Tag Archives: Anne Marie Borrego

About 4462 days ago E-Commerce

An Ad Model That Works

realbusiness.com The Underwriter Banner ads were going to fund the entire Internet. Then they unceremoniously fell from favor, and for good reason. But not all advertising models are created equal Company: Healthcommunities.com, in Northampton, Mass. What it does: Hosts content-rich Web sites for physicians, sponsored by pharmaceutical and medical-device companies Number of employees: 60 Conventional wisdom: As deep-pocketed E-health sites like DrKoop.com gasp for air, small, privately held health sites are likely to drop dead in their tracks. Unconventional wisdom: An imaginative, sound advertising model has made the company consistently profitable. Revenue growth: From $2 million in 1999 to $5 million in 2000; $7 million projected for 2001 Profit profile: Profitable since day one Capital: $60,000 in personal funds Last year’s dot-com epidemic left one group of online businesses feeling particularly queasy: the E-health companies. Despite having former surgeon general C. Everett Koop at its helm, DrKoop.com saw its stock price, which had peaked at $45 in July 1999, trading below $1 earlier this year, putting the company in danger of being booted off the Nasdaq. Like many other content-based E-health sites, DrKoop.com relied on banner ads, a model that proved to be not only unworkable but unprofitable. So how is it that one health-information company has succeeded online by relying on corporate sponsorships to make money? Dr. Stanley J. Swierzewski III, CEO of Healthcommunities.com, simply prescribed himself a new model. In 1996, Swierzewski, a practicing urologist, paid a Web-development shop to create a site that would promote his practice. He reasoned that other urologists would benefit from a similar service. Swierzewski was keen on the idea of offering the service to doctors free of charge, but he had his doubts about whether banner ads could support such a business. So he drew up a business plan in which pharmaceutical and medical-device companies would sponsor Web sites for physicians. The sponsoring companies could then use the sites to market themselves and their products to doctors within the Healthcommunities network. How does Swierzewski’s idea differ from the direct-to-consumer banner-ad model? For one thing, it employs a different format. There are no banner ads on a Healthcommunities site; the corporate sponsors are mentioned only at the bottom of each page. But that exposure is precious for many businesses that covet face time with physicians. According to Pharmaceutical Research and Manufacturers of America (PhRMA), in 1999 a whopping $14 billion went into marketing drugs, and the majority of that money went to direct-to-physician campaigns, says Jeff Trewhitt, a PhRMA spokesperson. In addition to dropping off logo-splashed mugs and free product samples, pharmaceutical reps spend time explaining the therapeutic properties of various drugs to doctors, Trewhitt says. The thinking goes that if the doctors know about the drugs and have a chance to give their patients free samples, they are more likely to prescribe the medications. So far, Swierzewski’s model seems to be working. He says that last year Healthcommunities generated $5 million in revenues, all of which came from medical-product sponsor companies. Because the underwriters pay for all the sites before Healthcommunities even builds them, the company doesn’t have to worry about attracting users and then selling those eyeballs to advertisers. “Our motto is ‘We generate the income before we generate the expense,” says Swierzewski, referring to his company’s unusual status as having been profitable on the Web since day one. That sets Healthcommunities apart from E-health giants like WebMD Corp., which posted a 1999 loss of $288 million on revenues of $102 million. One customer that likes Healthcommunities’ model is Boston Scientific, a $2.8-billion medical-device company based in Natick, Mass., that markets, among other things, surgical equipment to urologists. By sponsoring Healthcommunities sites for urologists, “we don’t just go in and talk about our products; we can also consult with them on a practice-building basis,” says Beth Bronstein, director of communication in Boston Scientific’s microvasive division. “We can ask them, ‘How are you marketing your practice? How is your communication with your patients?” Another key to Healthcommunities’ success, Swierzewski says, was his decision to pitch his first batch of free sites specifically to urologists. Focusing on that relatively small market — about 8,000 physicians nationally — allowed him and his staff to further develop the company’s business model before branching out into other specialties. It also helped him begin to corner the market one specialty at a time. “We got the majority of urologists signed on within three months,” Swierzewski says. He is now taking the company’s concept to pulmonologists and will continue to add to the company’s canon, specialty by specialty. Swierzewski had doubts about whether banner ads could support his business. So he drew up a business plan that would. Unlike sites that post information straight from drug and device manufacturers, Healthcommunities gets its content from physicians, who contract with the company. The client doctors then work with Healthcommunities staff members to customize their own personal Web pages, offering such things as physicians’ biographies, office hours, and information about the procedures they use to treat their patients. Some sites provide medical forms that patients can fill out at home instead of in the waiting room. Site users can’t purchase anything, and they don’t see banners streaming across the page. According to Dr. Roscoe Nelson, a urologist in Scottsdale, Ariz., who signed on with Healthcommunities to produce a site for his practice, the fact that the actual commerce on his site is transparent to the user is significant. “The problem that I see with the Internet in medicine is that a large percentage of the sites are selling things,” says Nelson. He feels that for many patients such product pitches detract from the credibility of the information that’s being offered. Patients who visit his site and view the doctor-generated content before arriving at his office “come in with good questions,” he says. And because his patients learn a lot of basic information on the site, Nelson can spend more time talking with them about specific issues. “I can personalize the time I spend with them in the office,” he says. Although Nelson feels comfortable that his site isn’t acting as an electronic pitchman to needy patients, he does acknowledge the potential ethical conflict involved in being sponsored by a pharmaceutical company. But he doesn’t believe that he’s been unduly influenced by that connection. “They made me a no-strings-attached offer,” he says of his site’s sponsors. “I don’t think there’s been any effect on my prescribing or treating habits based on the time that I’ve spent with sponsors. I prescribe the drugs that are medically indicated.” Swierzewski is betting that both the physicians and the companies that are marketing to them will continue to see the value in his offering. And unlike the founders of some of the big-name health dot-coms, Swierzewski is growing his company organically. He started it with a personal investment of $60,000 and has relied solely on its revenues for growth — much to the chagrin of the capital community. “They told me that I wasn’t spending enough,” he says. Despite his lack of outside funding, Swierzewski expects to grow the company from 60 employees to 100 by the end of this month. All that growth, and Swierzewski still has time to remove kidney stones? Despite his foray onto the Web, the doc says he’s determined to maintain an active urology practice. “There may come a time when I have to choose,” he says. But for now he spends his days logging time both on the computer and in the operating room. Anne Marie Borrego is an assistant editor at The Chronicle of Higher Education. With no fanfare and little venture money, the companies profiled here are delivering real stuff to paying customers and making a buck in the process. There may not be any “new rules,” but there are rules, and we suspect every one of them will look familiar. DVD Empire: The Bootstrapper SitStay.com: The Mom-and-Pop Shoebuy.com: The Scorekeepers Accuship.com: The Traditionalist Fashionmall.com: The Conservative Healthcommunities.com: The Underwriter Commentary E-tailing Intermediaries The Markets Please e-mail your comments to editors@inc.com.

About 4521 days ago E-Commerce

Online Music Retailer Faces the Realities of the Internet Economy

Inc. magazine profiled the start-up CDnow in its Anatomy of a Start-Up series in June 1996. In January 2001 Inc. checked back in to find the once-hot Internet music retailer suffering from big losses and plunging stock values. Company: CDnow Founders: Jason and Matthew Olim Vital signs then: Twin twentysomething brothers launched what was — back when they started it, in 1994 — an anomaly: a virtual store, on the Internet. From their parents’ house near Philadelphia, the Olim brothers spent about $80,000 (chump change by today’s dot-com standards) to create the online storefront, which they then grew from their own rocket-fueled revenues. The company pulled in $2 million in sales in 1995 and expected to hit $12 million in 1996. What the experts said: One praised CDnow for its ability to keep costs down, reach a global audience, and deliver a product to consumers quickly. Michael Sullivan-Trainor, then the director of Internet commerce at International Data Corp., said, “CDnow’s experience to date suggests that it can go the distance.” The big looming question was competition, for if CDnow could come out of nowhere and make millions, why couldn’t someone else? Competitors and music industry experts suggested that CDnow should leverage its existing popularity and diversify its product offering. Vital signs now: The company’s sales grew — to $147 million in 1999 — but so did its losses. (It posted losses of $119 million in 1999.) CDnow both benefited from and fell victim to the investment community’s hot-then-cold treatment of Internet stocks: it went public in 1998 at $16 a share; its stock shot up and then took a nosedive. Last July CDnow was trading at about $3 a share, and German media giant Bertelsmann AG agreed to acquire the company for $117 million in cash. (Full disclosure: Gruner + Jahr, a Bertelsmann company, acquired Inc. in August 2000.) What the experts say today: “The outgo was bigger than the income, which is never good,” says Robert Labatt, a research director for Gartner, a research and consulting company in San Jose. “They built a brand in North America and a smaller brand in Japan, but they were unable to make that brand work efficiently enough to be profitable.” Labatt has high hopes for CDnow’s future under Bertelsmann’s worldwide and capital-rich umbrella. And as for the much-touted database of paying Internet shoppers that CDnow’s proponents singled out as a strong point: Labatt thinks that although the data alone are useful, “the sale and reuse of that data is becoming more of a thorny issue, just as it has become more tactical.” As reported by Anne Marie Borrego. Copyright © 2001 G+J USA Publishing

About 4521 days ago E-Commerce

Online Grocer Fails to Deliver the Goods

Four years after profiling Streamline.com in its Anatomy of a Start-Up series in November 1996, Inc. magazine checked back in to find the company defunct due to its poorly conceived e-commerce model. Here’s a brief overview of what went wrong. Company: Streamline.com Formerly: Streamline Inc. Founder: Tim DeMello Vital signs then: DeMello started a Massachusetts-based service that provided home delivery of groceries and picked up and dropped off movie rentals, dry cleaning, and film. Each customer paid $30 a month for Streamline to deliver groceries weekly and stock them in a box (consisting of a freezer, a refrigerator, and a few open shelves) located in the customer’s basement or garage. In contrast to services like Peapod Inc. that set up partnerships with local grocery stores, Streamline operated its own warehouse. DeMello, with $5 million in the bank, projected revenues of $1.1 million for 1996 and nearly $50 million for 1998. What the experts said: Although one was enthusiastic about the potential for market acceptance, he warned that some customers might find the once-a-week delivery too infrequent. Another expert suggested that at-home grocery shoppers usually liked to be around when the bags arrived, so they could inspect the contents. Finally, noted a third observer, if DeMello couldn’t convince a large number of shoppers in enough cities they needed his services, profits would be pint-sized. Vital signs now: After the original Anatomy article appeared, Web shopping exploded, and Streamline decided to capitalize on the trend by adding the dot-com suffix before it went public, in June 1999. Pricing the offering at $10 a share, Streamline raised $45 million. But for the six months ending July 1, 2000, it lost $23 million, and its stock price dropped to less than $3. In September, Peapod, a Streamline competitor, acquired the ailing company’s Washington, D.C., and Chicago assets for about $12 million in cash. It also agreed to assume Streamline’s lease obligations in those locations. In November, Streamline announced it was discontinuing its service. What the experts say today: “The online grocery model is very expensive to start up and maintain,” says Ken Cassar, a senior analyst at Jupiter Research in New York City. Cassar notes that distributing perishables and nonperishables costs non-brick-and-mortar grocers a pretty penny. “And add to that Streamline’s refrigerator-in-a-garage model, and it becomes a more daunting model,” he says. Then there’s the tomato problem. “People tend to be rather particular about their tomatoes and other produce items. It takes a big leap of faith to allow someone else to pick your tomatoes,” Cassar says. As reported by Anne Marie Borrego. Copyright © 2001 G+J USA Publishing

About 4766 days ago Business Software

John J. Kilcullen: My Biggest Mistake

John J. KilcullenChairman and CEO of IDG Books Worldwide, creator of the Dummies series of how-to books. The biggest mistake I made was not collecting relevant data about our customers in the early days. Success in publishing evergreen best-sellers requires a careful balance of intuitive judgment and customer research. Although we grew very fast and turned a profit in less than two years, I wish our reader database had grown just as fast. To better understand our customers in the early years, we conducted reader research using “bounce back” cards placed in our books. But we didn’t create an inventory of those names in a database or perform any “data mining” for psychographic information (such as readers’ responses to the question “How do you feel about buying a book that describes you as a ‘dummy’?”). In branding, it’s critical to understand your customers’ emotional attachment to your product or company. So we missed the mark a few times. Seven of our first nine publications failed. During the early 1990s we published three books on Microsoft DOS. The first failed outright, and the second was only moderately successful. Then we launched DOS for Dummies, which became an international best-seller. We might have had success with the first book — and saved hundreds of thousands of dollars in unnecessary costs — if we’d done prepublication research to sharpen our focus. If we had used our data more wisely during those years, we might have developed new products more efficiently and achieved more cost-effective and targeted direct marketing. Two years ago we started using the Internet to connect with our customers. With sites like www.dummies.com, we’re learning more about our readers and why they feel excited about our product line. And that gives us the confidence to expand the brand into new subject categories, like Golf for Dummies and Wine for Dummies. –Written with Anne Marie Borrego

About 4827 days ago Data Security

It’s Midnight. Do You Know Where Your Tech Support Is?

Resources Finally, a new breed of tech consultants provide affordable, timely help to growing businesses No computer comes worry free. Despite all the advances in computers, software, and networks, our wired universe, sadly, often becomes tangled. And since the pace of business has revved up to Internet speed, random crashes and network traffic jams are becoming more taxing than ever. Of course, if your budget has room for a full-time tech-support team, kinks like these are mere headaches. Pop an Advil and call the help desk. But what about the smaller and solo businesses that can’t afford to devote precious resources to computer support? What about people like Andy Schilling? Schilling, who is president of Tangent Fund Management LLC, also wears the hat of “technology decision maker” at the private-equity-fund -management firm in San Francisco. Since Schilling joined the 15-employee company 11 years ago, Tangent’s computer arsenal has grown in much the same way that most other small companies’ do — one PC at a time, when a new employee is hired or a creaky computer dies. As Schilling bought new computers, he’d pass the old ones down the food chain. Tangent chose its tech support, too, as most small companies do — -by proximity. When the company decided to network its PCs, Tangent hired a local computer-consulting outfit, which installed, configured, and maintained the new network. When the business decided to add more PCs to the mix, though, it went to a local branch of a computer chain that provided basic maintenance for its machines. That worked fine — until the branch went bankrupt. So Schilling figured he’d devote more of his own time to the company’s tech decisions. But since his expertise is in finance — not in computers — he found himself at a disadvantage. Back in 1990, Schilling had purchased what he thought would be adequate hardware and software to network the office. But as time went by and Tangent added more users, the network constantly crashed. So he brought in new consultants, who advised installing an Ethernet local area network along with more-powerful computers. “We had to rip the whole thing up to put in the Ethernet,” says Schilling. Then he hired another local computer consultant just to wire the LAN, which added to the bill. “It would have been cheaper to install the Ethernet LAN from the beginning,” he says. For computer emergencies, Schilling depended on the same consulting company that had advised him to install the Ethernet network. Although he found its service useful, Schilling says he had to wait for the consultants to respond to his pages and then to travel to his site. Meanwhile, Tangent waited in limbo. “When they got here later in the day, the clock was ticking,” he said. “I kept thinking, ‘How many hundreds of dollars would it take to get our printers to print?’ It gets expensive.” Sometimes very expensive, says Mark Margevicius, a senior research analyst at the GartnerGroup. The average large company spends between $8,000 and $10,000 a year just to install, maintain, and support one corporate PC. Those costs are even higher, he says, for small companies, which often can’t afford an in-house tech staff. As a result, they suffer from significant downtime when faced with a computer glitch. Schilling was hardly alone in his frustration; most small businesses have never had much in-house IT help. According to Eric Klein, a senior analyst at the Yankee Group, 53% of networked very small businesses — those with between 2 and 19 employees — don’t have any full-time tech staff at all. Of networked companies with 20 to 99 employees, only 32% have a full-time IT staff. “The bottom line is that businesses are continuing to adapt to PCs and the Internet. The fact that they don’t have a tech staff points to an obvious hole in their support system,” Klein says. Moreover, because of the high hourly rates of most computer consultants (between $40 and $70 for those who offer both time and materials) and the time spent waiting on the phone for help from software and hardware vendors, many small companies don’t seek outside IT help unless they have a major crisis on their hands. Fortunately for companies like Tangent, a growing band of support warriors have spotted this hole and are rushing to fill it with affordable, timely help. By providing standard sets of PCs, software, and networking products — and, in some cases, by requiring lengthy subscriptions — these new businesses can keep their costs so low that even soloists and two- and three-employee companies can have full-service tech support at their beck and call. Some of these technology soldiers configure, install, and regularly monitor individual companies’ systems in an effort to spot problems before they turn into crises. Just call it Fortune 500 service for mom-and-pop shops. CenterBeam When CenterBeam Inc., a start-up based in Santa Clara, Calif., approached Schilling, last July, the Tangent president was grappling with yet another set of tough technology decisions. He was ready to set up an officewide E-mail system and scrap the multiple E-mail accounts that Tangent’s employees had been using to communicate. And he was thinking about registering a domain name and putting up a company Web site. CenterBeam not only offered him E-mail and Internet access but also promised new PCs with 128MB of memory and 17-inch monitors. The company would also provide printers, a wireless LAN, a local server, a software suite that included Microsoft Office 2000, a professionally managed firewall, nightly data backup, and 24-hour tech support. All this would cost Schilling only about $165 a month per user. Because CenterBeam bills its customers on a subscription basis, those costs would be fixed for three years — the life of the contract — no matter how much tech support Tangent might need each month. Some of these new businesses can keep theirs costs so low that even soloists and two- and three-employee companies can have full-service tech support at their beck and call. Just call it Fortune 500 service for mom-and-pop shops. Schilling scribbled out a back-of-the-envelope cost comparison between CenterBeam’s tech services and the system he had pieced together himself. CenterBeam was only slightly less expensive. However, Schilling found the notion of going with a service like CenterBeam attractive because of its consistency. “Now I know what the budget is,” he explains. “Before, it would go in cycles. I’d have some big problem and would have to get new software or buy new PCs. This is a lot more predictable.” CenterBeam cofounder Sheldon Laube hopes his service’s predictability and reliability will speak to small-business owners. “The whole idea is to not ever worry again about this stuff,” he says. As chief technology officer at Novell Inc. and cofounder and CTO of USWeb Corp. (now USWeb/CKS), a San Francisco-based E-commerce consulting business, Laube spent much of his career worrying about technology. And he’s still a worrywart: he and the CenterBeam staff regularly fuss over the health of their customers’ PCs. Laube’s employees use the Internet to peek into the inner workings of their customers’ computers across the country. They hunt remotely for potential problems — and, using the Internet, they upgrade customers’ software without leaving their desks. But even the folks at CenterBeam can’t solve every problem, like the mystery glitch that murdered a PC in Tangent’s accounting department. “One PC just died,” Schilling remembers. No bother. Schilling opened the storage closet and grabbed his “emergency PC,” an extra machine that had come with the CenterBeam package. Schilling called CenterBeam’s office and had all the old computer’s files transferred to the new machine. Because CenterBeam had backed up Tangent’s data nightly, transferring the information was a breeze. “The new computer was up and running in 45 minutes,” Schilling says. “Things like this were a real headache before.” Now headache free, Schilling liked the service so much that at press time he gave CenterBeam a ringing endorsement: his company invested an undisclosed sum in the computer start-up’s second round of financing. Everdream CenterBeam isn’t the only full-service, subscription-based tech provider vying for the small-business market. Everdream Corp., based in Mountain View, Calif., is aiming at soloists and small and midsize companies that would normally purchase inexpensive, so-called white-box computers from local resellers. Everdream manufactures and brands its own PCs before shipping them off to customers, who end up paying about $150 a month per computer. Everdream, like CenterBeam, provides software, hardware, and networking components, as well as Internet access, Web hosting, nightly backup, and round-the-clock online and telephone IT support. In addition, Everdream builds into its machines a simple, commonsense security feature: it divides the hard drives into two parts in an attempt to safeguard business applications from viruses brought in over the Web. One part of the hard drive houses business applications, and the other plays home to programs and games that users download. It would seem that tech-savvy companies — especially new dot-coms — would hardly need outside tech support. Not so, says the Everdream team, which is betting that many high-tech start-ups would rather develop their own technology than worry about day-to-day glitches. Such is the case of Tom Jones. As CEO of Stratasource Inc., a start-up based in Menlo Park, Calif., that provides automated systems management, Jones wanted his software engineers to spend all their time creating Stratasource products. Sure, the engineers could troubleshoot their own PCs. But the rest of the staff would still need occasional help. Last October, Jones signed up as a beta tester for one of Everdream’s PCs before committing his support staff to the system. This January he became a paying customer. While testing the gear, he hadn’t needed much support, but when he did need support, he got it right away. “I was working in Microsoft Word and just got hung up,” Jones recalls. When he called Everdream, a technician “entered” his computer remotely — so that both Jones and the technician were looking at Jones’s screen — and quickly showed the CEO how to solve the problem. That said, there are a few drawbacks to CenterBeam and Everdream’s services. Both companies are subscription based and require long-term contracts. Everdream’s customers are obligated for 30 months — a subscription only slightly shorter than CenterBeam’s aforementioned three-year deal. And then there’s the issue of privacy. Both companies tout nightly data-backup services and the ability to enter any subscribed PC through the Internet with permission. Schilling says that although allowing an outsider full access to his files is troubling, the trade-offs are worth it. “We have more up-to-date methods of communication,” he says. “And it’s clear to me that CenterBeam can provide us with much better firewalls than what we were going to be able to afford on our own.” Finally, these kinds of standard services may not fill the needs of small-business owners who require custom configurations or who are devoted to particular brands of computers not offered by the service provider. And they certainly don’t erase the need for customers to ask for written “service-level agreements,” which describe the time frames in which consultants answer service calls, deliver hardware and software, upgrade equipment, and solve problems. More to Come CenterBeam and Everdream both call California home and at press time had only just begun to expand nationally. By the time these pioneers provide services nationwide, they could be facing fierce competition from large computer companies like Micron Technology Inc., which already offers a subscription service for small businesses. Meanwhile, a potential rival, Dell Computer, recently invested in CenterBeam’s second round of financing, and CenterBeam has an agreement with Dell to supply its customers with the computer manufacturer’s PCs. Competition, of course, usually brings lower prices and better-quality service, which is good news for small companies that until now were unable to afford the kinds of services that their larger counterparts benefited from. For people like Andy Schilling, Tangent’s formerly frustrated president, these new services couldn’t have arrived on the scene soon enough. Anne Marie Borrego is a reporter at Inc. The Nitty-Gritty Company: CenterBeam Inc. Location: Santa Clara, Calif. Founders: Sheldon Laube, CEO, former CTO of USWeb/CKS; Glenn Ricart, CTO, former CTO of Novell; Marc Epstein, executive vice-president of product management and development, former CTO of Quarterdeck; Thomas Twietmeyer, CFO, former Autodesk executive Employees: 70 Funding: $55 million in equity financing from Crosspoint Venture Partners, Accel Partners, Microsoft Corp., USWeb/CKS, New Enterprise Associates, Intel Corp., Dell Computer Corp., Impact Venture Partners, and Tangent Fund Management LLC Buzz: $165 a month per user gets you Dell PCs, printers, high-speed Internet access, E-mail, a wireless LAN, Microsoft Office 2000, regular software upgrades, firewall protection, and 24-hour tech support. Dell recently announced an investment in the company, complementing a deal to supply CenterBeam customers with its own PCs. Fine print: You have to make a three-year commitment to the service. If you’re a hot dot-com, three years probably feels like a lifetime. Also, the CenterBeam monthly cost per user of $165 only applies to companies that need 10 or more machines. Prices are higher for companies with fewer users. Finally, you have to feel comfortable letting other eyes peer into your hard drives. Company: Everdream Corp. Location: Mountain View, Calif. Founders: Russell Rive, CTO, and Lyndon Rive, vice-president of partnership development. The brothers Rive hail from the Republic of South Africa, where Lyndon established a successful catalog business when he was 17. Before founding Everdream with Lyndon, Russell picked up computer and sales experience at Zip2 Corp., an online city guide that Compaq Computer Corp. snapped up last year for about $341 million. Employees: 70 Funding: $18 million from Canaan Partners, Draper Fisher Jurvetson, Ricoh Silicon Valley, and others. Investors include Jack Kuehler, former president and vice-chairman of IBM; and Stanford University. Buzz: Like CenterBeam, Everdream operates on a subscription basis. Customers pay about $150 a month for their Everdream-branded computer, 24-hour IT support, a choice of dial-up or DSL Internet and E-mail service, business applications like Microsoft Office, nightly backup, online training courses, and virus protection. Everdream splits the hard drive into two parts — one “locked down” part that handles the business-critical applications and another that’s open to Internet downloads. Fine print: As with CenterBeam, Everdream’s technicians will have access, albeit limited, to your hard drives. You have to sign up for a 30-month contract — that is, if you can get one. The company hasn’t rolled out nationally just yet but plans to offer service outside California by the second quarter of 2000.

About 4856 days ago E-Commerce

I Was Seduced by the Web Economy

Cover story Real-life lessons from CEOs on the front lines “We find that … millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly. … Money, again, has often been a cause of the delusion of multitudes.” Author Charles Mackay wrote those words in the 40th-anniversary edition of his classic 1841 book, Extraordinary Popular Delusions and the Madness of Crowds. Back then, nobody could have conceived of anything like the World Wide Web, but the hysteria that surrounds it today would have seemed awfully familiar. Think tulips. We’ve read and heard so much about the Internet that it’s hard to figure out what’s real. All that business about how the rules are changing or there are no rules but here are the new rules is exhausting. It breeds myths and the madness of crowds. What we say is that reality always tends to be more complicated than the hype would have you believe. The Web really is a great frontier of opportunity. It certainly does move fast. But common sense still applies. A business still must have the basics: customers, suppliers, employees, a plan. The companies profiled here learned that lesson the hard way. They’re led by smart CEOs who were burned after buying into the hype. To cast perspective on their experiences, we have included comments from some of the most influential figures in the new economy. They remind us about what really matters for every business. In 1932, at the nadir of the Great Depression, financier Bernard Baruch wrote a foreword for a new edition of Mackay’s book. He reflected on the crash of 1929: “I have always thought that if, in the lamentable era of the ‘New Economics,’ we had all continuously repeated, ‘two plus two still make four,’ much of the evil might have been averted.” It was too late then, but it’s not too late for us. THE 7 MYTHS OF THE WEB ECONOMY Myth 1: Building a Web site is easy The word from the experts Myth 2: Traffic will make you rich The word from the experts Myth 3: Smart money makes you smart The word from the experts Myth 4: Razzle-dazzle makes Web sites great The word from the experts Myth 5: Brand is everything The word from the experts Myth 6: Wild ads make Web stars The word from the experts Myth 7: Community, community, community The word from the experts Plus: Tales my guru told me Dispatches from the Web economy Emily Barker is a senior staff writer at Inc. Anne Marie Borrego is a researcher. Mike Hofman is a staff writer. Researcher Ilan Mochari and reporter Jill Maxwell also contributed to this article.

About 4856 days ago E-Commerce

Dispatches from the Web Economy

If you’re not on-line yet, you will be soon. That’s the finding of a recent study commissioned by Prodigy Biz Corp., which found that one-third of U.S. small businesses were on-line. The smallest organizations were the least likely to have taken the plunge. Only one in four companies with fewer than 10 employees reported that it had an Internet presence, while half of those with 10 or more employees were on-line already. Nearly 75% of small companies reported that cost was not a barrier for getting onto the Web. The survey results ranked reasons for going on-line as follows: promoting to prospects (69%); doing E-commerce (57%); providing better customer service (48%); competing with other businesses (46%); and communicating with employees (11%). Of course, few small businesses suggested that doing business on the Internet was easy. More than 40% of the small-business owners surveyed claimed that they did not have the staff or the time to maintain a Web site. And 66% didn’t believe that the Web offered them significant growth opportunities, because they are local businesses. Such quibbling aside, many off-line small businesses planned to get on-line in the near future. Some 40% of businesses that didn’t have Web sites — approximately 2.1 million — said they would be on-line soon. The study was conducted by International Communications Research. –Mike Hofman Four years ago Jayesh Patel, managing partner of the Los Angeles law firm Parker Mills & Patel, hung his firm’s shingle out on the Web. Although Patel intended to communicate to the firm’s base of big-ticket customers, the overwhelming response to the site has been from prison inmates, who write or call collect in search of a lawyer. “We don’t know what to do about it,” Patel says. “We can’t sort of boldly put on our Web page ‘Prison inmates, please don’t bother us.” His misconception, he says, was expecting the Web audience to be much like his client base: professionals in management positions with a good income. “The audience is far, far bigger than we would have predicted.” –Emily Barker “I like banner advertising,” says Vincent J. Schiavone, CEO of 4anything.com, a three-year-old Web business based in Wayne, Pa. A recent Andersen Consulting study concurs, concluding that experienced U.S. Web users are more likely to buy on-line from a company after exposure to banner ads than they are after exposure to traditional advertising. Schiavone has found that banner ads are actually a great way to promote the thousands of sites that his 100-person company produces. The CEO reports that he can buy ads on portal sites for as little as $2 per thousand page views. And since companies that sell, for example, lacrosse sticks are willing to pay a decent price to advertise on 4Lacrosse.com, Schiavone can mark up his banner-ad pricing. “The economics work for us on both ends,” he says. –M.H. Attention, dot-coms: your mountains of venture capital no longer guarantee you special treatment in the ad world. Scheyer/SF Inc., a boutique ad agency in San Francisco that handles accounts like EMusic.com, demands 50% of a campaign’s cost up front. “If the check isn’t in our hands, we do not do the work,” says agency president and founder Dennis Scheyer. He adds that ad costs are skyrocketing. Demand for airtime is so strong that when companies cancel an ad, TV and radio stations resell that time to another company at a higher rate. He points to one local radio station that a few years ago would have charged $500 for a 60-second spot. Now the price is $5,000. One more thing. Once the spot is contracted, dot-coms often have to guarantee it immediately and with cash. Call it the ad industry’s version of due diligence. No one’s waiting to see who wins and who loses in the dot-com game. –Anne Marie Borrego THE 7 MYTHS OF THE WEB ECONOMY Myth 1: Building a Web site is easy The word from the experts Myth 2: Traffic will make you rich The word from the experts Myth 3: Smart money makes you smart The word from the experts Myth 4: Razzle-dazzle makes Web sites great The word from the experts Myth 5: Brand is everything The word from the experts Myth 6: Wild ads make Web stars The word from the experts Myth 7: Community, community, community The word from the experts Plus: Tales my guru told me Dispatches from the Web economy Back to Intro, ” I Was Seduced by the Web Economy”