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Table of Contents
Not that long ago, a company that did business on the Internet was a rarity. And such companies had far more in common with one another -- facing the same challenges -- than they did with other companies in their industry. Today, the company that doesn't use the Internet for business is a rarity, and the focus is on competition within an industry and on brand identity.
It wasn't that long ago that an individual or a small team was responsible for a company's entire Web presence. Such people wore many hats and needed to keep their eyes wide open, learning everything they could about online marketing or page design or site structure. they probably wouldn't implement everything themselves, but they needed to understand the choices and the implications well enough to pick and manage the folks who would.
Today, Carnegie Mellon offers a masters degree in "Electronic Commerce." Conferences and seminars focus not on the Internet in general, but rather on specialties like "Measuring Internet Marketing." Many Web-related jobs have become very specialized. You are a Web marketer or a designer. And the marketer might focus on brand advertising or product advertising or opt-in email or affiliate programs or search engine optimization. And the designer might focus on transaction processing or database implementation or animated graphics or game design.
Today, a team or a service firm in charge of a company's Web design efforts might be unaware of the marketing implications of what they do -- how it affects search engine or human behavior. And the marketers may be unaware of the range of design choices available to them. Chances are they weren't around when the site's look-and-feel was established. And now that's locked into the company's brand image. The cost to generate fresh pages and maintain the site are tied to that underlying branded design, and that's the starting point for future budget decisions.
Today, the Web is such an integral part of business for traditional companies that traditional business people often make decisions that lock a company into particular industry-specific and brand-oriented marketing tactics and design choices. Companies that go that route sacrifice much of the flexibility and creative potential of the Internet.
In the early days, the company's Internet generalists would have protested and challenged and arrived at an alternative that was better suited to the Internet business environment. Today, I suspect that there are few such generalists in large companies, and their clout and credibility are diminished in a sea of specialists who can and will expertly implement orders without questioning the overall strategy.
Does this spell the end of the Internet generalist and of the dynamic character of the Internet business environment?
No. The generalists eventually move to startups, where fresh insights are welcome. Not having to battle the inertia of how things were done before and vested interests in branded designs, they can focus on what customers want and need and come up with creative ways of serving them.
Perhaps this is a natural cycle of change and renewal, part of the process of business evolution, which is accelerated on the Internet. But I'm appalled at the waste in terms of money and human potential. Darwin's world is brutal.
If this picture is accurate, what are the implications for our weekly "Business on the World Wide Web" chat sessions? Have they become obsolete? Do people today need and want programs focused at particular industries and market niches and career specialties? Or has "Internet generalist" or "evangelist" become its own job specialty? Is it a species that needs its own home and identity and a place to discuss common concerns and share insights?
Please let me know your reactions. seltzer@samizdat.com
Reportedly, online shopping this Christmas was about triple what it was a year ago. I have no hard statistics, but my gut feel is that the number of online stores was even more than triple last year -- meaning the competition for attention and dollars is incredibly intense. (I wonder how many of the newcomers will survive after the costs of post-Christmas exchanges and returns, or the even greater costs of customer dissatisfaction.)
Meanwhile, totally engaging interactive events like auctions and person-to-person games have matured to the point of compulsion. Why settle for the best price from a store when you can get the same merchandise at auction for far less, and in an competitive environment with intense variable reinforcement (all those bargains and amazing collectibles that just slipped by) and lots of interpersonal interaction. This style of shopping borders on gambling and is at least as addictive. So while the static catalogue-style stores scramble and spend trying to induce shoppers to come back now that the gift-giving season is over, the auction sites are likely to remain packed and draw even greater traffic as newcomers find them and get hooked.
And while the auctions are competing with you for shopper dollars, the online games are competing for their time and attention. Now when you buy a game on CD ROM, you don't just play against the computer. Rather, you can at any time connect to the Internet version and strike up a game with other people like yourself from all over the world. My nine-year-old son got Starcraft for Christmas and immediately got hooked don the Internet version (Battlenet). Over Christmas vacation, it looked like there were always over 20,000 players connected at any time, so there were many choices of games to join and it was easy to set up your own game with your own starting conditions and quickly recruit teammates and opponents.
At the same time, I got hooked on online blitz chess at the Internet Chess Club www.chessclub.com. I had done that quite a bit in the days before the Web. Now the look and feel of the online environment is compelling and, with at least hundreds and sometimes thousands of people wanting to play at any time, you can typically get a game within a few seconds with a player near your strength and with a time control of your choosing. At last count, over 60,000 games were played a day at www.chessclub.com When you check your stats -- your rating and won lost records at different speeds and in miscellaneous variants of chess -- they also tell you your accumulated hours and the percent of your life that you have spent connected to their site. (In my case, for the first three days that amounted to nearly 25%. I may be in need of an addiction support group.)
So the environment has changed. More people are spending more of their time online and less of their time at static sites. What do you intend to do about it? What can you do to make your site and your online business more compelling? What lessons can you learn from the auctions and the games and how can you adapt that to your specific needs?
If this question is of interest to you, please join us at our next Business on the WWW chat session, Thursday, January 21, noon Eastern Time (GMT -5) at www.web-net.org For transcripts of previous sessions, see www.samizdat.com/chat.html
Over the last year, the Web reached a new level of maturity -- not just the mobs of people coming online, but what they spend their time doing. The Web is no longer a curiosity, a gimmick. For many people, the Web isn't just a place to surf, and also isn't just a way to save time doing things they did before (like reading news). Rather, the Web experience is becoming an important part of their lives.
The activities I'm talking about were there before. But now they have matured and the audiences have reached critical mass. People attract people. Audience drives more audience, making these activities much more compelling than before. I'm talking about chat, auctions, interactive games, gambling, playing the stock market online, also live interactive porn. Such activities are getting millions of people hooked, leading them to spend many hours online.
How does this affect ordinary people running online businesses and Web sites? There are only a limited number of hours in the day, and even the most addicted user needs to sleep, eat, work, etc. some time. More time spent in compelling online activities means less time available for other activities -- both in the real world and online. While these sites may not sell products or services that compete with yours, they are competing for your customers' time and attention.
In other words, the business environment of the Internet is going through a major change. To build a successful Internet business today is going to take psychology rather than technology. Just putting up a catalog, just setting up to do secure transactions, even providing lots of useful free information is not likely to be enough. What else is needed? How can ordinary sites adapt to this new situation? I don't think everyone is going to want to turn their site into an auction. I also don't think that banner ads at the compelling sites are likely to be very useful, unless your site provides a very similar experience (like one porn site advertising at another). Visitors there are so hooked that they are very unlikely to click on a banner that will take them away.
We need to look for creative ways to compete for the time and attention of our target audience. We don't need to get people to spend hours per week at our site. but we do need to motivate them to come back, again and again. Otherwise, our traffic will decline even as the number of Internet users and the number of total online hours soars.
For an online store, consider using variable reinforcement. Giving a discount of 50% to every fifth visitor or 100% to every tenth would probably be more effective than 10% to each. Each new visitor gets some kind of discount -- anywhere from 1% to 100%. And to be considered a new visitor again and be assigned a new random discount, you need to have bought something -- that's what resets the counter; not just going away and coming back again.
Sites like Pricescan www.pricescan.com let you search for a common consumer product, like a book or audio CD, and see the prices for that item at a dozen or more different online stores. If price is what really matters to you, they make comparison shopping easy. In that environment, advertising a loss-leader price on a few selected items isn't likely to lead to any profitable follow-on business. People will buy those sale items, then go back to the price comparison site for the next item on their shopping list. So holding special sales probably won't drive traffic to your site and certainly won't build customer loyalty.
Random, variable discounts, like I suggested, would take you beyond that barrier. Every time you buy something and then come back, you'll get a new discount -- like pulling a handle on a slot machine.
If the prices were static, you'd want to check a Pricescan next time to see where you could get the best bargain. But with random discounts, the fact that you already bought at a store means that you're eligible for a new discount award. Go back and pull that lever and have some fun.
I haven't found any sites yet that do what I'm describing here. Please let me know if you know of any or if you plan to do something of this kind yourself. seltzer@samizdat.com
Imagine seeing a message like this at a Web site:
"Click here if you'd like live help from a knowledgeable fellow-shopper. Our "ambassadors" are frequent buyers and users of our products and services. They have actively participated in our forums and chats. Now they've volunteered to help fellow shoppers like you, in exchange for credits on future purchases.
"We can't guarantee that someone will be available the moment you place your request. We only have limited number of volunteers. But, from experience, the chances are better than one in three that you will be connected with someone within a moment or two. In that case, you can carry on a live chat-style discussion with our ambassador (in a Java window) as you continue to browse through our site.
"Remember our ambassadors are not employees. They are volunteers who provide the same kind of candid help you might hope to get from a newsgroup or forum or chat. But this is a personal one-to-one discussion. Their opinions are their own, not ours -- the kind of advice you might expect form a friend or a neighbor, rather than a salesperson. They don't receive any commission on what you buy. They are there to help, not to sell."
Imagine that the folks who volunteered, alert the system whenever they happen to be available, and the system matches them randomly with folks who have requested help. The ambassadors do not have scheduled hours. They connect when they can and when they want to, and they get credits on products and service based on the help they actually provide.
As a variant of that model, suppose the ambassadors work primarily by email. When you buy something from an online store, instead of getting an automated questionnaire asking if you were "satisfied," you get a friendly personal email message from a fellow shopper, wishing you well and asking for your reactions and providing helpful suggestions.
This is random, variable high-touch personal service. The store won't have enough ambassadors to reach everyone, every time they want to be reached. But when an ambassador does contact you, the experience feel good, like you won something today, like there are real people out there who care. And the ambassador comes away knowing a little better what matters to you, what you are really looking for, and how to make you happier the next time around.
Basically, automated functions don't tend to be compelling. Take, for example, the Microsoft real estate site -- homeadvisor.msn.com They have lots of clever calculators to help people make decisions, surrounded by soundbyte-style text. It looks good at first glance, but you soon leave it for sites that are truly helpful and that engage you in the real world (like the site of a realtor or buyer's agent in the area where you want to buy). We have to move from high tech to high touch.
People need immediate rewards, personal feedback, immediate gratification. The satisfaction can be variable -- you don't need to provide the same high-touch experience every time, if it isn't predictable and yet comes reasonably frequently that drives people even more than a regular reward. That psychological fact makes this kind of service far more doable than if you had to provide it for everyone all the time.
High touch is the name of the game in the new Internet business environment. Regardless of what you call them and how you set up the program, you need to recruit volunteers who are willing to act as a virtual extension of your company. And you need to train and motivate them to engage your visitors personally, in a way that you could never afford to do with paid employees. (NB -- It typically takes 1-2 full-time employees to respond to 200 emails per day.)
I haven't found any sites yet that do what I'm describing here. Please let me know if you know of any or if you plan to do something of this kind yourself. seltzer@samizdat.com
Richard Sutton (Warner Brothers) -- banners are becoming less effective and the novelty of flashing things has dropped off; using games, even for IBM;
Rosie O'Donnell holds the chat record at aol -- 54,000 unanswered questions
Terry Young (air force campaign) -- increased traffic by 50% and the traffic remained that high when the campaign ended
Ken Wruk and Heidi Messer -- important role of opt-in email, by 2001 25% of $40 billion e-commerce revenue will come form affiliate programs
do you know where your visitors are coming from?
Keith Foxe (Internet Shopping Network) -- the banner ad "I won" -- with an auction to buy means to win -- that's motivation, $7 million in advertising (run rate) driving $30 million in revenue, (I'd hate to have to compete against that), $20 per customer acquisition, $15 target, the engineer who blocked all webcrawlers
Ginny van Berkum -- E-trade and Charles Schwab spending $250 to $300 to acquire a customer, E-trade $150 million ad budget in 1999, apparently advertising spending on the Internet is very different than in traditional businesses)
Ken Bott (Continental) -- cool travel specials -- email alert once a week (the offer is cool, the technology needn't be)
Bill Van Cleave (American Greetings) -- in the social communication; making a profit selling a class of product that competitors are giving away; subscription model (6 months unlimited access) works best (NB -- every time somebody buys and sends one of these they are sending an ad for American Greetings); encourage subscribers to send many -- it costs nothing; one million sent this Christmas season, up from 50,000 a year before
Hillary Graves (iVillage) -- Internet is an effective tool to help people manage their lives, provocative messages drive clickthroughs (but must be closely tied to the content at the other end)
Greg Duncan (Amoco) -- email to a Web site as early warning of problems, the challenge of products that aren't associated with the corporation's brand image (chemicals); cost of recruiting employees -- $3000 traditional means, $300 by Internet
Paul Peterzell (Charles Schwab) -- the high ad spending rates serve as a barrier to entry for would-be new players; this week the Schwab sites was getting 60 million hits a day, a record; that's double the previous record set in November; in 1997, they had 2.3 billion revenue and 5.4 million accounts; they can handle 60,000 concurrent sessions; 300 physical branches in addition to online = "high touch"
Scott Laughlin (Microsoft) -- time shift away from television to the Internet; for Amazon.com, affiliates are more important for brand awareness than for getting customers; a high click through rather does not necessarily mean effective advertising (need to convert to sale)
Don Middleberg (Middleberg Associates) and customer from CBS Marketwatch -- ping.com as a source of email lists of journals; in the news business, brand is the product; nobody owns the customer on the Internet -- we share the customer
Steve Markowitz (Intellipost) -- online direct marketing programs = natural; get consumers to volunteer information about themselves and then track their behavior; bonusmail.com and mypoints.com reward customers for reacting to ads (points redeemable from 50 partners, for frequent flier miles etc.); 2 million members; HTML email with embedded links; up to 35% response rates; $3 to acquire a member and get $50 value from the relationship over time; members' number one complaint = "send me more email [ads]; I'm not getting enough"
[Related thought -- Today marketers and advertisers are depending heavily on cookies to track user behavior at Web sites -- what pages they see, the path they take, when they return, etc. But as more and more people use multiple Internet access devices of all kinds and we move toward the time when these devices will be readily available everywhere and we won't need to lug around laptops, cookies lose their tracking value, because the cookie is saved on the access device. Opt in email, using HTML pages, as described by Steve, does not have that limitation].
Paul Saper (Saper Media Group) -- IT sees the Internet as "a computer with wings"; the importance of a large company having an Internet evangelist; scale is very important on the Internet -- think big -- think very big
For slides of Richard Seltzer's presentation at this event "How to increase traffic at no cost" go to www.samizdat.com/iqpc/title.htm
For information about IQPC and their events, www.iqpc.cominfo@iqpc.com
Companies like Charles Schwab and E-Trade are spending enormous sums on advertising (see above notes) to stimulate continued rapid growth and to help them keep pace with one another in the race for marketshare. At the same time, the level of expenditure represents a barrier to entry -- making it every more expensive for a new player to enter the field. Does this mean that this particular market niche is now effectively closed? And does this also indicate a pattern in Internet business -- that early leaders, with extraordinary funds at their disposal because of their stock market valuation, will launch huge advertising campaigns and thereby close the field?
I believe that the Internet business environment is far more complex than that. Yes, hyper-spending levels for advertising do make it ever more difficult for newcomers to follow the same path as the early leaders. But there's more than one path.
In the traditional business approach, you start with a clearly defined goal, then systematically analyze the alternative means for achieving it; and once you have a detailed plan, you spend all that it takes and execute with precision. Yes, you can operate that way on the Internet, but by so doing you throw away unique opportunities this new environment provides for starting on a small scale, building an audience first, learning from the audience, and developing products and services specifically geared for the audience's needs (see #26). That's the iVillage path -- learn and grow, learn some more and grow some more -- rather than the big-bucks bulldozer approach.
So, as an example, how might a newcomer try to get foothold in online trading?
Let's begin with the assumption that you are already involved in financial services. Perhaps you have a brokerage firm and want to start an online trading business. So you understand the traditional business, have well-established relationships, and either have the necessary licenses or have partnerships with others who do.
If that is the case, then consider creating online trading clubs. These clubs would be based around affinity groups (e.g., employees of a company, members of a church, members of an existing social or business-related club). The initial sale would be to a group rather than to individuals -- reducing the cost of acquiring customers and making it all the more likely that sales could spread through word of mouth and online community activities.
Each member pays regular monthly membership dues. Part of this is a service charge, the rest (an amount that the members themselves can vote to raise or lower) is money to be invested by the club.
Members have access to online research information and to facilities to make it easy for them to interact with one another (e.g., chat/forum/email lists). They hold regular online votes, perhaps monthly, to decide what to buy and what to sell. Anyone can make nominations and lobby through discussion for their choices. The voting happens in a single day, with results shown in graph form, continuously updated in real time. (Perhaps the club might also hold straw votes at other intervals to get a sense of how people feel and fuel discussion, culminating in the final, binding vote).
It would take experience to determine the optimum size of such a club -- probably greater than 100 and less than 1000. Once membership reached the agreed maximum level, that club would be closed; and, if there was sufficient demand, a new one could be started for that particular affinity group.
The basic service fee each member pays might be equivalent to what someone would have to pay to place a single trade. By joining forces, they are able to make multiple trades each month, benefit from the research resources that are open to them, and especially benefit from their joint, collaborative research efforts and judgement. Members would build tight loyalty to one another, and to the club -- sharing in the excitement and the politicking for votes, and in the results of their investments. The members would follow their own preferences and set many of their own rules, so different clubs could evolve in different directions.
Each such club would generate a regular revenue stream for the brokerage, and perhaps open additional value-added service opportunities.
I haven't found any sites yet that do what I'm describing here. Please let me know if you know of any or if you plan to do something of this kind yourself. seltzer@samizdat.com
To succeed in the new Internet environment, businesses need to find ways to make mundane activities and transactions game-like -- spontaneous, real time, exciting, engaging, interactive -- as well as less costly and more profitable. That doesn't mean that every Web site should offer auctions, games, and such. But it does mean that we need to get experience with them, learn how matches are made and how games are played, and looking for techniques might be transferable to business situations.
For example, take a look at the real-time match-making system at the Internet Chess Club www.chessclub.com Once you join, you can play chess online with any of thousands of simultaneous users. Under traditional circumstances, that would be a daunting tasks -- thousands of players, each with different playing strength (ratings), each looking for games of different duration (time controls) and perhaps even with alternative rules (wild). It could take quite a while to find someone who might want to play against you and then to negotiate terms. But one alternative that the Chess Club provides is remarkably quick and easy.
Open the graphical matching system. There you can enter what kind of game you are looking for -- the range of strength of acceptable opponents, the time control, whether you want a standard game or wild, and if wild, which variety, and whether you are looking for an unrated game or a rated one (whether you want the results to count toward raising or lowering your rating). Proposed matches appear as colored dots on a graph. Full dots stand for rated games, and circles for unrated. One axis represents the rating of the person proposing the game and the other axis represents the time control.
If you aren't a chess player all these details may seem a bit confusing. The important point is that colored dots on a simple graph can represent a wide range of current real-time offers. Click on a dot, and you immediately start a game with that person -- no negotiation necessary. With thousands of people online at any one time, the odds of finding a game quite quickly -- by either entering your proposal or just clicking on someone else's -- are excellent. It usually takes me no more than half a minute.
How might a mechanism like this be applied in business?
Consider trading in stock, bonds, commodities, etc. One axis could represents price and the other quantity. When you position your cursor over a dot, you see the specifics of the offer. One color could indicate a firm offer to sell, another a firm offer to buy, and a third color a request for bids.
With a hard offer, you click and the deal is made (all parties are certified members, with lines of credit or deposit accounts; access to the online trading room is secure and authenticated; the money is immediately transferred from one account to another).
With a request for bids, the seller indicates the starting conditions -- e.g., a specified quantity of shares, with bidding starting at a specified level, and a minimum number of bidders. When the required number of bidders has clicked on (and has not left), a Java window opens, with a short timed program, (as in the old Atari game Mule). The participants click to raise their bid and the one with the highest bid when the time limit ends is the buyer.
Perhaps you'd have different "trading rooms" -- different real-time matching graphs -- for different stocks or commodities. Trades could happen very quickly, with minimum transaction cost -- perhaps far less than today's $15 online trading charge.
Also consider the possibility of using this same technique for taxis,
trucking companies, rental vehicles -- for any
business that uses a dispatcher to match resources with clients in
real time over a geographic area. Imagine a transponder on vehicle links
with satellite so the central system knows it location at all times. The
individual resource (taxi etc.) sets parameters for what assignments it
will accept and on what terms, and alerts the system when available. The
client (on the Web) enters his or her requirements and the terms he/she
will accept. The client sees on a live real-time map all available resources
that match the requirements (perhaps color-coded, with one close but out
of range in a different color). If client clicks on a dot a message goes
immediately by Web or pager to the resource, with all the necessary information
about the client. In addition, a resource that is available and has Web
access could also see a map with the location of pending requests, color
coded by general terms, and rather than wait for a client to contact him
and accept his terms, he could click on one of those offers and accept
that clients terms. Hence the match is made without negotiation, without
the need for a dispatcher -- immediately.
In this mode, numerous independent operators could all work in a common environment, taking advantage of this central services. Result -- resources are rarely idle and clients are served extremely promptly.
I haven't found any sites yet that do what I'm describing here. Please let me know if you know of any or if you plan to do something of this kind yourself. seltzer@samizdat.com
from Samizdat Express
from PLEASE COPY THIS DISK www.samizdat.com, seltzer@samizdat.com
The full text of Internet books and fiction by Richard Seltzer is available at the Web site. These books are now also available on diskette at Amazon.com. The following links take you straight to the books descriptions:
(Adding dozens of new ones every month, Gutenberg has already made over 1500 etexts available for free over the Internet. These include classic works of literature and history, as well as out-of-print and little-known works by great authors. If you can, connect by ftp, rather than the Web, to get the most recent ones. Here's a list of those recently added, alphabetized by author. The file name is useful for fetching the text from the ftp site. Many of these are also available on diskette from PLEASE COPY THIS DISK for those who cannot get them themselves. For the current catalog, check http://www.samizdat.com/catalog.html or send your email request to seltzer@samizdat.com)
Thomas Bailey Aldrich
B. M. Bower -- The Flying U's Last Stand (fusls10.txt)
Thornton W. Burgess -- Adventures of Reddy Fox (rdyf10.txt)
Anton Chekhov
E.C. Gaskell -- Life of Charlotte Bronte, Volume 1 (1locb10.txt)
Julian Hawthorne (editor) -- The Lock and Key Library: Classic Mystery
and Detective Stories - Old Time English (lckyl10.txt)
J.F.C. Hecker -- The Black Death/The Dancing Mania (bdadm10.txt)
O. Henry -- The Gentle Grafter (grftr10.txt)
Marian Keith -- The Black-Bearded Barbarian (bbbrb09.txt)
Andrew Lang -- New Collected Rhymes (nwclr10.txt)
Natalie Sumner Lincoln -- The Red Seal (redsl10.txt)
Jack London -- Michael, Brother of Jerry (mcjer10.txt)
Mary Murdoch Mason -- Mae Madden (mmmmm10.txt)
John Milton -- Poetical Works (pmsjm10.txt)
Helen Nicolay -- The Boys' Life of Abraham Lincoln (bloal10.txt)
Bucky O'Connor, by William MacLeod Raine[Raine #2][bkcnrxxx.xxx]1809
Ruth Ogden (Mrs. Charles Ide) -- Tattine (tttne10.txt)
Baroness Orczy -- El Dorado (ldrdo10.txt)
Frank L. Packard -- The White Moll (wtmol10.txt)
Plato
William M. Raine -- Wyoming, Story of Outdoor West (wymng10.txt)
Sir Walter Scott -- Chronicles of the Canongate (cnngt10.txt)
William Shakespeare
H.G. Wells
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