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This article was prepared for the August 8, 2001 edition of U.S. 1

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E-Commerce Lives

Contrarians take note, the Internet as a business


is flatter than a deflated balloon. The currently disparaged way of

shopping, however, still offers the convenience of midnight browsing

for last-minute birthday presents and the possibility of building

lots of extra features in the purchasing experience. Where else can

you find an extensive roster of book reviews right next to the volume

you are thinking of purchasing? How else can you compare digital


prices from dozens of stores in seconds?

For those willing to go against the tide and offer their wares or

services online, there is a new, step-by-step how-to. It is "The

E-Business Book" by Dayle M. Smith, published by


Press, and available both online and in bricks-and-mortar stores

for $19.95.

Subtitled "Reasons for Developing a Real E-Business for Real


Smith’s book gives the following advice for steering your business

more and more toward the Internet:

The Internet offers a huge potential audience for your


or product. Internet users now number more than 60 million around

the world, a number expected to more than double by the end of 2002.

What print, radio, billboard, or television promotion approach could

serve up such numbers of potential customers?

But there’s a rub — will some of this vast number turn out to

be your customers? According to research by the Gartner Group, fewer

than 1 percent of worldwide Internet users turn out to be consumers,

in the sense that they consume anything beyond information by means

of the Internet. Nor should you base your business plan on a likely

number of "hits" (visits to your website) as a percentage

of total Web traffic. The total number of site visits, reports,

is skewed significantly by the multi-millions of hits each week to

the 100,000 or so porn sites now on the Internet.

That vast number of hits must be discounted in any sane estimate of

business hits on the Web. The same must be said for the average amount

of time a person browses on the Web, which was widely quoted for


as 63 minutes per session. When visits to porn sites are subtracted

from that average, by some expert estimates it drops by almost half.

You should also revise downward the total spending on the Web if you

want to subtract the hundreds of millions of dollars spent on the

modern-day version of peep shows.

No other medium except face-to-face selling allows the user

to "click through" to initiate a purchase or other


The best magazine or newspaper ad misses the opportunity to translate

a reader’s interest or approval into a "buy" decision. Direct

marketing letters also fail in this regard. There’s no button to push

for direct connection to the company or merchant. Television and radio

suffer from a similar disconnect, although interactive TV promises

to improve this situation significantly if and when it appears in

most households. Although direct telephone marketing potentially


the message receiver to say "yes" in the form of an immediate

order, the almost universal consumer response to this marketing


is "Why the hell are you calling me at my home-and at dinner


By contrast, a company’s own Web page and its advertising on other

websites contain almost instantaneous access to product or service

information. The "yes" decision on the part of the


is always just a click away. Not that such clicks come inexpensively.

When Borders established its website in 1998 to compete with

and, the popular bookseller spent $5 million (and

an estimated $20 million in 1999) in large part for click-through

advertising placed on such Internet portals as Yahoo!.

Barriers to entry are remarkably low, at least at the


or Web-visible part of the business. In 1997 Web development


necessary to get a smallish company up and running on the Internet

were generally quoted in the $3,000 to $5,000 range. By 1998 that

estimate had dropped to $2,000 to $2,500. By late 1999, most business

magazines guesstimated an investment of $500 to $2,000 for a passably

attractive and useful website. And by 2000, the cost had dropped to

zero, as more than 2,000 Web hosting services offered free help for

website construction. (Perhaps in the near future website developers

will outbid one another to pay clients for programming services!)

Free? It’s true, and from more than one vendor. Among the newest kids

on this most inexpensive of blocks is ( Backed by such

firms as Sun Microsystems, the Washington Post, and Newsweek, this

innovative service is designed to get small companies up and running

on the Web quickly and for free. The nitty-gritty of the

experience is that after registering, Bigstep lets you create and

maintain a site for free, rather than at a monthly rate of up to the

$250 that some site-hosting services charge small businesses. If you

wish to register a unique Web address or establish merchant credit

card services, Bigstep says it passes the associated fees onto


at cost, with no markup. And best of all, you’ll have risked nothing

but your spare time to join the E-business party. (The Bigstep


model relies on sponsorships and fees for optional services for


Assistance with more complicated business sites, especially those

involving database management, is hardly free. But front-end website

development, whether simple or elaborate, is often misconceived as

the major and most important element of business creation. Therein

lies the biggest problem with many dotcom businesses: nothing stands

behind the website. The much touted "virtual" businesses of

the Internet quickly find that they rely on someone’s (their own or

a partner’s) quite physical bricks-and-mortar reality to fulfill


orders. In short, the backshop operation is at least as important

as the snazzy website for a profitable E-business.

The future of the Internet is much brighter for business

start-ups and entrepreneurial investment than current track records

suggest. As we have seen, the Internet has posed at least as many

financial problems as profits for many companies. The allure of what

this network of commerce may become, however, remains undeniable.

In sheer size of audience, it is still in its infancy. Much of the

industrialized world has not yet come aboard. Kevin Kelly of Wired

magazine puts this rising population of users in a memorable way:

"The Internet is actually being underhyped. Of all the people

[who will be] online in 10 years, only a 10th are online today."

Measured in dollars, the total marketplace represented on the Internet

is also expanding robustly. Retail transactions were estimated to

rise to $40 billion by 2002, up from $8 billion in 1999.

Sotheby’s forged a win-win Web strategy by including small

businesses. Like many smaller antiques and collectibles sellers,

Linda Dawson foresaw little good for her 23-year-old family business

when the giant auctioneer Sotheby’s came onto the Internet. Auction

sites on eBay, Yahoo!, and elsewhere had already exposed Dawson’s

clients to a wide range of antiques at prices far below those she

typically charged. It was not uncommon for an instore customer to

delay closing a transaction, Dawson says, until he or she "had

checked out comparable prices on the Internet."

She saw, correctly, that the future of her business lay in coming

up with a strategy to not only accommodate the Internet but also take

advantage of it. "We have to do this to survive," Dawson told

her employees.

At the same time, Sotheby’s was revising its own Internet strategy.

The common wisdom in the antiques business is that selling is the

easy part — it’s finding the good items to sell that requires

hard work and contacts. Sotheby’s wisely realized that the greater

its auction inventory, the larger the Internet audience it could


to attract. And in a variation of the chicken-and-egg analogy, the

larger the audience clicking onto Sotheby’s site, the more sellers

would be convinced to place items for auction at Sotheby’s.

The auctioneer’s strategy was clever. Instead of fighting its


Sotheby’s opened its website,, to thousands of smaller

dealers and auction houses. This big tent approach gave Sotheby’s

what it wanted — an exponentially larger inventory to attract

client interest. At the same time, member companies such as Dawson’s

antiques firm got what they wanted — a huge client base


their items for sale.

The plan succeeded beyond the expectations of Sotheby’s and those

of members like Dawson. By its first Web auction under the new


Sotheby’s had enrolled 4,660 member companies and expanded its auction

inventory to 5,000 lots per week, a fivefold increase from previous

inventory levels. At the same time, members were discovering a whole

new channel for their businesses. Dawson estimates that E-business

accounted for 25 percent of her sales in mid-2000 and that by January,

2001, that figure had risen to 50 percent.

A current quick-read business book is entitled Who Moved My Cheese?

It describes how the future has a nasty habit of moving the


away from all of us in one way or another. Linda Dawson looked


at where her cheese was headed and, through her E-business strategy,

followed it courageously and creatively.

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