Friday, June 8, 2001

Over Half of Profit Seeking Websites Have Made it.

A newly released study from ActivMedia Research finds that more than half of all profit-seeking websites are already profitable. The research, conducted this spring among 500 executives and business managers at websites around the world, finds a far better picture of online success than is generally recognized.

Among the results:

- Two out of three (66%) e-commerce businesses online today are either entirely (46%) or partially (20%) intended to be profit centers.

- The remaining one-third is divided among those that are not intended to be profit-oriented because they are dedicated to improved business operations and cost reduction (11%) or are primarily publicity vehicles (23%).

Among website executives at sites that are wholly or partially profit-seeking:

- 54% of online business state they are already profitable

- Another 28% expect to become profitable by the end of 2001

The typical website arrives at profitability after 2 years online, but this varies greatly by the primary strategy that websites choose. ActivMedia’s new study, “E-Survivors! Winning E-Commerce Strategies for 2001" finds that online businesses generally assume one of four primary business strategies.

- Websites in the strategy segment identified as “Growth Through Positive Cash Flow" insist on maintaining margins, even at the expense of rapid growth, and reach positive cash flow and profitability the quickest.

- Sites in the strategy segment “Aggressive Promotion? have the lowest levels of profitability and take the longest to reach positive cash flow.

Soon-to-be-profitable firms are somewhat larger than the firms on the Internet that are profitable today. They have an average of 94 total employees, compared to only 23 for those firms that are currently profitable. Furthermore, these firms tend to be more mid-sized rather than huge; 27% have between 11 and 50 employees.

ActivMedia Research’s VP of Market Research, Harry Wolhandler comments, “The Internet is undergoing a vast weeding-out process. The E-Survivors that remain standing reflect a serious, business-like online community that is not pursuing the ‘get-rich-quick’ strategies that grab web headlines. Instead, these companies pay serious attention to the Internet as a sales channel and develop their both their Internet capabilities and their backstage business service capacities as much as possible to ensure their success online. The online losers are those who think they can capture online markets through aggressive promotion and pricing alone, while their supporting business abilities suffer through an inability to serve their customers well. The online winners are garnering an increasing share of loyal customers who are willing to pay reasonably for strong service, while the losers suffer from lack of margins that inhibit their ability to compete in the business service dimension, where it really counts."