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Resources > Blog > Business Models for the Web
Mike Prettejohn

Business Models for the Web

What is the World Wide Web?

The
World Wide Web
is an open ended networked hypertext system.
Links in a document can refer to other documents on other machines
in other parts of the World.
The Web can provide a uniform interface to other information
services, including
WAIS,
ftp,
gopher,
telnet,
and
Usenet News.
The Web can also deliver arbitrary data such as
images,
sound, and
video,
as well as
html
and
text.
As further forms of communication are developed
such as
Internet hosted virtual reality systems,
and
multicast,
it will
be possible to present access to these systems through the Web.
WWW is fundamentally client server in concept.
All the hard work of interpreting the
html
document is left to the client.
This leads to a very customisable user interface,
with choice of fonts under the control of the user.

How many people are using Web Servers to publish information?

Netcraft
survey
the number of web servers on the Internet each month. The
June 1996 successfully contacted 252,000 WWW servers worldwide
in a single day.
Of these, 171,000 were in the
.com
domain.
Altavista
the largest of the search engines, quoted a fairly similar figure of 225,000
individual hostnames in its database during June 1996.

What are the important attributes of the Web?

On the Web, dissemination of information is;

  • immediate
  • cosmopolitan
  • interactive
  • auditable
  • visually appealing
  • at no direct cost to the publisher

In short, the Web is the biggest step forward in corporate communications since the Postage Stamp.

The versatility of the Web means that many well established companies deploy it throughout the pre-sales and sales fulfillment process. The special characteristics of the media also mean that new opportunities exist which are being exploited by intrapreneurs and enterprising new companies.

Business Models

Exactly how do you make your web site pay for itself?

Here are some current examples of business applications where companies have used the web to shape their approach to their chosen market. It will become clear that there is no causal relationship between the technical quality and effort invested in a site, and its commercial success, though the first example is very smart, both technically and commercially.

Pre Sales Support and Corporate Awareness

As a manufacturer of upmarket Unix workstations with an emphasis on graphics, video, animation, and multimedia, Silicon Graphics‘ business fits very well with the Web. Their site properly exploits the multimedia capability implicit in the Web, and powerfully supports the pre-sales process. Even someone completely unfamiliar with the company and its products will feel impressed and compelled by the quality of the presentation and diversity of promotional information on topics like Extreme Tech, Awesome Products, and Serious Fun

Technical Support

Many computer industry suppliers have seized on the Web as an opportunity to reduce the cost of servicing their customer base. If customers can be encouraged to look after themselves by browsing the suppliers pages to find answers to problems, and patches for bug fixes, then life is less frustrating for everyone.

When Netcraft recently connected a large business to the Internet, the first real web access by a real user was by a support technician to download a printer driver from Hewlett Packard. BUDS, a thoughtful HP reseller, has taken this a stage further by putting links in its own pages referencing these drivers, and producing its own pages on HP products that it sells, but for which there are not yet pages on HP’s own server.

I rang Dell Computer three times to find out if it was possible to fit an 8Mb memory upgrade to the machine this presentation was developed on, and received three different answers; Yes, No, and Not Yet. After checking the web page I could see that the Latitude supports 4 and 16 Mbyte SIMMs, but not 8. This should be a more authoritative answer than those given by the technical support representatives, but the possibility of the Not Yet answer being correct, with a 8Mb SIMM being available shortly, emphasises the importance of support pages being extensive and up to date.

Investor Relations

As part of their promotional presence, larger companies often feel the need to use the web to inform, and reassure, their shareholders. In 1994 Sun Microsystems wrote to all its shareholders, advising them that its quarterly reports would be made available by a faxback service, and via a Sun Investor Relations web page. It estimated that the paper based quarterly reports that this service replaced took $200,000 more to produce, and up to four to six weeks to reach some overseas shareholders.

Time Limited Information

The Internet and the Web offer a clear opportunity for people to superceed paper based publishing of time limited information. One person who saw this opportunity was John Witney, who founded Jobserve, to take on the might of VNU and Reed Business Publishing in providing advertising services to computer contracting agencies. These companies were previously served by two titles with fortnightly publications, and copy deadlines days prior to publication. The contract market moves very swiftly, with decisions to hire often taken in less than a week from an initial requirement. The availability of advertising on an internet mailing list which brings requirements to contractors within 24 hours, and a web server that carries the previous five days requirements has been a conspicuous success.

Malls and Magazines

One attempt at making money from the Web is, rather than attempting to sell something directly to the Internet community, simply promoting your site as a starting point for shopping expeditions. These sites are becoming known as Malls, and one example is MecklerMedia’s Internet Shopping Mall. The important statistic for a mall is the number of accesses their site receives each day. If this is high, companies who wish to sell products to the Internet Community may think it worthwhile to pay the Mail for a storefront and a link to their own site.

A commercially similar affair is the magazine, though the aesthetic appearance of a magazine site is quite different, usually containing quite a lot of proprietary promotional information. Well known examples include the Global Network Navigator and Wired. These sites have some greater flexibility in how they earn their money; but their underlying principle is the same; the commercial success of the site primarily depends on the audited number of accesses.

Promoting a Proprietary Standard

Adobe has developed a new standard for high presentation quality documents, known as Acrobat. In order to achieve a high take up of the new standard it needs to give as many people as possible the facility to read documents produced in the new format. It then has a good chance of encouraging electronic publishers to make use of the format, and establishing itself in the enviable position of being in possession of an widely used proprietary standard.

Adobe’s Web site has a key role to play in this process. Readers are made freely available for Unix, Windows, and Macintosh platforms, and the main theme of the site is to promote Acrobat as desirable and available.

A Publishing Enigma

Walnut Creek web site is part of a special and innovative business model which commands attention as it has created a thriving business by operating outside of the traditional parameters of a publishing company;

  • It does not publish on paper
  • It owns the copyright on only a small fraction of its catalogue
  • Its Internet ftp archive offers the same material as its CDROM’s at no cost

It has no protection against other publishers copying the software on its best selling CDROMs and selling them for less, or against purchasers of the CDROMs copying the software as many times as they want, and because it only publishes electronically, copying is easy.

It has succeeded though kudos and convenience;

  • For many people, the transmission costs involved in copying a whole operating system over the internet are higher than the cost of buying the same software on a well produced CDROM.
  • Through the close integration of the company with the Internet community, it has become fashionable to own Walnut Creek CD’s.
  • Through successful manipulation of both Internet and paper based media Walnut Creek has become one of the most visible companies on the Internet. A 1994 New York Times article ranked Walnut Creek’s ftp archive as the busiest server on the whole Internet.

This combination has created a multi-million dollar worldwide business for Walnut Creek’s founders.

Selling on the Web

The Internet is precipitating considerable change in the book selling industry. Well known publishers such as O’Reilly Associates now have a chance to sell an increasing proportion of their books direct cutting out distributors, wholesalers, and bookshops.

In principle, the publisher is in a very powerful postion. However, many are unable to deliver books quickly to the purchaser, having traditionally passed on the cost implicit in storing stock to the distributors. To compete, booksellers have to see that the parcel delivery company brings the product to the purchaser’s door as quickly as possible after he clicks to buy.

One company which has excelled at this combination of large, specialised, stock and prompt delivery is Computer Literacy, to the extent that a colleague of mine regularly buys books from them, and receives next day delivery even though he is in a different continent. His justification for bearing the cost of transporting the books from California to Bath is that;

  • Technical books are often published months earlier in the States than in England, and he has access to the book much sooner this way
  • Cover prices are usually lower in America, and this goes some way to make up the delivery charges.

Computer Literacy has made good use of the Internet to break down traditional geographical boundaries on sales.

Do’s & Don’ts in setting up your own Site

Inspired by these examples you decide that your company should have its own web site. Here is a guide to some simple do’s and don’ts.

Do;

  • Choose your Business Model Carefully
    Make sure you have thought through your business model for the site before you implement. Think about what you want from the site, in terms of increased awareness, pre-sales support, customer communication, subscription and advertising revenue, or direct selling.
  • Choose your Business Partners Carefully
    Particularly if you are new to the Internet, you may want to form a relationship with a consultancy or specialist software house to bring your service to market. The closer this relationship, and the more common interest there is in the commercial details, the more chance you have of success. You should have your partner involved at an early stage; look for a company that can help you develop your business model and is prepared to share in the risks and rewards of your enterprise, rather than one whose only interest is in selling you disk space on their server.
  • Make your Site Uptempo
    To be successful, your site must be useful and compelling.
  • Stimulate Initial Visits
    You must make the existence of your site well known. This can be achieved through use of the traditional media, press releases, contacting existing customers, soliciting links from related web sites and Usenet newsgroup announcements.
  • Encourage Repeat Visits
    You want your prospects to return to your site after the first visit. Make sure that you have an easy to remember url for your front page, and that it is easy for people to find the information they want, both through page navigation, and free-text search. Consider running regular promotions and competitions.
  • Make use of a range of Internet Protocols
    There is more to the Internet than just http. Successful sites often make extensive use of other protocols, such as ftp for program distribution, mailservers for subscription lists, and wais for freetext search.
  • Actively Maintain your Site
    Make sure that there are no broken links, and that the information on the pages is consistent with information given to sales, technical support and other customer interfacing staff.
  • Make Comparisons with Existing Sites
    Check up on the competition, and look out for ideas in unrelated markets that you can apply to your own.
  • Take Care with respect to Security
    Ask your service provider about the steps he takes to properly secure your site. If possible, use a provider who will give you an individual httpd rather than one which could be compromised by other companies mistakes. A hacked webserver is a very visible form of corporate embarrassment.

Don’t;

  • Be overly concerned about the technicalities of transactions over the Internet
    There are usually ways and means to circumvent the difficulties involved in secure payment over the Internet. Subscription services and encouraging customers to set up accounts with you are two popular choices, which may be commercially more attractive than individual isolated transactions.
  • Put boring or irrelevant information on your site
    Too many people make the mistake of putting voluminous and tedious corporate profile information, or naive Hello, we’re here pages on their sites.
  • Put your site on a Server unless it provides a full range of protocols and facilities
    If your site is to be useful, it is inevitable that you will want to do more than simple web pages.
  • Dither
    The opportunities available today will not last forever.

Summary

The Web can play an important role in promotional activity, corporate communications, technical support, advertising, and direct sales, for many companies. Innovators, like Adobe, Walnut Creek, and Jobserve have utilised the media in a more specialised way to create advantages which would not otherwise have been possible.