DOING BUSINESS ONLINE

The question on many people's minds is, "Can you make money doing business on the Internet?" Recently Learn the Net examined three businesses -- a retail store, an Internet-based clearinghouse for information and products, and a non-profit organization -- to find out. For these businesses it made sense to go online. But the bottom line is no one is getting rich. In coming articles we will be presenting more of our findings on how they implemented their Internet strategy and how it has paid off.

The prevailing myth is that once people flock to a website, the money rolls in. Unfortunately, it's not that easy. Hundreds of thousands of websites are already online; hundreds more spring up every week. Getting people's attention isn't easy, unless your website is branded with a name like MTV, Disney or Time Warner. So don't count on your site becoming the Times Square of the Internet unless you really work at it. But as we discovered, you can make money in cyberspace. Here are three ways businesses are generating income.

Selling Products Online


Thousands of cyberstores now thrive on the Web, providing people with a way to purchase goods and services electronically. For even the smallest businesses, the Internet can deliver a global market. Depending on which survey you believe, that's anywhere between ten and thirty million people. If the demographics of the online community are a good match with your customer profile, that's a lot of potential customers. Let's take a conservative 1% response rate to your online catalog, comparable to direct mail, but at a fraction of the cost. That's a minimum of 100,000 new customers. Of course the trick is to get your website onto their computer screens, no mean feat. What kind of products are selling? We learned that people are reluctant to buy big ticket items online, like clothes or furniture; they are buying software, music CDs and books. Sales aren't booming yet, but it takes time for people to adopt new technology and modes of transactions. The Automatic Teller Machine wasn't an overnight success either. Most analysts predict healthy growth for online sales. What do you think? Will you be seduced by the lure of cybershopping?

Advertising


If you've spent time online, you've undoubtedly seen advertisements all over the Web. Companies like AT&T, Microsoft, Saturn and Delta Airlines pay for advertising banners and links to their websites from other companies' websites. Advertising rates vary wildly, from a few hundred dollars a month to many thousands. If you want to know specific rates websites are charging, consult The Internet Advertising Resource Guide. What determines which websites will attract advertisers? Websites that attract the right demographics. For instance, if you are selling telecommunication services to businesses, you want to pitch your message to executives making decisions in that area. If that's who regularly visits a website, it becomes a prime candidate to sport an electronic billboard for a phone company. To put it bluntly, you're selling eyeballs. The more targeted your audience is, the better.

Once again, the demographics of the Web are a key factor in determining whether this strategy will work for you. It's vital to understand who's on the Internet and who's visiting your site. The irony is that although computer technology makes it possible to gather some very specific data about visitors to a website, other demographic information is best gathered by doing an old-fashioned reader survey. That's why many websites require you to register. They're trying to figure out who you are. Without this information, it's difficult to tell, so traditional polling techniques are often used. As you might expect, no two studies agree; like most new phenomena, there is on-going debate over Web usage. For one analysis of who's online and what they're doing, read a report from Nielsen Media Research. For another perspective, see the user survey from Find/SVP.

Subscriptions


Some websites now charge subscription fees, starting as low as $5.00 per month. Subscriptions can be on a monthly to yearly basis. One company doing this, Cognito, offers full-text search of thousands of articles in its database. The Mercury Center, an electronic publication of the San Jose Mercury News, has similar pricing for its daily fare.

Subscriptions run contrary to the brief traditions of the Internet, where most information has been free. According to a survey from Jupiter Communications, a majority of respondents claimed that they were unwilling to pay a monthly fee for website access. Apparently cybersurfers don't perceive enough value from the experience to pay for it, at least not yet. That could change dramatically as multimedia hits the Web. But some information, even text, does have value and some people are willing to pay dearly for it. Lexis, a legal online database, charges $2.00 per minute. While incremental billing isn't practical on the Web right now, it soon will be. For a look at who is actually making money online and future trends, read Activ Media's survey statistics. Also check out CommerceNet, an all around resource for Internet business.

The Internet is still in its infancy, an unexplored territory with great potential and few rules. Although there is great uncertainty and high risk, one thing is sure -- opportunities abound for electronic entrepreneurs. But to regard the Internet as a motherlode of instant riches would be a mistake.

Are you making money? Let us know so we can spread the news around.

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