Saturday, April 21, 2001

E-Commerce Shakeout: Mature Web Emerges

In the face of a very public shakeout of Web businesses, a new, increasingly mature online business picture is emerging, according to ActivMedia Research LLC’s latest annual web report card. Each year since the formation of the Web, ActivMedia has conducted a scan of webwide activity, interviewing thousands of Web business managers to study the “Real Numbers” that stand behind the hype and publicity that attends the Web. This year the picture offers a fascinating view of a maturing Web, rising out of the ashes of the not-so-mature also-rans, wannabes and has-beens of the Internet’s stratospheric early years.

According to ActivMedia’s latest report, “E-Commerce Shakeout: Surviving the Maturing Web,” there are a solid core of profitable Web businesses continuing to thrive online. Continuing trends identified in two previous annual waves of research, it appears that Aesop was right … slow and steady does win the race. As in past years, reaching profitable positions online requires fiscal discipline. The greatest challenge for most Web businesses is to finance rapid growth. A majority of online businesses that are dedicated profit centers are already profitable (58%), compared to only two in five of those businesses who are partially online as a profit center, and partially for other reasons (37%). In both cases, another one in four expect to become profitable in the next year (27%). One in ten online businesses have no portion of their Web activity that is oriented toward profit (11%), and another one in four are directed toward publicity and not profitability (23%). The remaining two in three (66%) are either purely (46%) or partially (20%) intended to be profit-generating online businesses.

The changing shape of the Web is determined by the evolving environmental conditions and constraints placed upon web businesses. Removing the artificial prop provided by seemingly unlimited access to venture capital and seed money has exposed dramatic flaws in many initial web business plans. As the dust from the online shakeout settles, the profile of those remaining businesses that will form the core of tomorrow's Web is starting to emerge. The environment that surviving profit-oriented companies face today is one of both increasing opportunities and increasing challenges, with many reporting an increasingly happy ending as well.

VP of Market Research Harry Wolhandler comments, “In recent years, many analysts overemphasized the role of the Internet on world economy. As hyped as it was, at some point all technological waves become rationalized, a process which is proceeding today. This was true in the evolution of personal computers in the early ‘80s and in development of automobiles in the first decades of the century, and it is true of the Internet today. As with any new technology, the Internet drew much enthusiasm--perhaps too much for its promised role in the world economy. But now that the early pioneering days are ending, the honest, steadfast growth of the maturing core of the Web is starting to be visible and the Internet is taking its rightful place among the other marketing channels as a key communications platform for conducting business.”