E-Business: When the Land Rush Ends

• 11/01/2000

A cold chill has been running through the New Economy ever since the Internet stock market crash in April of this year. The speculative bubble burst, and it continues to take out e-businesses that principally relied on other people’s money to prosper. Current e-business models are shifting from a land rush mentality, to a more balanced emphasis on consistent revenue growth and a clear path toward profitability. You know the land rush is over when tens of millions of Web sites compete for hundreds of millions of eyeballs.

The Internet isn’t dead -- it is ready to be farmed. And this farming requires a level of business sophistication that goes beyond one’s ability to register a domain name. You have to work it, and you need the tools to do it right.

One path to prosperity is to build tools for farming the Internet. Internet infrastructure is clearly a growth industry, and the builders of the tools have continued to prosper in the face of the current chill. I would bet on the future of Internet infrastructure providers any day. But, what if you are the farmer, trying to make money using the best tools that infrastructure providers give you?

The answer, I think, is a clickstream data warehouse. How do you know if your Internet crop is growing well? How do you know if your Internet customer base will buy it? Without a clickstream data warehouse the e-business environment can be remarkably opaque -- often nothing more than a set of grand assumptions with little understanding of the actual underlying dynamics.

The irony is that clickstream data is remarkably easy to collect. Unlike the tortured mechanisms that have been created to extract data from operational systems into data warehouses in traditional brick-and-mortar environments, clickstreams are automatically recorded by all popular Web servers in several standard formats. This avalanche of detailed user behavior data can be transformed and loaded into clickstream data warehouses, which will certainly be the largest data warehouses in existence.

An intermediate step in the path to a clickstream data warehouse is the use of Web server log file analysis tools, like WebTrends, Analog or NetTracker. These tools are especially good for recording site hit statistics, site entry and site exit pages, and other gross statistical aggregates. These tools are typically not good at time sequence analyses, like what happened over the course of a site visit, why was the shopping cart or visit abandoned, what was the effectiveness of a promotion targeted at a particular user population, or what are the overall trends in these statistics over time? You need a clickstream data warehouse to do these kinds of time series analyses. Interestingly, the output of log file analysis tools can be used as part of the input data for a clickstream data warehouse, meaning that log file analysis tools and clickstream data warehouses often coexist in a synergistic fashion.

The e-business environment has a number of unique characteristics that make a clickstream data warehouse the key to business success. The Internet is a great leveler of the normally high barriers to entry for many types of businesses or business functions. In six months’ time, it is not hard for your enterprise, or its competitors, to create an e-business that has a worldwide reach and the promise of a multi-million-dollar revenue stream.

It may come as a rude shock, but the level Internet business environment actually rewards business efficiency and savvy marketing even more than the much more bumpy traditional brick-and-mortar environment.

One other aspect of clickstream data that has yet to be fully exploited by e-businesses is the richness of information collected by the clickstream. It is much richer than the CRM-style data collected by leading-edge brick-and-mortar companies. In the Internet environment, an enterprise can know everything about what a user does, as well as get a picture of total market behavior that goes well beyond actual customers. Unless you are a monopoly, your enterprise only has a small fraction of the total market as its customers. And, while you may understand these customers well in the CRM sense, the key to growth and market dominance is the understanding of what non-customers want, and how to convert them. Clickstream data warehouses are the mechanism you use to move beyond CRM to eRM, that is, electronic relationship management of the entire marketplace, not just your customers.