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Making Money on the Internet

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How much money will my company make on the Internet?

I often hear this question from businesses. The answer, most of the time is, "in the best case scenario; you'll break even." When their color returns, I usually ask them, "How much money does a bank make from an ATM?"

For each ATM, a bank pays thousands of dollars for installation, insurance, daily maintenance, rental, network linkage, upgrades, theft-prevention, and more. A bank does not make money from ATMs, it pays to provide them.

Next question: Would you bank at a place that did not have ATMs? Probably not. ATMs are a valued, often essential, service that we have come to expect. For example, I bank at a credit union whose nearest office is 300 miles away. I haven't seen a teller in over two years.

I am not suggesting that your next modem should come with a cash dispenser. I am saying that the Web provides services that are fast becoming essential and valued. In much the same way that the availability of ATMs grew explosively in the 1980s, I expect Web sites to bloom in the near, medium, and far future.

The Web will become a necessary center for commerce in three areas:

  1. Technical and sales support. Intelligent programs running on Internet servers (CGIs or other programs) can dissect customer questions for key words, assign probability scores, and group questions into defined categories. Then, batches can be forwarded to people best able to handle them, or a program may handle certain questions. At the least, an automated program can send a comforting acknowledgment to the querying users. All these functions - not to mention the savings on the tangible and intangible costs of keeping 800-number callers on hold for an hour - dramatically ease the cost of supporting products and services. Support is not a traditional area of income, but the Web may reduce (though not eliminate) the cost.

  2. Nexus for product information and specifications. We've all heard contest rules or car dealership specifications mumbled incredibly quickly at the end of a radio or television commercial. The summary given there is just enough to satisfy the legal department. Now, consider magazine ads for prescription drugs. What's that, around three pages of ultra-small type? Traditional media has limits to the quantity of information that it can transmit. In contrast, on the Web, for a comparatively low cost, companies can provide detailed specifications, without imposing a vast bulk of information on other, not-as-interested users.

  3. Product purchasing, update, and upgrade distribution. It has become so expensive to distribute software through traditional channels (see TidBITS-352) that for the international corporation and the independent developer alike, the Web can be defined as a place to save a great deal of money. Software upgrades and updates cost tens of thousands to distribute through traditional mechanisms (such as mailing floppy disks). The cost of setting up and maintaining an Internet system that can serve thousands of users a day is a small fraction of the cost of mailings. This promotes more timely updates and incremental upgrades. The newest, coolest stuff gets out as it is developed, rather than being held up for a major overhaul that would justify the mailing cost.

[There can be a flip side to this ease of distributing incremental software updates - see "Waiting with Beta'd Breath" in TidBITS-328. -Geoff]

You may ask, "This is all fine and good for software companies, but what about my business?" This is just one model of how the Web can save money. I have built subscription-based trade information centers, secure two-way database access points, internationally distributed scheduling systems, ordering systems that can assist the buyer in obtaining all the requisite parts of a multi-part purchase, and more. Other uses stretch only as far as the imagination.

What About Web Advertising? Ad-tiles - small graphic panels typically at the top of a Web page enticing a surfer to visit a site - are reputed to have a "click-through" (successful enticement) of two percent. Of visitors that click-through, maybe two percent explore a site once they discover it's an advertising venue.

Ad-tiles are, for the most part, a bad idea. They're generally obtrusive, ineffective, and misleading. They are rapidly moving into disfavor with Web advertisers. Another inappropriate Web advertisement method is the use of meta-ads, where, prior to being allowed to go to where user intended, the Web surfer is forced to an intermediary advertisement. Web surfers have not been as anesthetized to this type of annoyance as TV viewers and many react in unpleasant ways.

A little background may help put the newness of the Web into perspective. When radio first appeared, it had model to determine the best method of advertising. Eventually, per-show sponsorship became the preferred method. In the case of television, the same per-show sponsorship model didn't prove to be the optimal solution. I suspect that we have not yet discovered the best method for Web advertising.

The best method for attracting large numbers of people to a site - and I'll let the cat out of the bag here - is to have excellent content. This requires knowing your audience, using in-depth log analysis, and having quality people working with adequate resources.

Who's There -- So far, the Web audience is like none that advertisers have experienced before. Web surfers are far more technically savvy than channel surfers. They are on the Web to gain information. Never patronize them, talk down to them, or feed them unqualified assertions. Most importantly, to the best of your ability, understand what they want and give them the information they request.

Don't Wait For the Nielsens -- Every commercial Web site keeps a detailed log of its users, the likes of which TV advertisers would pay for in flesh. Yet hardly any sites make full use of these logs. Specific, important information can be gathered from logs, including what users are interested in, what they read, what they ignore, where they came from, and (loosely) how long they visit. Though it's not perfect, this information is an invaluable tool for planning site revisions. Most technical people concentrate on data and analysis tools that are absolutely factually substantiated, and may miss the big demographic picture by ignoring the potentially more valuable inferred information.

Webmastery -- All too often the budget for a Web site is a fraction of that for janitorial services. The Web is a remarkable medium capable of producing quality - and response - in nearly direct proportion to what goes into it. Many people call themselves webmasters based on a little knowledge of the basics, much like someone who wrote an article for the high school newspaper and calls himself a journalist. The difference is that the market is familiar with what it means to be a journalist. Webmastery is just that: a skill to be mastered. Qualifications and prerequisites include acute design sense, programming ability, managerial and interpersonal competence, and in-depth understanding of many technical areas. When a company gets its hands on a good webmaster, again, all too often, due to fear, past negative experiences, and lack of understanding, the company stifles the webmaster's ability by a nearly unworkable budget.

All right: so you've put up everything you had, customized your site to match what the logs tell you about your the users interests, and, boy, with what the webmaster makes you're thinking of changing careers. So why has your Web site has performed so badly? Let's look at some problems that lead to the disillusionment many early adopter companies have felt from their Web ventures:

  • Unrealistic expectations: Advertisers are used to television and magazine figures. They want 150,000 people to hit the site per day, because that's how many the rating services tell them saw the 30-second TV spot last night. Advertisers don't grasp that viewers of their Web site are there because they want to be there. They are not passive viewers suffering through another audio-visual assault, but inquisitive potential buyers or those who have already purchased and want more information. Each Web hit should count as at least 1,000 TV commercial viewers in terms of potential.

  • The Web sites stinks: Just because the junior vice president of water cooler refilling is capable of building a Web site doesn't mean he should. Just as designers are brought in to create a TV spot, so goes the Web. It is as much a place for alluring imagery as for hard information. Often, commercial Web sites lack quality content. Television and radio ad firms often use lifestyle look-and-feel imagery; they seem to want to reproduce a TV commercial on the Web, cinematographics and all, regardless of the capabilities or interests of their audience. This is the wrong approach. Though it's true the average attention span of a Web surfer is considerably less than a minute, it's wrong to have this figure drive content. Surfers are looking for something. If they do not find it on a page, they choose the next most likely link until they do; or they give up.

If a site provides a thorough but layered information structure providing adequate quantity and quality information (quantity, meaning the site is as complete as possible, and quality, meaning the information is well-written and designed, appropriate, and meaningful), then the site will be visited.

Customers already expect a business to maintain a Web site; and their expectations will only grow. Though your Web site may never earn a dime, it may help save your business. Like ATMs are to banks, it will become mandatory for a business to maintain a Web site to stay competitive.

And it's wise to assume your competitors will read this article too.

[Dan Meriwether is the author of The Macintosh Web Browser Kit, published by John Wiley & Sons, and a consultant whose clients include Canon, Wells Fargo Bank, Tsutomu Shimomura, and other national and international organizations. Dan is also BMUG's webmaster.]

 

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