Transcript of the live chat session that took place Thursday, March 20, 1997, noon to 1 PM (US Eastern Time) These sessions are scheduled for noon-1 PM every Thursday.
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Since the chat itself happens at a rapid pace, it's often difficult to note interesting facts in particular URLs as they appear on-line. Here's a place to take a more leisurely look. I've rearranged some of the pieces to try to capture the various threads of discussion (which sometimes get lost in the rush of live chat).
Please send email with your follow-on questions and comments, and suggions for topics we should focus on in future sessions. So long as the volume of email responses is manageable, I'll post the most pertinent ones here for all to see.
Threads (reconstructed after the fact):
We're here to share experiences about doing business on the Internet -- particularly the World Wide Web. What works? What doesn't work? Why? What are the trends that matter? How can you/should you adapt to the Internet culture and environment?
I work for the Internet Business Group at Digital Equipment in Marlboro, MA. In that capacity, I end up talking to people from large companies about how they can use the Web for business. I also have my own personal Web page -- which is content rich and no frills -- which I do for practically nothing and draws a fair amount of traffic and attention.
Richard Seltzer 12:05pm (184.108.40.206) Once we get going, in a chat session like this things can get pretty frantic. It's sometimes difficult to follow the threads of conversation. And there's no time to write down interesting URLs and facts. So each week, I take a copy of the raw transcript and edit it to make the threads clearer and post it at my own little Web site so anyone could take a look. You can see transcripts of previous sessions at http://www.samizdat.com/#chat
Richard Seltzer12:03pm (220.127.116.11) Today we want to focus on how to make an electronic commerce site work -- what can you and should you do to attract the right kind of traffic, and what's it likely to cost you? How can you build a successful on-line business?
Todd 12:01pm (18.104.22.168) Hi. I'm a developer at DIGITAL.
Richard Seltzer 12:01pm (22.214.171.124) Welcome, Todd, what area do you work in?
Todd 12:05pm (126.96.36.199) I'm doing Ui development for system management which includes the Web.
firstname.lastname@example.org:03pm (188.8.131.52) Hi Richard, I manage Web-Net a business Networking User group focuing on the Web. I also have a couple of new web services.
Richard Seltzer 12:04pm (184.108.40.206) Welcome, Sudha. What are you two new Web services?
email@example.com 12:10pm (220.127.116.11) Richard: My newest service is called Coola Free Webzine Carrier (www.coola.com). It is based on Push technology to deliver magazines by email. People can customize their selection at Coola and get new issues by email. We haven't submitted to search engines yet but have attracted a couple of 1000 members in 2 months. I'll like to hear from people about cost effective ways to reach new subscribers.
barbara 12:06pm (18.104.22.168) Hi! I'm here!
dj 12:07pm (22.214.171.124) Just joining in. Small business owner and interested in EC. How do you find current stats on what is working and what doesn't on the WWw?
Richard Seltzer 12:11pm (126.96.36.199) dj -- that's what we're here for -- to figure out what's working and what isn't.
Ed Jaros - Green Bay12:08pm (188.8.131.52) Good afternoon all :-)
Alan (firstname.lastname@example.org) 12:10pm (184.108.40.206) Hello everyone, sorry I'm late.
tbarnes 12:27pm (220.127.116.11) hello everyone! i'm just lurking right now...
Gisela - Stream Int'l. 12:37pm (18.104.22.168) Hi. Just joining in late.
email@example.com:07pm -- (22.214.171.124) Todd, Amazon has been spending lots of $$$ on regular media to build their brand name. How do you measure them as successful?
Todd 12:08pm (126.96.36.199) -- Yes, Amazon.com appears to be a booming success. It gets pointed to often. But what is it that makes it a success? Can that business model be replicated? And if so, will we be looking at an Internet with just one or two monster sell-everything sites and no room for the little niche player? In other words, part of their success seems predicated on the fact that they sell virtually all English-language books. And part comes from the fact that it is books (not widgets) that they sell.
Richard Seltzer Yes, Sudha, Amazon.com does appear to be spending a lot on traditional advertising (like NY Times Book Review Section). We have no hard facts on what their costs are and how profitable they are (if they are making a profit yet). I believe that they are plowing all current revenue back into the business, banking on exponential growth.
Todd12:18pm (188.8.131.52) Amazon seems to have done a number of things right. Their niche is well defined (books), very deep (most books in print), and not too broad (only ? books). Also, they have agressive pricing and a well established way to collect money (credit cards) and get their product to their customers (UPS, FedEx, ...).
Richard Seltzer12:30pm (184.108.40.206) Back to Amazon.com for a second. Keep in mind that their apparent success derives in part from the fact that they sell books (and for today's Internet demographics that makes sense) and that they sell all of them (greater selection than in any physical store. But they also go out of their way to create on-line communities -- for readers, publishers, and authors. They are set up so people in all those categories can provide valuable content that makes the site more interesting and makes the buying experience richer and more valuable. As an author, you can fill out an on-line form, and instant an "interview" with you appears at the site, as if an editor had spoken with you. As a reader, you can leave comments about books you have read. As a publisher, you can upload tons of info (including book covers and sample chapters) for posting at the site. They understand the Internet environment and work very well there. They didn't just mimic some old traditional business model.
tbarnes12:32pm (220.127.116.11) richard, does amazon.com sell books on tape as well??
Ed Jaros - Green Bay 12:36pm (18.104.22.168) Food for thought. Seems like amazon is following this philosophy: Networking is a high-energy activity, so start now and build your action plan around these suggestions:
Ed Jaros - Green Bay12:11pm (22.214.171.124) This is long but related to the focus: Speaking at CMP Media's Networked Economy Conference Wednesday, several media experts agreed that "hits" or "click-throughs" are not the most effective ways of judging a Web site's impact or that of its advertising. "HITS stands for How Idiots Track Success," said Katharine Paine, CEO of The Delahaye Group, Inc., an international image consulting firm. Paine opened the panel discussion on "The Business of News, Marketing and Advertising" at the conference located in suburban Washington, DC. The answer, she said, is to look at the information about users. "For the past year we've been talking to dozens of companies a week, offering them full psychographic profiles of their Web site visitors based on a simple registration theme," said Paine. "But most Webmasters would still rather count hits." Also on the panel, Joshua Greer, CEO of Digital Planet predicted that the online industry is going to see a media backlash in 1997. "The media has been very good for this industry," said Greer. "But as they realize that some get rich quick companies didn't pan out and as major companies rethink their Internet strategies, you'll start to see more negative stories about the industry."
Richard Seltzer 12:14pm (126.96.36.199) Ed -- Thanks for all the detail. That rings true to me. It feels like this is not a "get rich quick" environment, and that simple mindless spending on banner ads does not usually translate to profitable sales. In email between sessions, Kaye Vivan pointed to an excellent brief article http://www5.zdnet.com/zdnn/content/inwk/0405/inwk0051.html "Net Shops Focus on Tracking Users."
firstname.lastname@example.org 12:20pm -- (188.8.131.52) I just checked the site you mentioned. Its a nice article.
Ed Jaros - Green Bay 12:22pm (184.108.40.206) Note that many website hosting agreements allow only for a certain amount of MB transfer per month. If you do a bang up marketing job to the wrong people it will end up costing you more bucks in hosting as well.
Richard Seltzer 12:25pm (220.127.116.11) Ed -- Amen. Yes, if you are running your business on someone else's machine, you will be charged for traffic -- based on the size of the files times the number of times they are accessed. That makes it all the more important to attract the right traffic, rather than any traffic at all.
email@example.com -- (18.104.22.168) Ed, that's a wonderful point. Many of us don't realize that as a cost.
Richard Seltzer12:18pm (22.214.171.124) Barbara -- Actually, that article I just mentioned is right up the alley for your question. The article is from ZiffDavis (InterActive Week): http://www5.zdnet.com/zdnn/content/inwk/0405/inwk0051.html The message is that all hits are not equal. You want to build the right kind of traffic, not just any traffic. Less traffic can mean more sales, if it's the right people. The folks at Netstores apparently benefit from detailed analysis of their Web logs -- carefully checking where people come from when they come to this on-line store and the likelihood that they will purchase correlated with where they came from. So they place their ads not at the sites that will bring them the most traffic, but rather at those that will bring them the highest percentage of buyers.
barbara 12:21pm (126.96.36.199) Richard, that sounds interesting. How does Netstore get such detailed analysis?
Richard Seltzer (188.8.131.52) Barb -- Check the article. Apparently, their Web hosting provider has some custom software that helps. (Viaweb is the company, www.viamall.com) But I don't think it's rocket science -- just massaging and manipulating data that should appear in your Web usage logs.
Ed Jaros - Green Bay 12:15pm (184.108.40.206) Barbara, personally I think yahoo is on the right track with banner advertising. You can buy a word and have your banner pop up on the results page. I feel you get a focused market that way and are pursuing a qualified lead at that point.
firstname.lastname@example.org:15pm -- (220.127.116.11) Barbara, I agree banner ads create product awareness and don't guarantee immediate sales. But they are growing because its targeted ads. An ad in Altavista when a keyword comes up shows the add to only people interested in related topics and has a better probability of turning to future sales.
barbara 12:44pm (18.104.22.168) In regard to advertising internationally, do people just use places like Alta Vista, Yahoo, Lycos, or are their special International sites, i.e., that target places like England or Europe?
email@example.com 12:49pm -- (22.214.171.124) Barbara, there are companies like Euro Marketing (http://www.euromktg.com) that help for reaching foreign markets. I personally like Altavista. Do you know how Altavista guarantees certain number of hits for an ad at a certain keyword?
barbara 12:52pm (126.96.36.199) Sudha, Thank you for the URL. I don't know how Altavista guarantees certain number of hits for an ad at a certain keyword. Does anyone here know?
Richard Seltzer12:21pm (188.8.131.52) Alan -- I'm skeptical of statistics like "click-through" rates, because they tell me nothing about the people ho are doing the clicking. I'm also skeptical of the value of ads based on key words at search engines (though that's definitely better than purely random). I think that the "tracking" concept is a good one. Figure out who buys and where they come to your site from. if there is another Web-based environment that these people frequent (not just as a way to navigate find, but as a place to belong and participate), that's where I want to appear (but maybe not necessarily as banner ads; maybe in other ways I'd work out in collaboration/partnership with that other site).
Alan Majer (firstname.lastname@example.org) 12:24pm (184.108.40.206) Richard - Actually that's where I think that SiteSpecific shows they've done their homework. Rather than getting paid by click-thru they actually charge based on the number of qualified leads that they generate. For some work that they did for 3M this meant that they got paid based on the number of people who filled out an online form requesting more information.
Richard Seltzer 12:26pm (220.127.116.11) Alan -- SiteSpecfic sounds interesting. Do you have a URL for them?
Alan Majer (email@example.com)12:29pm (18.104.22.168) Richard - Sorry I don't. I came across them in an article in the Feb edition of "The Red Herring" pg 42. Unfortuanately they didn't give a URL in the article. I'm sure a web search would turn them up. The president's name is Seth Goldstein if that helps.
firstname.lastname@example.org:33pm (22.214.171.124) Alan: Site Specific is at http://www.SiteSpecific.com/Site/
Da Webmaster12:30pm (126.96.36.199) I heard about a really interesting product from a company called Aptex (i think), they apply their text-understanding software to observe content and serve ads based on like users wanting to see like things. They claim to boost click through by 50%. Sort of like real-time community building.
Richard Seltzer12:33pm (188.8.131.52) Da -- Apix (?) sounds very interesting. Sounds a bit like Firefly, only with a sales intent. I see lots of benefit from "collaborative filtering" -- sorting out who is similar to who in their likes and wants, and helping to match them together (in instantaneous communities) and to link them with the products and services they might be interested in (so long as all the participants know this is happening and want it to happen -- unlike "cookies").
barbara 12:18pm (184.108.40.206) Alan, we develop,market, and implement electronic commerce software that allows businesses to communicate, market, and sell their goods and services electronically. PECOS and PECOS.net are business-to-business, electronic catalog software.
Alan Majer (email@example.com) 12:22pm (220.127.116.11) barbara - are your products mostly designed for corporate Intranet or for the Internet?
barbara12:27pm (18.104.22.168) Alan, they can be used either for the Internet or Intranet. PECOS is a client server application and robust development environment that enables manufacturers, distributors and direct marketers to conduct business-to-business transactions in real time. PECOS offers LAN, WAN, and Internet communication options, as well as integration with CD-ROM technology.
Alan Majer (firstname.lastname@example.org) 12:33pm (22.214.171.124) barbara - Because the main advantage of the Internet is that it is a build-it-yourself environment do you find that people are more interested in buying EC tools or do you think they're looking for a complete solution right from the start?
barbara12:40pm (126.96.36.199) Alan, it depends on the company, but I think that the type of software we offer provides a more complex and complete solution than a "do it yourself" one would. Large companies need solid, well-thought out and tested software which works for their customers, sales force, and employees. A "do it yourself" can never include all the components that a complete package does. Although the Internet is for all size companies, our software is best suited for medium to large businesses that deal with other businesses.
Alan Majer (email@example.com) 12:48pm (188.8.131.52) barbara - I guess that for large companies it becomes more important to have a working package that can meet their needs. Once they find something that will do the work they will require then I'd imagine that they just want to know whether it will be flexible enough to meet their needs.
barbara 12:53pm (184.108.40.206) Alan, PECOS is very flexible. I know our professional service department works very closely with the client to ensure they get the features they really want.
Alan Majer (firstname.lastname@example.org)12:56pm (220.127.116.11) barbara - where is your main market geographically. If you're dealing with larger companies that probably means multinations too. Does that mean you do a lot of selling outside of North America?
barbara1:01pm (18.104.22.168) Alan, yes. We have customers in Australia, Europe, and the UK as well as North America.
dj 12:17pm (22.214.171.124) My business has been a supplier to the industrial sector. (Manufacturer and machining) Sales have dropped off recently and we are looking to expand the current operation or branch into other sectors of interest. I am looking to jump into the EC but am not sure how to use it to my benefit.
Alan Majer (email@example.com) 12:19pm (126.96.36.199) dj - sounds like an interesting candidate for the Internet. You could probably use the Internet to generate leads. It would be especially useful if you could provide your machining services to regions that may not have the service locally.
Ed Jaros - Green Bay 12:20pm (188.8.131.52) dj, I am working with several Metal Fabrication company's web sites. Their reason for having a site is mainly for image. Secondly for converying info, thirdly for sales.
dj 12:25pm (184.108.40.206) Another reason I want to use the internet is to get a jump on others in the same field. I am from a rural community but located near major industrial sectors (Michigan) Will EC help in expanding over top competitors?
Alan Majer (firstname.lastname@example.org) 12:26pm (220.127.116.11) dj - are any of your competitors on the Internet? Have you looked at what any of them are doing?
dj 12:39pm (18.104.22.168) Alan-Have found quite a few metal competitors on the net-none so far in my locality. I am wondering if they have boosted sales by being on the net. Have emailed a couple, but no response yet.
Alan Majer (email@example.com) 12:43pm (22.214.171.124) dj - the fact that people are ignoring e-mail messages isn't a good sign. I've found that's farily common when contacting people. I've sent many requests for more information and then never hear from them (although there are others that are much more helpful). It certainly highlights the need for people to pay attention to their websites once they set them up.
dj 12:33pm (126.96.36.199) Richard-metal fabrication is the field we are in now.have done fiberglass work or would consider service/technical assistance in manufacturing and quality.
Richard Seltzer 12:37pm (188.8.131.52) -- dj, For metal fabrication/fiberglass etc. I'd suspect that you would be best off providing information and on-line value-added services that made it easier to customers to select what they want and sort out how they are going to best use it. I suspect that the convenience of doing atransaction/sale on-line is not that great -- I'd look for other ways (first) to provide better service to potential customers by use of the Internet.
Richard Seltzer 12:45pm (184.108.40.206) dj -- Try http://www.industry.net I think that's where you are likely to find other metal fabrication vendors and also where you're liable to be able to get a dialog going about whether Web-presence boosts sales in that business given today s Internet demographics. In any case, I'd suggest doing some brainstorming on what kinds of on-line service/info would benefit customers, rather than just thinking in terms of on-line sales.
dj 12:54pm (220.127.116.11) Richard-I have been to industry.net though not recently. FYI-have enjoyed the metal forum that is at http://jobshop.com Interesting topics posted and some sourcing done by engineers. I have replied here to some, but again no responses.
dj 12:45pm (18.104.22.168) Richard-one of my customers has recently added a page to the WWW. Orders have increased slightly, but this may be the seasonal effect also. (Motorcycle acessories) How will I prepare my business if the web does draw more orders?
Richard Seltzer12:50pm (22.214.171.124) dj --- I would focus on creating a Web site that is a place that your target customers would want to come to and return to often -- a place where they receive value from the content and from the interactions they can have their with others who have common interests or who are experts in matters that are important to them. Do that first. Carry on a dialogue with these folks. Let the business grow around that nucleus.
Alan Majer (firstname.lastname@example.org) 12:54pm (126.96.36.199) Richard - it sounds like you're suggesting that web sites are good places to conduct market research and learn more about your customers. I remember reading somewhere that many people were criticizing Labatts brewery for the huge sum of money they spent on their site... and yet that they weren't selling anything on it. The interesting thing that they said in response was that they had found that their web-site was worth it's weight in gold for learning more about emerging trends and consumer preferences and consumption patterns.
Ed Jaros - Green Bay 12:57pm (188.8.131.52) Alan... I perform newsgroup searches for my wife on a regular basis to find out for her who is talking about her company. It's good to know what is being said about you in the outsite world.
Ed Jaros - Green Bay 12:28pm (184.108.40.206) Sudha, Majordomo is doing great for us in sales. Mainly because of the ease of use and empowerment to update your site list at will on-line. I don't think it does alot fo EC except for the fact that whomever owns the list has a targeted audience and can give info that puts them in the position of expert. When someone is looking to buy i would guess they would contact the expert first.
email@example.com:42pm -- (220.127.116.11) Ed, Web-Net User Group operates totally on networking. I agree. It benefits a lot to form your channels and help mutually.
Ed Jaros - Green Bay12:47pm (18.104.22.168) dj - e-mail turn around time is supposed to be less than eight hours. Something I have my customers do is set up a separate mail box for incoming from their site. Easier to track and respond.
Richard Seltzer 12:54pm (22.214.171.124) Ed -- Yes, it's amazing the number of sites that aren't set up to reasonably handle the email traffic those sites generate. Often they provide only one email address, and it's for an automatic bounceback message that's virtually content free. From my perspective, the main strength of the Internet is connecting people to people, not people to documents. You should always make it easy for potential customers to reach real people -- not get them lost and frustrated like with all the endless automatic telephone answering menus.
Gisela - Stream Int'l. 12:57pm (126.96.36.199) Richard - I agree about getting back to e-mail generated from your site and having real people there to respond.
Bob Zwick (firstname.lastname@example.org) 12:58pm(188.8.131.52) In refernce to managing email from a Web Site, is anyone using the automation features with the Goldmine software packge ?
Richard Seltzer 12:59pm (184.108.40.206) Bob -- Please email me URL or info regarding Goldmine, so I can include it with the transcript.
Alan Majer (email@example.com) 12:37pm (220.127.116.11) Richard - I'm not sure, but from my browser it often looks like cookies are somehow being given out by banner ads. Does anyone know if that's possible?
Richard Seltzer12:41pm (18.104.22.168) Alan -- I believe (somebody please correct me if I'm wrong) that you can have any chunk of text or any graphic issue a cookie. At some sites, they try to give me a dozen or more separate cookies for the same page -- because each little graphic has a different one. I fail to see the value of that. (And it is a major nuisance to the user).
Bill_H12:43pm (22.214.171.124) Alan - "cookies" are not "given out" by banner adds, but an access to a given Web page can automatically generate a reference to another Web server which may request to set a cookie. Reference (http://www.doubleclick.com)
Todd 12:38pm (126.96.36.199) Richard - what's the alternative to cookies for something like MovieLink where you want the server to be able to identify you on sucessive requests?
Richard Seltzer 12:42pm (188.8.131.52) Todd -- I think the easiest way to have the server recognize you is with an optional registration/sign-in-process.
tbarnes 12:45pm (184.108.40.206) Richard, did you ever answer the question regarding what's comparable to cookies? I'm wondering too.
Richard Seltzer12:51pm (220.127.116.11) Sudha -- I must admit that my reaction to cookies is irrational -- I just don't like Web sites collecting information about me without my consent and knowledge. Hence my browser preferences are set to alert me when a cookie is asked for. Hence I get all those annoying little cookie alert messages.
Bill_H12:55pm (18.104.22.168) Richard - I too am allergic to cookies. I think it's a sneaky way to derive info from readers. Informed consent by popping up a "may we set a cookie" message is a weak form of consent. I do not know of a way to defeat "cookies" during a session, other than no accepting them, but by setting the "cookies.txt" file protection to READ ONLY, the browser cannot write the cookies collected to during the session to the disk, thereby forgetting the cookies collected during the session when the browser is exited.
Richard Seltzer 12:46pm (22.214.171.124) -- Sudha, I hadn't heard of that Web Advertising show. Who is running it? Where can I find further info? Please email me some details and I'll post with the transcript. firstname.lastname@example.org
email@example.com:50pm -- (126.96.36.199) http://www.thunderlizard.com/webad97.html
firstname.lastname@example.org:56pm (188.8.131.52) I hate 1/00pm on thursdays. Bye now
tom dadakis email@example.com 12:59pm (184.108.40.206) Hi, I just followed today's discussion because i was busy on a project.
barbara 12:59pm (220.127.116.11) Bye. This chat session was very useful to me. My e-mail address is firstname.lastname@example.org. Elcom's URL is http://www.elcom.com.
Ed Jaros - Green Bay1:00pm (18.104.22.168) email@example.com Website Strategist http://www.sparknet.net
dj(firstname.lastname@example.org) 1:01pm (22.214.171.124) I am working on my web page content. Thanks for the strategy. Any other ideas?
Gisela - Stream Int'l. 1:01pm (126.96.36.199) E-mail: email@example.com. Stream URL: http://www.stream.com
Richard Seltzer 12:57pm (188.8.131.52) All -- thanks very much for joining in. Please join us again next Thursday, same time, same station.
FYI http://www.aditi.com has an interesting offering of "Outsourcing your Email Responses."
Bob Zwick Cottage Micro Services, firstname.lastname@example.org http://cottagemicro.com
I'm sorry ... client conflict again :( I'll be away from a PC at noon on Thursday.)
I read the chat from last week and Sudha mentioned the Web Market West, The Future of Business on the Internet, April 7-8, 1997 (http://www.herring.com/events/wmw97/home.html). Looks interesting and relevant to the topic of our chats. Sure would be nice to get some feedback from someone who attends to see what new ideas and trends are suggested.
Getting to Black: Creating Successful Businesses Online
The editors of The Red Herring and HITS zero in on the bottom line of the Internet business: With consumers reluctant to make online purchases, subscriptions not working, and advertisers unwilling to lay out money for banners, how are web businesses going to make a profit? Presentations by emerging Internet companies and challenging debates among industry executives will let you see the solutions your peers are using to get to black. Find out what's hot in content, commerce, tools, and services and what's working in Internet business. Explore the opportunities, and meet the people who are creating them.
Web Market West is produced by Herring Communications, in association with Yahoo! and hosts Piper Jaffray, KPMG Peat Marwick, and Wilson Sonsini Goodrich & Rosati.
The panelists are :
David Friedensohn, CEO, Sonicnet; Seth Goldstein, CEO Sitespecific; Ford Smith, CEO Cyberslice; Jay Tenenbaum, CEO Commercenet; Allen Weiner, Director and Principal Analyst, Dataquest
One other comment. Ed Jaros mentioned Katie Delahaye's presentation he saw. I have heard her speak a number of times. Not only does she do absolutely dynamic, fact-filled presentations, her company does good and personal followup with people who contact them via the Internet. If anyone is looking for a resource to help a client (or their own company) assess the Internet market for their product, they should definitely contact The Delahaye Group (http://www.delahaye.com). I still refer to the statistics she gave in a presentation of hers I saw last June.
That reminds me...I think they were in the middle of doing a study on the different statistics/site analysis software programs that are being used by web managers and advertisers to track traffic. Might be interesting to have her or someone from their group join us for a chat one day.
Amazon.com is filing for a $32.5 Million IPO selling 11.5% of the company. In 1996 they lost $5.8 million on revenues of %25.7 million. For mores see the story at http://www.msnbc.com/news/64449.asp
Serendipity! It seems I always stumble across timely articles the day before your chats! And especially days when I can't be there. For your readers who may not get the Ziff-Davis news here are some very interesting links to articles related to this topic. Jesse Berst did an excellent job of putting together these and some other relevant statistics and information. Here you go:
Without the Right Tools, You Can Kiss Ad Revenue Goodbye
Jesse Berst, Editorial Director, ZDNet AnchorDesk, Wednesday, March 26, 1997
Vendors to Simplify Web Advertising
By Michael Moeller, February 24, 1997 2:09 PM EST, PC Week
About Bellcore's efforts to provide back-end software and applications to ISPs and web site developers
StarPoint's advertising server tracks Web paths to tailor ad copy
By Margaret Kane March 4, 1997 2:09 PM EST PC Week Online
Ad Buying Comes To The Desktop
By Catharine P. Taylor, February 24, 1997 2:09 PM EST, Inter@ctive Week Online
About FlyCast Communications' software for agencies who can bid advertising space
Ad Protocol Proposed
By Catharine P. Taylor, February 24, 1997 2:09 PM EST, Inter@ctive Week
Calling for the development of a communications protocol that would standardize the information exchanged between advertisers and publishers about advertising on the Web.
New Measure Of Web Audiences
By Catharine P. Taylor, February 24, 1997 2:09 PM EST, Inter@ctive Week
About RelevantKnowledge, Inc.'s instanteous measurement of web activity
Borland ditches print for Web ads
By Sean Silverthorne
February 20, 1997 2:09 PM EST, PC Week Online
CEO is "shocked" at the traffic generated by Borland's Web site.
Using Banner Ads to Promote Your Web Site
By Dr. Ralph F. Wilson, June 22, 1995, Web Marketing Today
IAB/CASIE Proposal for Voluntary Model Banner Sizes
Here's just a tantalizing sample of what the article said. It also predicts the future of advertising on the web.
"The most common Net ad today? A banner across the top of commercial Web sites. Advertisers pay based on the number of "impressions" an ad gets, that is, how many people see the ad (regardless of whether they click on it). Some sites fetch $120 per thousand "impressions." Others can only demand $6 for the same number.
More than 900 companies competed for $300 million in Web ad revenues in 1996. That's expected to grow to $400M this year-and to $4.8 billion by 2000. But before you get too excited, realize it's a rough playing field. The 10 largest Web publishers snagged two-thirds of the ad money spent last year. Smaller niche companies got lost in the shuffle."
There you have some fodder for the discussion. Hope you find this interesting and helpful!
Interesting comments regarding web commerce. Enjoy.
Forwarding, From: Bill Gurley email@example.com
GOOD NEWS, BAD NEWS: ON-LINE COMMERCE TAKES OFF
"So oftentimes it happens that we live our lives in chains, and we never even know we have the key." - The Eagles
By now you have probably heard the news - on-line commerce is on fire. Dell is doing over a million dollars a day on its Web site, Cisco is supposedly on a billion dollar a year run rate, andGeneral Electric is forcing its suppliers into electronic bidding wars, guaranteeing GE the best prices available for each price or service. We have waited a long time for broad-based electronic commerce, and it looks like 1997 will be the year that the market gains legitimacy.
So what's the rub? Why did we title this article, "Good News, Bad News"?
The good news is that electronic commerce has arrived. The bad news is that it does not seem to require a great deal of fancy technology to make it happen. While many authors and analysts argue that the Web is simply not ready from a security or reliability point of view, companies like Dell and Cisco are moving further ahead of their competition. Those that sit around twiddling their thumbs may one day wake up and realize they are light years behind - all because they were too willing to believe the expert who claimed that the Web simply was not ready.
Let us begin with the business-to-consumer market. Skeptics argue that the Internet needs to overcome several big hurdles before the market can explode. First, the consumer is much too afraid of this new technology. Second, the merchant must be comfortable with the technology as well as the likelihood that the payment will clear. Lastly, in order to mimic the compelling features of today's cash transactions, there must be support for micro-payments and anonymous transactions.
While we are sure that several high-tech elitists will take exception to this, it seems to us that passing credit card numbers through a secure browser connection accomplishes most of what is needed to spur this market.
Consumers are growing quite comfortable with credit cards on the Web, and pretty soon it may be as common as punching a password into an ATM. The merchants are already familiar with the technology and the services, and the total risk to the consumer weighs in at a negligible $50. More times than not, the $50 fee is waived.
While this may still imply that there is a large market for micro-payments, the potential size of that market may be shrinking every day. The credit card companies, threatened by micro-payment technologies, have proved quite adaptable. What used to be a $20 minimum purchase, appears to be falling lower and lower every day. Currently, most credit card companies will support transactions as low as $6, and we suspect that that number will be dramatically lower in six to 12 months. Micro-payments may be fighting an uphill battle against some extremely frightened, yet powerful competitors.
We recognize that we have still not addressed the issue of anonymity. Apparently, it is a major benefit to some purchasers and perhaps even some merchants to have absolutely no clue about who is involved in the transaction. While this type of technology may help support some specific discrete and/or illegal business activities, we have a hard time seeing this as a needed feature for the broader market. Every on-line merchant we speak with is interested in finding out more about the customer, not less.
Additionally, we speculate that most customers would like nothing better than to know that the manufacturer or retailer has proof of the purchase. This way, warranty claims and support issues are easier to administer.
We also recognize that not everyone owns a credit card, and with this in mind, we will now address the market for debit card equivalents on the Internet. We should start by pointing out that the market for debit cards has for the most part been a disappointment relative to expectations. Blame it on simple intelligence. If someone is willing to offer you credit, as well as frequent flyer miles, why would you choose to use your own capital to fund a transaction? Despite all this, the use of ATM cards to fund local transactions is indeed rising. And while it does not seem immediately necessary, it is likely that you will be able to pay merchants directly from your checking account, once the right authorization tools are in place. However, this will still not require a new payment method, just an extension of the ATM network already in place.
If new techniques are to succeed, we believe that they must undercut these already established markets on price. Almost all credit card transactions (as well as ATM fees) fall underneath an umbrella of about 2.5% of the transactions, and we suspect these numbers will fall for two reasons.
First, the consolidation in the bank market should help remove complexity and potentially lower costs. Also, the FTC is currently investigating certain credit card industry practices, including a provision which makes it illegal for merchants to charge a different price for credit card transactions vis-à-vis other payment types. If this rule were deemed anti-competitive, we could began to see merchants charge the consumer extra fees, depending on the underlying payment method. This would obviously put price pressure on the credit card industry. From our perspective, this implies that any electronic commerce "facilitator" must be able to facilitate the transaction for a price well below 2% and perhaps below 1%.
The business-to-business market has similar dynamics. Many industry pundits pontificated about the need for elaborate VAN networks complete with guaranteed EDI transmissions and 64-bit encryption. The evolution in the market suggests otherwise. It turns out that it is very simple to emulate a purchase order on-line. Most business-to-business transactions include known parties, and therefore the P.O. represents more of a record history than an official payment receipt. As a complete transaction history can be delivered on a Web site, the need for 100% guaranteed delivery of payment verification is not that high.
Admittedly, some high volume manufacturing operations require multipleorders per day that are specific to the minute in terms of delivery. These vendors are already utilizing EDI. And since these vendors already require an exceptional level of reliability, it is not likely that these services will move to the Internet anytime soon. The real question is what does the Internet do to the marginal growth of the EDI industry?
The cost difference between adding a vendor to an EDI network and adding someone to an extranet configuration is quite dramatic. According to an article in Information Week, adding an incremental distributor to an EDI supply chain can cost as much $20,000 in software, hardware, and services.
Compare this with the costs of firing up a Web browser. Admittedly, traditional EDI is far and away more robust and reliable than anything available on the Internet today. However, EDI service providers will have a hard time fighting the promises emerging from the Internet community.
Even though a guaranteed MIME-based EDI attachment type may be years away from reality, somebody will promise that it will be ready tomorrow. These promises will likely weigh on the growth of the EDI market.
This is not to say that we do not see investment opportunities in and around electronic commerce. In fact, here are three investment areas about which we are particularly excited.
Certificates and smart cards. In Europe, smart cards are quite popular as money stores. In the United States, we expect them to emerge as primarily a verification technology. Certificates and smart cards should help credit card companies and banks lower the cost per transaction well below the 1% we mentioned earlier. Moreover, the SET specification actually has a method for solving the questionable anonymity problem.
Value-added sales tools. The key to driving electronic commerce will be to differentiate the shopping experience for your customer. Tools such as BroadVision's (BVSN#, $9) personalization server, Trilogy's pricing engine, and Net Perception's collaborative filtering tool are the value creators of the on-line age.
The "Wave Riders." Our favorite e-commerce plays are to invest in the companies that are utilizing this technology to gain a leadership position within their own industry. E-commerce leaders have lower sales costs and a more intimate relationship with their customers, which lead to less waste with respect to inventory. It's hard to bet against pure economics.
We would like to point out that our skepticism is primarily limited to alternate payment methodology. Multi-billion-dollar banks can acquire technology. Technology companies can't acquire multi-billion-dollar banks.
This article by Seth Schiesel appeared in the March 25, 1997, issue of the New York Times. It's available at http://www.nytimes.com You have to register (for free). Then you can do a search to get the complete article.
Sounds like (surprise, surprise) high-cost, high-visibility Web sites that don't have a business model that makes sense in the Internet environment are in trouble. So what models do make sense? What works and why?
The article tries to generalize about media Web sites, mainly newspapers and magazines.
My own speculation follows:
It looks like none of the mega media sites has found a business model that worksmega ones has found a business model that works for them.t Not that it's impossible -- just that they hadn't solved the puzzle.
Yes, classified advertising makes sense -- it has high information content and is well-suited to on-line searches.
But banner ads, apparently, are not producing the levels of revenue that such sites optimistically forecast. And subscription sales of information on the Web appears, in many cases, to be a losing proposition.
So what's the winning business model?
I don't think one size fits all. I don't think mimicking traditional business models makes sense.
I believe that part of the benefit should come from relationship/community building. I also believe it's important to offer Internet-based value-added services that couldn't be done in print (but that takes some imagination and creativity). And I believe that it is foolhardy to invest in the creation of lots of high-quality high-cost editorial material for the Web or doing high-cost high-graphics conversion of content for the Web. The winners will be the ones who learn to use the Internet environment to their advantage, encouraging their readers/users to contribute content and to participate in on-line events which in turn attract more users. The Internet is great for spontaneous and timely interaction among people. The challenge is to find ways to build profitable businesses around those unique capabilities.
And I believe that micropayments for information could/should be an important part of the mix in many cases.
-- Richard Seltzer
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