRO offering clients such
as Web publishers, advertisers and catalogue producers the ability to
monitor aspects of site usage. I/PRO's I/COUNT system, released last May and
now marketed in conjunction with Nielsen (Wall Street Journal, 6 September,
1995), offers statistics such as:
the total number of users at a Web site,
time spent per page,
sections read within each site and
the geographic and organisation origin of users.
Specifically, these statistics cover:
Usage by various time periods (monthly, weekly, daily, hourly)
Usage over time (today vs. one week ago vs. one month ago, etc)
Usage measured by estimated number of distinct users, pages downloaded and
percentages of total
Estimates of session length, time spent per screen, number of links per
session, entry points and exit points
Breakdown of usage for specific domains, specific sections of the server,
specific time intervals
Breakdown of usage for specific domain characteristics, ie location, number
of members, sales.
Efficiency of documents, measured as a function of the frequency and recency
of their usage, relative to their position within the server
Detailed information about the top sites using the server ie organisation
name, location etc
Summary information (average, total, maximum, minimum) about domain
characteristics, session characteristics (length, paths, etnry and exit
points) and file usage characteristics (time spent per screen)
Benchmark comparisons of the server's usage with American industry standards
User characteristics (age, gender, zip code, job title)
The I/PRO's costs range between $US200 and $US3000 per month, depending on
site traffic level and reporting options chosen by the customer.
http://www.netmedia.com
Other products providing qualitative analysis and reporting include
NetBench, from another American corporation called the Delahaye Group.
NetBench works in conjunction with products from I/PRO to offer particularly
elegant graphic format reports which include actionable recommendations on
how to improve performance of the marketing effort.
Interestingly, NetBench also examines what is being said about an
organisation in key forums, and offers a summary report on a given company's
overall image on the Internet. It is claimed this summary report even notes
the tone of the discussions, location, issues, and messages about a company
and its key competitors providing a "snapshot" of its image in Cyberspace.
NetBench's "smart site" and "wander" components provide visitors to your
site with real-time feedback while the visitor is still at the site. They
"intelligently" suggest related information on similar topics to that
already chosen by the visitor, or direct a frequent visitor to areas that
are new and as yet unseen (Business Wire, May 31, 1995. Contact: Craig
Barberich, Director of Sales and Marketing, 0011 1 415 328 4638).
http://www.webtrack.com
There is also Webtrack, which will tell you which of the 2500 companies in
the US with a media budget of more than $US0.5 million maintain web sites
and which sites accept what kinds of advertising, including the rates they
charge (Business Wire, May 31, 1995).
Are there risks associated with keeping statistics?
Information concerning Web site usage is a commercially valuable commodity.
In general, you should feel apprehensive about such information falling into
the hands of your competition either by accident or through some policy
change, for example, leading to the information being wilfully on-sold.
You may also find your existing Australian Internet provider baulks at the
suggestion that an American company like I/PRO be encouraged to pry into the
affairs of that gateway's visitors.
If keeping accurate statistics involves asking visitors to fill out an
initial survey, you run the risk of alienating them to the point where they
leave and never come back. The Net community is impatient and easily turned
off a site.
Are people really selling goods on-line with any success?
http://www.dataquest.com/
One sees many wildly optimistic reports about on-line selling. The
respected SIMBA organisation said in a report last month that the on-line
consumer sector is growing at a rate of 40.7% per year compared with 15.3%
for business services such as online brokerage information.
This sounds quite impressive, however, it was reported last May that a
Dataquest survey showed fewer than 25% of Internet users are willing to make
an online credit card purchase. When Barclays Bank launched BarclaySquare,
also in May, they quickly scored 12,000 visitors but a month later, their
head of corporate business development had to confess that few had actually
bought goods (Bloomberg, News & Observer Publisher Co, June 23, 1995, London).
A survey published last July indicated that Gen X is apparently not going
to come to the rescue of on-line salespeople either.
At least not in the short term, anyway.
While it is true that 98% of undergraduate students have access to the
Internet in New York and half of them use it every day, the survey indicated
that 71% of them use it just for e-mail, bypassing the Web entirely. Only
0.3% of students had ever bought one thing on-line. In fact, only a third
intended, after graduation, to even stay online at all.... (Investor's
Business Daily, 11 July, 1995).
http://future.sri.com
If you are determined to open up an on-line revenue flow, perhaps the best
way of doing it is to understand the psychology of the Internet community.
There are many aids in this difficult quest, such as the first major
psychographic survey of on-line groups in the US which you see on-screen now.
A senior analyst at SRI (tel: 0011 1 415 859 5353) last June put it thus:
"If you want to understand how the Web can move from a relatively elite
venue towards a mass medium, many of the answers are in the attitudes and
lifestyle patterns of who's online - and equally important, what groups are
not online despite their having the exact right demographics. The
psychographics indicate a hidden diversity of opportunities behind the
stereotypes of who's on the web."
http://www.synergy.net/webwork.html
I think this psychographic stuff may be useful food for thought when we try
to sell our goods and services on-line. But if you prefer more practical
advice, entire Web sites have been devoted to fostering on-line business
opportunities such as "Workin' The Web". Irrespective of whether it does
what it says, you may get some good ideas here, if you come back to it later
on, to build into your own site.
What businesses suit the Internet?
What do the statistics say?
http://www.umich.edu/~sgupta/hermes/
The Hermes survey quoted earlier indicated that among on-line shoppers, the
most popular categories were:
* software,
* hardware,
* books,
* music and
* travel.
Interestingly, the least popular items were apparel and ... yes, legal
services.
Some examples of on-line business ventures in Australia
http://www.sofcom.com.au/
But the proof is presumably in the pudding. You can find a number of lists
around the Internet of Australian on-line enterprises.
One such is kept at the Sofcom site but there are many others. An on-line
presence theoretically establishes a firm as a technology leader, and at
this point anyway, an innovator.
Or at least, it should. A company can actually be undermined by its web
site if it demonstrates a failure to grasp some basic principles. These are
very important so we cover them in the following section.
Defining Web publishing objectives
Web design: available technologies and making the medium be the message
http://www.winternet.com/~jmg/topten.html
This simple site by Jeffrey Glover contains everything I think you need to
know in this area and I strongly recommend you heed its lessons. In short,
the top ten ways to tell if you have a sucky homepage are:
your header picture is over 50K
you put up a 400K picture of yourself and you appear in the lower-left 20K
you put up pictures of your pets
you have a link to the White House
you blink
you have title animation and fade-ins
you use construction pics on your page
your home page consists of a desperate plea for a job
you use some crappy 4-bit GIF that looks like a film negative left out in
the desert for 5 years
You're on your own hot list
Seriously though, audio and video are now commonplace on the Web and you
will see many examples today. At a demonstration in Cambridge University
last week by Sun I saw the latest animations which can be played back using
the Hot Java browser which is available on-line free for Windows 95 users.
It was all very impressive, but the central issue here is that all this
stunning multimedia is racing ahead of Internet pipe width.
The bottom line is that users with slower connections will get fed up and
leave your site if you put too many bangs and whistles in it.
When is straight text better?
It is always better to have a straight, clean, pure, fast loading ASCII
text component to your web site. You will impress visitors and actually
ensure that a few come back!
Good intra-site navigational practice
Lost visitors at a web site usually means you lose them as potential
customers. Every page should offer a visitor ready return to the top level
site entry point. You may have noticed our attempts to do this on this
conference's Web page.
Keeping the customer happy - customer response and major turnoffs
Dead gateways, Dead links and Slow feeds
The response you want to elicit is up to you.
However, whatever it is, you will not succeed unless maintenance is a
crucial part of your Web operations.
I'd just make the following brief points:
A gateway that rarely goes down, and warrants that it won't, is a very
important acquisition.
A good, fast pipe to the Internet backbone that serves up your Web site
without lame dribbles is also crucial.
After that, although it can be a bore, it is very important to check that
links continue to work properly.
Establishing a presence
Lawyers in Disgrace - Laurence A Canter and Martha S Siegel
In April last year, two American immigration lawyers spammed the Internet
with advertisements about their law firm. That means that they blasted their
little electronic brochures into newsgroups and list-servers, irrespective
of the intended content.
In fact, a kind of electronic war broke out. Protesting flames and
automated cancelbots shot across the planet to contain their handiwork.
Endless discussions about the acceptability of their strategy, however, did
not prevent them from making what they claimed was $US100,000 worth of business.
If you would like to read their book for Internet novices, called "How to
Make a Fortune on the Information Superhighway", or "Everyone's Guerilla
Guide to Marketing on the Internet and Other On-Line Services", you will
probably learn most of what you need to know to establish a presence on the
Internet. But be careful.
Both practically and, perhaps soon, legally, this behavior can be
counterproductive.
I might point out that at the International Bar Association Congress held
in Paris a fortnight ago, there was much talk in the day-long Regulation of
the Information Superhighway session about the IBA drafting an international
treaty in this area.
The idea was that the treaty should regulate this kind of spamming,
nowadays also known as a brown-out. Even if this Treaty never gets up, you
should at least be aware that, at this point, such spamming strategies can
be extremely counterproductive.
Finding out about Netiquette through the Net and books
There are numerous books on this subject and on-line Frequently Asked
Questions files.
Two books I've found useful are:
The World Wide Web Unleashed, by John December and Neil Randall published by
Sams and
Inside the World Wide Web, by Steven Vaughan Nichols and Rob Tidrow,
published by New Riders.
But I am sure you are all aware that any bookshop has shelves filled with
Web books stretching off almost further than the eye can see.
Simple Web pages and sponsorship
A case history: Yahoo
http://www.yahoo.com
On-screen now, you can see one of the Internet's best search engines: Yahoo.
Yahoo was started by two Stanford graduate students and, three months ago,
they decided to use sponsors to make a profit so it would not have to charge
for use.
Yahoo's co-founders, with a $US 1 million venture capital injection from a
new partner, redesigned its home page to accommodate advertising, initially
charging five sponsors $US20,000 per month.
http://www.advert.com
From this successful case history, you can learn many things which are
discussed in more detail at the site you see on screen now. However, in
summary, you might say:
a site host needs something good to sell - Yahoo had a great search engine
a site host needs powerful audit capabilities so as to demonstrate sponsors
are getting value
sponsors should ensure that their Web-based advertising goes beyond image
building and name recognition to fill a more significant information role.
Information/Customer Service Systems
Showing off your handiwork in on-site demonstrations...
If you want to show off your Web site handiwork at the offices of your
clients without actually going on line, you will quickly learn how a Web
browser works for documents contained on your computer's own local hard disk
rather than the wider Internet.
If you use Trumpet Winsock to get on-line, a good tip in this regard is
that this can often only be done by changing the winsock.dll file to another
file called mozock.dll which can be downloaded from the Netscape Web site.
The next step: seamless in-house document server systems and the larger Net
Information within a company can be served up to all the PCs on the network
via an in-house Web server. Later when you go on-line, hopefully with
appropriate fire-wall technology to help protect your network from hackers
and viruses, the information infrastructure, established initially for
in-house use only, can quickly be adapted to access the wider Internet as well.
Summary:
http://smartstore.ac.com/smartstore/
I think my earlier points about on-line shopping, virtual reality and the
importance of fostering a sense of "community" are the most significant for
on-line business people. As was pointed out last month in the Wall Street
Journal, the problem with existing on-line business is that people can't
"bring along friends, swap tips with strangers in the aisles or people watch".
Virtual reality, even in its prototype forms such as Worlds Chat, will
change that.
http://bf.cstar.ac.com/bf/
Also, it remains to be seen how global comparison shopping facilitated by
intelligent software agents will affect the retail industry. BargainFinder,
the example you see onscreen now, has been on-line since July 1 and has
completed about 40,000 searches.
I suspect on-line discounts will be a major issue both for retail outlets
and on-line professionals.
An Internet Tour
Home page design
Top Ten Ways to Know if you have a Sucky Home Page:
http://www.winternet.com/~jmg/topten.html
How to judge the effectiveness of your WWW initiative
NetBench (qualitative analysis and reporting service): http://www.netmedia.com
I/PRO, I/COUNT: http://www.ipro.com
Webtrack: http://www.webtrack.com
Finding out about Internet demographics
Making sense of statistics: http://future.sri.com
User profiles: http://www.ora.com/survey/
Internet users: Who they are, What they want... http://www.dataquest.com
Net Surfing for Profit
Workin' the Web: http://www.synergy.net/webwork.html
Advertising and ethics
Ethical Considerations of Legal Netvertising:
http://www.kuesterlaw.com/netethics/brandy.htm
Australian on-line business information:
Who is out there? One example: http://www.sofcom.com.au/
Ausweb 96: http://www.scu.edu.au/ausweb96
NOTE:
A full (but not static) version of the keynote speech will be available from
October 9, 1995, at:
http://www.mira.net.au/netlaw95/
or
http://technoculture.mira.net.au
-- Jason Romney, Attorney (specialising in multimedia developers and on-line service providers) and journalist. Tel: 04111 84248 (regular columnist for: the Australian Financial Review, Storm magazine, the Law Institute Journal, The Disk CD-ROM magazine and weekly commentator for live-to-air radio, Byte Into It!, 102.7 3RRR-FM Mondays at 7pm) Personal E-mail Address: jromney@werple.mira.net.au Storm Techno-Culture & 3RRR-FM Byte Into It! URL: http://technoculture.mira.net.au Price Brent Attorneys and the Information Media and Communication Group (IMC) http://www.pricebrent.com.au/ (Price.Brent@pricebrent.com.au) Level 20, 500 Bourke Street, Melbourne, 3000. Tel: (613) 246 5000To Explore within the law...