By: Richard T. Scott
Okay, it's official, well, maybe not official, but atleast I'm convinced. Until recently, many of you no doubt wondered just where the Internet was going. Nearly everyone agreed that the digital highway was interesting, and, for some, even useful. But could you make money on it? Not a few voices have waxed skeptical about how few Web sites actually do make money. At best, they say, the jury's still out.
Well, the jury's no longer out. The Web is here to stay. That is not to say that it's ready for prime time: it's not. But it has reached the point of no return. Too many people have committed too many dollars lo Web sites and to businesses on those Web sites to turn back. The biggest mistake booksellers can make now is to underestimate the future of the Net and the role it can play in their business.
People are making money on the Net more than you might think. A survey conducted last fall by ActivMedia, an Internet research firm that monitors online commerce, found that "thirty-one percent of all commercial sites are profitable and over 40 percent expect to be profitable within the next 12 to 24 rnonths." How about booksellers? At last year's ABA Convention, I moderated a session in which approximately 60 booksellers in attendance said they had a Web site. Close lo 50 percent of these booksellers said that. they were making money on it.
Here's a sampling of profitable web sites admittedly a small sampling, but one that's representative of the diversity of profitable businesses that can be found on the Net. These are not booksellers, but they do demonstrate what a powerful force for generating sales lhe WorldWide Web can be:
CHARLES SCHWAB & Co: The brokerage firm recently announced that its on-line business totals $50 billion in on-line customer assets. That represents, for Schwab, 700,000 active on-line accounts.
EXPEDIA: In mid-February, Expedia, Microsoft's lnternet travel service, reached the $1 million level in travel tickets sold in one week. This, after only four months in business.
Auto-By-Tel.: This site lets you request a quote on-line for the specific car you want. When you've submitted your request, a car dealer near you contacts you with the quote. Auto-By-Tel has been directly involved in the sale of more than $2 billion worth of automobiles since its launch in March of 1995. The company is responsible for more car sales in one month than the largest traditional car dealer makes in a year.
CDNOW: This on-line retailer offers a searchable database of CDs and videos. Jason Olim, and his twin brother, Matthew, founded the business in the basement of their parents' home. The brothers achieved an operating profit of 18 percent on sales of approximately $6 million last year.
HOT HOT HOT: A tiny Pasadena, California store specializing in hot sauces. Now it offers over 150 of these sauces to on-line aficionados of spicy foods, and it does so profitably.
QuickQuote: This site went on-line in May of 1995, allows you to submit information in order to get a quote on the cost of an insurance policy or an annuity. QuickQuote represents first-rate insurance companies and makes the process of acquiring insurance relatively painless.
According to another survey conducted earlier this yearby ActivMedia, global Net-generaied sales this year are projected to reach $13 billion. That's serious money.
Advertising on the Net is growing, too. Most Web-watchers put advertising dollars spent on the Web last year at around $275 million. This is expected to more than double this year, and hit $5 billion in theyear 2000. That may be small by comparison to the $173 billion spent on advertising in the U.S. last year, but it's not small change, and it does demonstrate that the Internet is destined to become a major channel of commerce.
It's entirely possible that ActivMedia's figures are too optimistic and that my experiences with book sellers on lhe Web represents the more successful, but less typical, on-line businesses. Nevertheless,all but the most casual observer of Web activity has to see that somethingis happening here.
As with any start-up, it behooves booksellers who go on the Web to set themselves apart from the competition. This means finding some way to be unique, and it means being creative, imaginative, and keeping the consumer's interests in mind.
That more on-line businesses aren't profitable doesn'tsurprise me in the least. The success rate among new businesses has always been low. Starting a new business venture is, after all, a risky affair. Most start-ups fail. That significant numbers of on-line ventures succeed is what's note worthy, not that some fail.
What makes the successes among on-line booksellers all the more significant is that many of them didn't originally go on-line with the idea of doing it profitably. Many have told me that they simply felt the need for an on-line presence, a new channel of communication with consumers.
If the Internet as a commercial arena is not yet ready for prime time, what stands in its way?
Certain conditions must exist below a new medium goes mass market: You need the technology. You need a critical mass of users,and you need to move from luxury to perceived necessity.
The technology is here, though it's not sufficiently evolved for mass consumption. Today, the Web is too slow for all but the most dedicated users. Some sites take a minute or more to materialize. If a site has alot of graphics, it's even slower. This slowness can be caused by slow modems at either or both ends of a transmission. It can also be caused by narrow bandwidth, which, figuratively speaking, means the wires are too narrow. In the next few years, both of these problems will be solved.
As for a critical mass of users, we're almost there. Estimates of the number of Internet users vary, but an average of these estimates puts present worldwide users at somewhere between 30 and 40 million. These same estimates put the number of users in the year 2000 at well over 150 million. Some make that number much bigger.
The final factor to consider is when the average user begins to consider the Internet a necessity rather than a luxury. We're not there. yet, but that day is coming soon.
The telephone was invented in 1876. In 1880 only 47 thousand people had them nationwide. By 1890 the number was only 250 thousand. In the early years of the telephone, only big business and a few government offices had them. Then they began to appear in the homes of the wealthy and in doctors' offices. Eventually, when enough people had them, people began to realize that the telephone was not only an interesting device, but a practical, useful one a necessity, if you will. This didn't happen overnight. Well into the 1940s, it was not uncommon to find American homes without a single telephone. In short, it took the telephone decades tobecome a necessity.
The Internet has been around since 1972. The Web, however the part of the Net that offers booksellers the most opportunity has only been around for six years. Give it a few more years and it'll knock your socks off.