Five Modes of Making Money on the Web
1. Promoting Retail Traffic. Pier 1’s Bridal Registry System establishes a more intimate relationship between the store and its bridal customers and their guests. Users can identify gift possibilities for purchase in any Pier 1 store in the country.
2. Direct Selling or Marketing of a Company’s Existing Products and Services. The Web’s power as a sales vehicle has proven to be inversely proportional to the size of the seller. In other words, small companies are doing better than big ones. That’s because the Web’s worldwide reach can instantly transform a small outfit into a global distributor. By contrast, large corporations that already have their distribution networks in place find the Web to be only a niche channel, with direct sales registering only a small blip on their revenue radar screen.
Even the most successful Web merchants’ direct sales revenue has yet to reach $1 million. While that would be quite a lot for many small firms, it’s just a drop in the bucket for corporate behemoths. Similarly, scores of large companies say their Web sites have enhanced their marketing message. But when asked about actual revenue streams, the three most common answers are: "We just got started, "It’s not secure" and "It’s too new."
Smaller companies and so-called cyberpreneurs are moving a lot faster — and getting more dramatic results. Virtual Vineyards in Los Altos, Calif., for example, sells tens of thousands of dollars worth of wine on the Web every month. Virtual Vineyards has succeeded in part because its products aren’t easily found outside major cities. But most large companies already have their national and global distribution in place. For them, the Web is a place where customers can go for information rather than goods.
3. Advertising on the Net. Many companies looking to make money from the 20th-century technology of the Internet are turning to a centuries-old business model: advertising. Sites that include HotWired and America Online Global Network Navigator charge advertisers as much as $15,000 a month to post information about their companies, products and services.
A leading cyberpsace advertising company is DoubleClick, a pioneer at leveraging technology and media expertise to create solutions that help advertisers and publishers unleash the power of the Web for branding, selling products and building relationships with customers. Its flagship product, The DoubleClick Network, is a collection of the most highly trafficked and premium branded sites on the Web (AltaVista, Dilbert, US News, Macromedia and over 60 more).
One sticking point for Web ads: There’s no way to get a decent measurement of the ads’ effectiveness. The most popular method for measuring Web usage is one that even Web experts concede is useless - "hits," or the number of files requested on a site. The problem is that hits have little or no correlation with the actual number of visitors to the site. Market researchers are working to develop more realistic measurements of how much interest an ad on the Net generates. But for now, setting a fair price for an ad on the Net is something of a guessing game.
4. Subscriptions. Another way of making money on the Web is to charge users for access to content, most commonly with subscription fees. While a few pricing models are beginning to emerge, there are no clear success strategies yet. Most content providers charging for subscriptions also count on advertising revenues from their sites. In fact, many agree that advertising really will drive the business. Charging subscription fees will not generate significant Web revenues anytime in the near future, most analysts agree. The biggest obstacle to selling subscriptions over the Net is that consumers are used to getting cyberspace information for free, thanks to the dozens of free news and information Web sites that are available.
Nonetheless, a few bold daily newspapers have begun charging for content. The Wall Street Journal has been charging — and getting — a subscription for access to its Web site. Mercury Center, the Web extension of the San Jose Mercury News, began charging fees that range from about $1 to $5 a month. USA Today charges $13 a month for services including Internet access using proprietary software.
5. Services. The fifth model involves charging for some type of service, such as searching databases or providing space and additional services to clients on a Web site. Discount stockbrokers such as E*Trade have become hugely successful using this medium. One of the most successful service providers on the Web is Pittsburgh-based Industry.Net, an online marketplace for manufacturing and industry. Industry.Net, which started as a dial-up service, went on the Web last October, offering businesses a place to shop for manufactured products and goods. It charges manufacturers and suppliers $3,000 to $8,000 a year to maintain an "electronic storefront" on its site. In this way, Industry.Net has generated about $20 million this year in Web business alone. It expects to bill another $8 million by year’s end.
Electronic Newsstand Inc. in Washington, D.C., which sells magazine subscriptions online, is another business that has generated revenues by offering services to both consumers and businesses. The company started its business on a gopher server in 1993 and launched a Web site in April. It now has several different revenue models.
Electronic Newsstand’s primary business is linking to the home pages of publishers, for which it charges about $1,000 a month. In addition, it offers several advertising programs, including a "pod" plan available for $5,000 a year that gives publishers a chance to place the logos of up to 10 advertisers on their own home pages, keeping the revenues. Electronic Newsstand also keeps $5 to $10 for each subscription sold through its service. - JK
Figure 1: The Pier 1 Import Bridal Registry System invites couples and their guests to view their up-to-date gift selections online. The system is designed to increase traffic in Pier 1 Import retail stores.
Figure 2: By registering with the Bridal Registry System, visitors are logged onto an active VSAM database against which they can make real-time inquires and updates. CA’s OpenIngres database with the VSAM Gateway makes the connection possible.