One recent form of technical entrepreneurship is using the improvements in computer technology, especially the Internet, to conduct business, promote business or perform the process called entrepreneurship. This whole field has become known as cyberpreneurship, and varies from an organization which merely promotes itself by using an electronic brochure called a home page on the Internet, to companies and organizations which sell their products and services through the use of electronic mail on the Internet. Considerable mythology has quickly developed about firms that have experienced spectacular growth through their sales via the Internet, but it is mostly hype and most businesses using the Internet have reported very poor response to their home pages or difficulty in measuring that response. Many firms do not even track the number of users accessing their home page. Very little research has been done (and certainly not published) which actually measures success in terms of sales using the Internet or even user satisfaction. If we are to believe the futurists who predict that we will soon be conducting the vast majority of our business through some form of the Internet, a modicum of proof of its success is in order. That is the purpose of this paper.
Most people alive today have probably heard of the Internet. In fact, if the propaganda is believed, most people have already surfed the Internet. At least most computer users have probably done so. It is becoming more and more common for firms and organizations everywhere to advertise and even sell their products and services via the Internet. In fact, inquiries to our MBA program have demanded that we at Western “get with it” and make all of our propaganda about our program (and maybe eventually all of our teaching material as well) available on the Internet. It is now possible to learn all about our program, apply to it and be rejected (or accepted) over the Internet without ever talking to a live person! Maybe soon you will be able to obtain your degree as well over the Internet, as one current Bell commercial now claims you can do with a PhD through Indiana University!
But there are various problems to be solved before the Internet takes over completely all human functions. One example is how to persuade customers that their credit card particulars are not being automatically distributed worldwide when they use it to pay for something on the Internet. Although my students assure me that all security problems of confidentiality on the Internet have been solved (and students are the primary source of all knowledge, especially about the Internet, are they not?), I don’t believe most potential clients of firms on the Internet are yet convinced!
Another problem is how to comparative shop easily and quickly on the Internet. I’m sure the software to do this and many other functions on the Internet are rapidly being developed, but shoppers will be slow to adopt the Internet as their primary source. Maybe industrial customers will be the first to switch, automating their competitive bidding procedures with all suppliers.
But my immediate interest is to put some accurate numbers to the statistics about the Internet that are being hyped in the public press today. So there are ten million active URL’s on the world wide web today! (Sorry, it just became twenty!) How many are actively or successfully being used to sell a product or service? What proportion of a firm’s sales is being made on the Internet versus conventionally? Are there any firms selling solely on the Internet?
Have any research studies been completed or even started which survey the success of the Internet as a sales tool, or even the mistakes made by those firms who have rushed like lemmings over the cliff called the Internet? I have managed to find very few published studies about entrepreneurship on the Internet or in fact few studies in progress on the subject. Most of the existing or in progress studies deal with surveys of users or browsers of the Internet, rather than firms selling products and services. In fact, most of these studies claim very few users actually use the Internet to buy anything, but merely browse and “window shop”, especially because they do not trust the confidentiality of using credit card numbers on the Internet.
One of the most interesting surveys of Internet users is conducted every six months by the Georgia Institute of Technology’s GVU WWW Survey Team at the Graphics, Visualization and Usability Centre of the College of Computing. In the October 1995 [HREF1], they surveyed over 23,000 users (76% American) and 1209 Web service providers. They estimated the current number of users around the world as 18 million. Educational careers had just overtaken computing careers at about 30% of respondents. The average age of users is gradually becoming lower as younger and less wealthy users gain access. Nearly 30% of respondents were female, a rapidly growing percentage. Over 30% of users would not pay for access to WWW sites, although over 50% of respondents currently do so, while over 30% use work provided sites and over 20% use sites provides by schools. Users do not do much shopping (only 11%), with 60% of them citing security concerns as the primary reason for not shopping on the Internet. The biggest problem faced by users was the slow speed of downloading and displaying content.
Providers of Web services do not allow ads in general (79% of Webmasters), but those who provide other services provide home page design, Internet consulting, disc space, marketing advice, traffic analysis and shell accounts, in that order. The researchers admit that their survey suffers from the problems of self selection and a non-random sample.
Other sources of similar surveys are the Hermes [HREF2] group of the University of Michigan and the Project 2000 [HREF3] group at Vanderbilt University .
Among the surveys of marketers on the Internet is Activ Media, Inc. with its Trends in the World Wide Web (WWW) Marketplace [HREF4]. This is a continuing survey of firms and their experience at marketing on the Internet, although it has only beeen repeated in the Fall of 1995 after being launched in the Spring of 1995. ActivMedia claims to be the only marketing research firm that formally surveys businesses doing business on the Internet and they do not claim the study to be definitive but guarantee that it is the most detailed and quantitative information available concerning the World Wide Web commerce at this time.
ActivMedia claims that sales on the WWW were $436 million in 1995 and will grow to nearly $46 billion by 1998. They claim the Web has the potential to take over a large portion of all commerce transacted globally, especially for small and medium sized marketers generating new sales by extending their reach to global markets. Much of the growth will be based on a transfer of commerce from other less efficient direct response and retail distribution channels. ActivMedia claims that two percent of serious Web marketers now account for over half of the Web sales dollars, but many small consumer oriented companies will join the WWW during the next year. Marketers will continue to throng to the WWW, regardless of the sales results and because of the encouragement from Web presence providers, firms specializing in creating home pages for firms on the WWW, the low cost of a WWW presence and competitive pressures. Successful role models are expected to emerge during 1996, further adding to such pressure.
The US dominates current WWW commerce, as might be expected, but is expected to fall to 70% of Web commerce by 1998, with significant increases for other countries. But exports will continue to play a significant role in Web commerce, increasing its current 43% proportion of sales dollars. Currently, providers of advertising, consulting and presence provider revenues, although not included in the Web sales data, do comprise a significant portion of Web commerce, with an estimated ratio of one Web advertising company for every seven Web marketers.
In terms of whether Web sites are currently “earning their keep”, ActivMedia estimates Web development expenditures at $116 million and Web storage payments to external providers of $15 million for 1995, suggesting revenues are nearly four times expenditures, but much more site development expense was allocated to earlier years, especially since older sites are likely making most of the current sales. The study estimates the growth rate of Web marketers during 1995 at 1800% and as high as 50% per month during the summer, projecting growth of 860% during 1996, 400% for 1997 and 210% during 1998. In general, these will be mainly smaller and more consumer oriented Web marketers, with more manufacturing and business oriented companies over the next few years.
From the Spring 1995 to the Fall 1995 study, the proportion of marketers describing their Web sites as profitable rose from 22% to 31%, suggesting a slow payback of the WWW investment costs. But since the growth has been quite recent, the low proportion is not surprising. The study claims that travel has taken over from computer hardware and software as the top sales category, as users have moved away from being primarily computer oriented people. Other sectors claiming an increasing share include real estate, financial services and audio/consumer electronics.
American firms dominate the consumer sector, while Europeans account for a disproportionate share of manufacturing, research and industrial concerns. ActivMedia claims that most successful Web marketers fall into the $10,000 to $60,000 per month category during the last quarter of 1995, but over half of all Web sales are by the 2% of Web marketers who earned over $100,000 per month during that time. Significant increases in sales of industrial equipment as more purchasing departments gain access to the Web lead to suppliers becoming a growing factor in Web sales, but secure transactions will lead to dramatic increases in consumer marketing, as well.
Since they are selling the results of their marketing research surveys, ActivMedia is light on hard statistics and heavy on the hype of the results presented, but they are the only provider of marketer based survey results discovered thus far.
This led to our current survey of Internet business users. A questionnaire was assembled based on several suggestions from colleagues and pre-tested using the Internet business users listed on the Internet in London, Ontario in March, 1996. This list was neither completely exhaustive nor up to date, as new listings are encountered daily. But of 101 firms sent the questionnaire by electronic mail, 75 responses were received and are summarized below. The revised questionnaire was then placed on our Business School’s home page at Western [HREF5] and responses are currently being collected from around the world. The final questionnaire is shown in Exhibit 1.
The pretest in London, Ontario resulted in some very interesting results in itself, as well as testing the questionnaire for the overall study. Of approximately 100 questionnaires distributed, 23 were internet services providers, 33 computer consulting and retail companies, 6 real estate firms, 5 financial firms and 33 general business firms. Preliminary results from the first 75 respondents indicate the following lines of business, with multiple responses from some firms:
Provision of Internet Services 33 - 44% Service 20 - 27% Professional services 15 - 20% Retail 29 - 26% Manufacturing 11 - 15% Education 5 - 7% Health services 4 - 6% Financial services 5 - 7% Wholesale 9 - 12% Real estate 6 - 9%
Most of the early respondents are in the computer business, usually providing general consulting plus Internet home pages, Web listings and other services. Nineteen such firms are based in the owner’s home, having recently started operations and not yet doing enough business to require office space outside the home. However, this is one business that can be operated successfully from the home to a considerable volume of sales, since the customers never need visit the office and much of the business can be conducted over the Internet itself via electronic mail. Most of the computer oriented firms started providing Internet services in the last two years, 1994-95, while the age of other firms ranged from 40 years to less than a year.
Most (67%) claimed that they did not have to make substantial changes to their computer hardware and software , while the 20% who did were computer firms setting up web service computers at their startup stage. The costs of having the business on the Internet covered a wide range, from as low of zero for a firm that covers its costs by gaining revenue from listings on its web network to a payment of $65 plus a low monthly fee ($25) for maintaining a home page to a high of $150,000 and a $2500 monthly cost for a firm supplying Internet services to a number of customers. Most respondents quoted only the cost of their initial computer and fairly low fees for the development and maintenance of a home page.
Nearly all respondents had their first presence on the Internet within the last two years, with the earliest being 1990. As the Internet publicity has become more and more common in all forms of media in recent years, more firms have expressed an interest in establishing a presence on the Internet. Respondents quoted all forms of media, friends and the Internet itself as being the primary sources of information which led them to consider a presence on the Internet. The primary reasons for their Internet presence were as follows:
Hoped to jump ahead of the competition 41 - 55% Hoped to keep up with the competition 36 - 48% Heard about it and thought it would be good for business 26 - 35% Thought it would be good value for the cost 24 - 33% Increased sales 31 - 41% Hoped to keep up with the industry 26 - 25% It would force me to learn about the Internet 16 - 21% Customers requested it for easier access/communication 6 - 8%
Only a few suggested that customers had requested the Internet presence, while other suggestions included increased promotion for their firm and international exposure and sales, indeed turning the world into a global village. Most firms had only contacted several Internet service providers before establishing their home page, while others established their own, although several expressed a lack of satisfaction with the service chosen and an intention to switch. One firm had contacted 200 service providers, but that was to research the market before establishing his own provider service.
Almost half of the firms (45%) have a counter on their home page, while others rely on estimates from their provider for volume statistics. Estimates varied from 10 to 600 hits per day to rates of 4000 per month or 100,000 since being established 18 months ago. One firm quoted very high hit rates since publishing its Internet address in its promotional literature. Relatively few employees were trained to use the Internet, except for providers, where that was a large part of their job, although firms did commonly provide access to the Internet, but not necessarily at each desk.
Firms varied in size from the one man show of a new business just starting at home with an office and a computer to a firm with over 4000 employees and 135 locations. Staff training had been obtained from:
Trial and error 39 - 52% Internet books and manuals 31 - 42% Vendor supplied training 16 - 21% Computer consultants 14 - 19% Schools and colleges 11 - 15% Internet 9 - 12% Self taught 9 - 12%
These sources of training were rated fairly high in effectiveness, except for the vendor supplied training, which was rated insufficient and expensive. Other complaints included poorly written manuals, lack of vendor support, management resistance, insufficient training, human error, lack of time and a learning curve effect. The difficulty of training staff was rated easy for most of the computer oriented firms, but more difficult for those inexperienced with computers.
The following applications of the Internet were reported by respondents:
Current Future Advertising specific products or services (home page) 75 - 100% 75 - 100% Sending and receiving electronic mail 75 - 100% 75 - 100% Accessing information from other Internet sites 71 - 94% 66 - 88% Informing customers about location, products, services, etc 63 - 84% 61 - 80% Accepting customer orders 36 - 45% 62 - 82% Ordering inventory and contacting suppliers 34 - 41% 56 - 74% Other (sales promotion and provision of information, 14 - 20% 34 - 41% including technical details)
Other respondents could envision the day when the Internet would essentially replace the telephone, television, home computer and all print media. Advantages of being connected to the internet were quoted as:
More in touch with industry contacts/colleagues 57 - 76% Better informed about customer needs 51 - 67% Increased sales 52 - 70% More competitive 46 - 61% Better informed about industry trends 46 - 61% Improved staff morale 27 - 38% Improved work quality 21 - 28% Made staff work more enjoyable 22 - 31%
Few disadvantages were reported, except for problems of getting executive support for a web presence, slow response speeds on graphics and getting customers to establish a web presence.
The Internet was credited with increasing sales by most of the computer oriented firms while other firms reported that direct sales as a result of the web presence were difficult to estimate. Twenty percent reported no increase and needing a trial period to judge the value of their home page. Sales percentages made via the web varied from 0% to 100% , for some web site providers. Marketing of the business via the Internet was estimated to cover the whole spectrum, from no improvement to a great improvement, fairly evenly across the range, with the no increase category quoting lack of customers using their home page and proponents expressing increased promotion and international advertising very cheaply.
Almost all respondents suggested they should have become involved with the Internet sooner and would recommend early involvement to their fellow business colleagues, but recommended professional assistance for those who lack computer skills. Future activities on the Internet included more expanded coverage, updating of information provided and making actual sales via the Internet.
Most of the Internet providers suggested highly successful sales on the Internet, as one would expect, since they were selling home pages on the web. But most other businesses said sales as a result of the home page were difficult to measure, and increased promotion, both at home and abroad, were the primary result thus far. Some Web listed firms said that new entrants should be patient in expecting reults from their home page, especially until they obtain numerous links to various directories and search engines. Most felt that the low expense of a home page was cheap for the international exposure, but several questioned the benefits of a home page and the necessity to keep it updated.
So the overall conclusion of this research project is that entrepreneurship on the Internet has not really progressed much beyond the advertising stage yet. Most firms say it is difficult to measure the impact of a home page on their sales thus far. Much of the hype about the Internet as the solution to increasing the sales of most firms is attributed to those selling space on the Internet.