Ten things you need to know about the Web (circa 1997)

By Peter Hulm

1.    "The Internet is expensive to access, artistically primitive, painfully slow, and overpopulated with garbage. And it is wonderful. It gives voice to those who don't have a radio or TV frequency or a printing press. It transcends boundaries; while some contend that it is a source of disunity, if you are thinking globally, it is a source of unity. It breaks down 'entry barriers' to business; today, media are very expensive, but with a little money and quite a bit of ingenuity, you have a chance to start an Internet business that, at the instant of launch, is distributed internationally."

-- Alfred C. Sikes, Former FCC Chairman and President, Hearst New Media and Technology (in Fidler, 1997:xiii).

2.   How big a deal is Web advertising?

Jupiter Communications (www.jup.com) says total estimated U.S. online ad spending in 1996 was $301 million (Sterne, 1997:21).

That's less than 2% of the $16 billion spent by the top ten advertisers in 1995. Nike's ad budget for 1994 was $138 million. IBM's ad budget is around $700 million. CompuServe budgeted $300 million for equipment upgrades in 1995-1997 (ibid:21-23). The rest of the world totalled $6.1 million.

But the U.S. figure was also a five-fold increase over the year before (ibid).

The biggest Web space buyers were all techie companies, portals and search engines. They were also the biggest space sellers. However, for the price of a television ad, you can create a Website.

3.    Can you make money with paid subscriptions?

Wall Street Journal online (www.wsj.com) had 600,000 subscribers when it was free.

The day it switched to payment this dropped to 30,000. Even at the highest fee, subscribers were paying less than $1.5 million a year.

But some 1.5 million people look at the Yahoo! Home page each day (Stern, 1997:24).

4.   How much is a hit worth?

Say your traffic manager reports that you are getting 100,000 hits. What this typically means is only:

  • 10,000 pages were viewed because each image on a page is considered a hit and there are an average 10 hits per Web page.
  • 1,000 visits (which on average means that each person surfs on 10 pages)
  • 200 unique visitors because Web sites are often visited by the same users.
  • Likewise, 50 transactions, which (the advertising manager won't tell you) can be just sending an e-mail, taking part in a contest as well actually making a purchase,

i.e. maybe 10 orders from those 10,000 hits. One order per 100 unique visits is a high ratio. (ITC, 1999: 334)

5. How long will it take to learn about my competitors and get a feel of how the World Wide Web works?

"We estimate that about 100 hours of surfing is required to obtain a good feel of how the Internet does and could function as a commercial tool." (ITC, 1999: 5). Do you have two weeks to spare?

6. Who are you selling to?

[I know traditional grammarians say it should be 'whom'].

It's been estimated that Business-to-Business applications represent about 80 percent of the commercial opportunities on the Net. Are you targeting your site at consumers, the remaining 20%? (ITC: 1999:5).

7. How big is the Net?

Those B2B transactions are expected to account for US$800 billion of the $1 trillion worth of Internet commerce in 2003-2005 (OECD, 1999, cited by ITC, 1999:11) represent 0.5% of the retail trade in OECD countries in 1999.

8. Sales are not all.

"The major strengths of the Net lie in reducing interaction costs rather than in generating additional sales" (ITC, 1999:11).

9. How much time will it take to create a Website?

At the simplest level, about one hour per Web page (ITC, 1999:35). You can work out for yourself how much it will cost to set up a site (average number of pages, at least 100) and to maintain it (changing 10 percent a month).

In other words, 220 hours minimum per year. That is pretty much what one person's working hours are in a month and a half.

Have you time for that? So you want to hire someone? Don't forget to factor in the social security costs and taxes (either you will have to pay these directly or indirectly to a consultant).

This does not include animated pages, with the ability to receive feedback through pre-defined forms or a caddie for orders online. If you want the latter, ITC recommends having your own server ($3000-$20,000 or more and $500-3,000 a month for handling).

To permit dynamic Web pages connected to a database requires a professional programmer. ITC says: "Add several thousand US$ (or more). For secure transactions online, it costs $1,000 to set up an account with a secure server plus some $200 a month.

Integrating the existing business processes would cost $5,000-$30,000 "provided the required adaptations are small". To protect yourself against hackers, add $10,000 or more. For one-to-one marketing, count on $100,000 or more, much more. You makes your choice and then pays your money. (ITC:1999:35-6).

10. Beware of e-myths.

ITC's guide Cybermarketing (the reference for a number of these points) lists five major misunderstandings about the Web:

  • Internet marketing is not cheap. "Marketing costs are typically prohibitive" (ITC, 1999:75).
  • Intermediaries will not disappear, because most manufacturers cannot handle direct sales.
  • Internet businesses are local rather than global. Small businesses do not compete on an equal footing with large corporations: "Established brand names and financial resources are clear advantages to large MNC [multi-national companies]."
  • Finally, purchasing by credit card on the Web is risky for the seller [by fraud] not the buyer.

Sources

ITC (1999) Cybermarketing, a guide for managers in developing countries by Philippe D. Monnier.

Roger Fidler (1997) Mediamorphosis: Understanding new Media, Pine Forge Press, ISBN 0-8039-9068-3.

Jim Sterne (1997) What makes people click: Advertising on the Web, Que, ISBN 0-7897-1235-0.