Chapter 3: Selling on the Web

Overview

The number of online 13- to 22-year-olds will grow from 17 million to 22 million by 2004. How can your company target a group that, unlike adults, internalizes the Internet? What do you need to do to attract and keep them as customers? How should you alter your marketing and product development strategies? Forrester’s Wired Youth Summit will help you understand this sought-after group and give you new ideas you can use today to develop these critical relationships.

When the Web arrived in the mid-1990s, just about everyone in marketing thought it would be a great sales medium to consumers—something like TV, radio, or direct mail. Billions and billions of dollars were invested with that idea in mind. Thousands of new companies sprang up to sell on the Web or to provide services to those who would be selling there. Every major corporation in America produced a Web site, most of which involved the marketing of some product or service. Hundreds of sites planned to make money from advertising placed on their sites by others. Spending on the Web was a big part of the boom times of the nineties.

In fact, between 1995 and 2002, very few companies were selling very much to consumers on the Web. With the exception of travel, music, pornography, and books, the sales were very, very small. Why were they so small? At first, people said it was because half the nation was still not on the Web (hence millions of dollars were spent to equip schools for the Web). Then the argument ran that even those who were on the Web were hesitant to buy because of the possibility of credit card fraud. No one was saying that the Web was not a great sales medium. Everyone just said, “These things take time.” Amazon.com, the leader that showed everyone how Web sales should be done, didn’t make a profit until 2001. But Amazon’s failure was said to be due to its overextension into too many products. If it had just stuck to books, it could have been profitable, everyone agreed.

Part of what was pushing everyone to spend like mad on the Web was the idea of the “first mover advantage.” America Online gave away six diskettes to every man woman and child in America and soon not only became number one, but absorbed most of its rivals and then took over the giant Time Warner conglomerate. AOL was always profitable. But several unprofitable dot coms had successful IPOs, making their backers very wealthy. After that, investors went absolutely crazy over the Web.

Many of these Web companies focused on the “new economics.” Profits were unimportant to the new economics. The important things were hits and clicks. How many people visit your Web site? How long do they stay there? What do they look at? What do they click on? Those who pointed out that the Web sites did not show any profits were considered “old-fashioned” people who “just didn’t get it.” Many of the Web firms were run by young people, many of them technically inclined, who had never run a business of any kind before. They wore jeans and ponytails and shopped for organic foods. It was a weird, wonderful world, and it lasted about 5 years.

That was when hundreds, then thousands, then millions of people began to realize and admit that the emperor had no clothes. Investors began to look more closely at their Web investments, and they did not like what they saw. Microsoft, after all, was one of the most profitable companies in the history of the world. But only a handful of the hundreds of thousands of Web sites were profitable at all. And, worse, few of them had any hope of profitability in the near future. Most of them even lacked a long-term profit forecast. Selling on the Web to consumers turned out to be a gigantic failure. Let’s see why that was.