NEW MEDIA: Web Words - Internet industry must look at how to generate value

I was sad to read that Martha Lane-Fox's brother is leaving Lastminute.com. Or rather, I was sad to have to read that he's leaving, because, despite the constant industry and media browbeating over the bursting of the dotcom bubble in recent months, the acres of column inches still devoted to Lastminute suggests that the key issues facing our industry remain ignored.

I was sad to read that Martha Lane-Fox's brother is leaving Lastminute.com. Or rather, I was sad to have to read that he's leaving, because, despite the constant industry and media browbeating over the bursting of the dotcom bubble in recent months, the acres of column inches still devoted to Lastminute suggests that the key issues facing our industry remain ignored.

The truth is that Lastminute.com is an irrelevance - unlikely to survive in its current form and a poor barometer of the future of our industry.

The reality is much more prosaic; some companies have sound business models, based on real strategies and achievable profits, and others don't.

There are the good, the bad and the ugly. The good are profitable, the bad unlikely ever to be profitable and the ugly never had any hope at all. Far too often the industry triumphs the case of the bad and the ugly. It analyses all too infrequently why the good succeed.

So how should we be looking at our industry? Profitability should clearly be the key success criterion. Focusing on page views or the numbers of unique visitors is interesting, but not particularly helpful. More critical is the ability to value individual visitors. If companies cannot understand and measure the value of their unique customers, then they clearly have no real ability to focus on their most important customers and so have no control over their potential to be profitable in the future. Similarly, it is as absurd to view visitor or page view numbers in isolation from your competitors' performance, as it is to analyse ACNielsen data on one company alone.

But beyond this, there is still too great a focus on the internet as a sales and marketing channel and not as a tool to root out inefficiencies and increase productivity. As everyone knows, but few appear to follow, the internet impacts the whole value chain. One of our clients, Fleurop (Interflora in Germany) can demonstrate how the use of an integrated e-business solution has increased its profit per transaction by 500% while increasing sales substantially year on year. This is meaningful data.

So service businesses should be looking much more aggressively at whether the solutions really make any difference to their clients' businesses.

For too long they have been hiding under the immeasurability of meaningless jargon.

Businesses must channel a greater percentage of internet spend into measurement, based on clearly defined goals.

We are all guilty of failing to focus on this enough, but clients need to demand it from their partners/suppliers. As a minimum, clients should invest 10% of their budget in research and evaluation.

Companies may also have to jettison some basic assumptions about web-based trading, such as the idea that e-business always leads to lower costs. Although this assumption may hold true for the value chain as a whole, it will also be the case for some companies that costs may actually rise when doing business electronically.

Why? Because the corollary of being able to do more is that more is expected of you. This may be in greater customer service demands, for instance.

However, if your overall business benefits then fine, but it's worth going the extra mile to make sure they really do create value.

This Christmas, expect e-commerce to under-deliver on its promise yet again. This should not sound the death march for the internet, however.

Instead it should force those in the industry to focus on how to generate value.

Hopefully the marketing media will lose their obsession with the power of online advertising and instead will lead the way in focusing on the real issues of profitability. It is time to look to common sense for solutions rather than miracles.

Chris Robson is chief executive officer at Syzygy AG.



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