Webonomics, by Evan I. Schwartz, is a practical, strategic tool for positioning
and growing your business in the today’s exploding World Wide Web economy.
Schwartz addresses the unique problems and rewards businesses can expect to
encounter when conducting business in cyberspace. He also dispels some of the
most common misconceptions about doing business on the Web. More importantly,
Schwartz targets the key to business success on the Web: understanding consumer
behaviors and expectations. From scores of case studies, Schwartz has formulated
nine guidelines for growing your business on the Web. Schwartz’s analysis of
these cases clearly explains why some businesses thrive and others fail
miserably on the Web. To illustrate Schwartz’s nine principles of Webonomics,
this synopsis includes only a handful of his case studies. To apply his nine
principles, Schwartz warns that we must first understand the motivations behind
four main groups involved in the Web economy: The consumers, the content
creators, the marketers, and the infrastructure companies (3). The consumers are
in the driver’s seat. They expect to make the Web a place of their own, a
place of customized information and relationships. The content creators are
those ventures that inhabit the Web and attempt to inform and amuse visitors.
Content creators attempt to enhance their brand image and somehow make their Web
sites profitable ventures. The marketers represent the thousands of companies
that are promoting and selling products and services. The marketers who use a
traditional approach to advertise, market, and sell their product on the Web
will fall short of success. Finally, the infrastructure companies are selling
the tools (hardware and software) to reach this digital landscape. Keeping these
four main groups in mind, we now examine Schwartz’s nine principles of
Webonomics. Principle 1: Quality of Experience, Not Quantity of Visitors Web
surfers base the quality of their experience on the total experience of visiting
a Web site. The visitor to a site wants a place where he or she can identify and
communicate with others who have similar interests. Schwartz refers to this as
“community.” The goal is to offer something that causes visitors to return
repeatedly to your site; something that grabs and keeps their attention. One of
the most common misconceptions about the Web is that sheer numbers are proof
that your site is successful – that all you have to do is run up big numbers,
then sell advertising space on your site to marketers who want to reach your
audience (36). But reliance on sheer audience size is a recipe for success on
television (mass media), not the Web. For content creators, the top priority
must be to form a lasting bond with individual consumers and making sure that
they are satisfied enough to return again and again. If consumers pay a
subscription fee for some of your content, this serves as tangible proof that
you are providing a quality Web experience. The Wall Street Journal is one of
the few content sites on the Web that actually manages to do both – attract a
large audience and provide a high-quality, interactive experience to a core
group of consumers. To illustrate the importance of a quality experience,
Schwartz contrasts two adult Web sites: Playboy and Bianca’s Smut Shack. Given
its well-known brand name, it is easy to understand how Playboy’s site has as
many as 100,000 visitors daily. In contrast, Smut Shack attracts only a quarter
of the number of daily visitors experienced by Playboy’s site. But numbers do
not necessarily equate to success or quality! Here are some of the reasons: The
average Playboy visitor spends eight to ten minutes at the site, while the
average Smut Shack visitor returns ten times per month and spends an average of
an hour each time (25). However, it is unknown how many of Playboy’s daily
hits are repeat visitors because of information not disclosed by Playboy
Enterprises. Essentially, Playboy’s site has very few interactive features
that allow visitor participation and the site is only updated an average of
twice monthly. The Website, which allows visitors to view a few photos from its
magazine, is mainly an advertisement for its print edition. On the other hand,
Smut Shack is built around the ability to let people interact and contribute to
the ambiance through its many interactive features (26). Visitors choose an
online name and can become part of the intimate activities in different
“rooms” on the site. Visitors have an opportunity to actively participate in
ongoing bulletin board discussions and chat sessions with other people hanging
out there at that moment (24). Unlike Playboy’s site, Smut Shack’s site is
constantly changing, which enhances the total experience and induces people to
return to the site. One of the main draws that attract people to the Web on a
daily basis is news (27). Because news is an “easy-to-come-by commodity” on
the Web, news groups must do something more to attract Web surfers’ attention
(27). Adding value to news is essential. To illustrate this point, Schwartz
contrasts USA Today and San Jose Mercury News. The first mistake made by USA
Today was charging a subscription fee. Even after removing subscription fees,
they were unable to add enough value to the basic news, therefore falling short
of what Schwartz describes as a quality experience. In contrast to USA Today,
Mercury News adds value in several ways. First, this newspaper has the natural
advantage of being the local paper in a region that the global high-tech
industry calls home (31). Second, because the printed edition is not circulated
nationally, readers can only get the news online. But on the Web, those readers
can feel a part of that community, getting news and the inside poop on an
industry that interests them (31). Third, Mercury News also offers a
subscription service ($4.95/month), called NewsHound, which customizes the news
to readers’ specific topics of interest. NewsHound, a news-filtering program,
then searches thousands of stories from the paper and wire services, selecting
the stories that meet the subscriber’s criteria. Every hour, the NewsHound
sends whatever it fetches right to the subscriber’s electronic mail address.
That is adding value – something with which USA Today is still struggling.
Even though USA Today attracts ten times the Web audience of Mercury,
Mercury’s smaller audience has a better browsing experience. Editor &
Publisher, an industry magazine, selected the Mercury Center as the best
newspaper Web site. And NewsHound won the award for best original feature on a
Web site (32). Principle 2: Marketers Shouldn’t Be on the Web for Exposure,
but for Results Contrary to what some people believe, the Web is not a mass
medium. Unlike network television during prime time, you will never find a
significant number of the tens of millions of people surfing the Web in any
given place (27). The Web will never enable marketers to achieve the kind of
exposure they have achieved with mass media (50). Therefore, marketers must
throw conventional marketing practices “out the window” and harness an
interactive approach that appeals to a target market. According to Rich Everett,
manager of interactive communications for Chrysler Corporation, there are four
steps to landing a customer – tell, sell, link, and think. A traditional ad,
he says, will “tell” you that a product exists and “sell” you on its
benefits. The Web must pick up where traditional advertising leaves off. If the
company does its job right on the Web, it will “link” qualified and
interested buyers into a room and give them enough information and interactive
tools to “think” whether they are actually going to purchase the product or
service (51). Many marketers believe that a banner ad will get the same results
as a TV ad. In reality, banner ads typically entice only about two to five
percent of the people who see them to click on them. However, a Web surfer who
spends time returning to his or her favorite content site again and again is
going to be more receptive than someone who visits just once and never returns.
These repeat customers will be more likely to click through to promotional sites
(56). We can understand why establishing a bond with individuals becomes
crucial, especially for marketers. The relationship between marketer and
consumer gets reversed on the Web. Web surfers have complete control over what
messages they choose to interact with and how they interact with those messages
(57). Ads as we know them do not exist in the Web economy. Old media pushes
messages at us an average of 3,000 advertising messages per day. In the new
media, consumers pull the information and choose what messages they want to hear
or see. Because the new generation of consumers is more sophisticated, marketers
are unable to manipulate them as easily (58). Marketers have a new goal of
identifying and responding to consumer needs. Consumers finally regain control!
Mass marketing will never go away, but its dominance is declining. The Web is
accelerating this trend dramatically. Schwartz sites four main reasons for the
declining dominance of mass marketing. He calls it the four C’s: clutter,
clicking, cynicism, and competition (60). With the onslaught of 3,000
advertising messages per day, there is clutter. Therefore, each additional
message has minimal impact on the consumer. This forces marketers to create ads
that are more outrageous and have to be run more often. This is a textbook
example of the law of diminishing returns. Since the arrival of TV remote
control, people have been clicking around channels during commercials to escape
the ads. Of course, not everyone channel surfs. It’s safe to say that some
people are avoiding some commercials some of the time (60). Hence, mass
marketing becomes marginally less effective than it once was. Commercialism has
finally taken its toll on those who have grown up immersed in it. Consumers now
see it for what it is and no longer believe advertising claims. The result is
consumers demonstrating high levels of cynicism. This rings true not just for
mass media and advertising, but also for the political process and the judicial
system. Finally, the mass marketing impact is diminished by competition. The
direct-marketing industry diverted the attention of millions of consumers away
from mass marketing. Cable TV hacked away at the dominance of network TV
ratings. Now the Web is proving to be a more powerful competitor, pulling
consumers away from TV altogether. In fact, children with PCs are spending as
much or more time on their computers than they are watching TV. With all of
these forces against marketers, how do they tell the world about their Web site?
Schwartz states four main ways to promote a Web site. First, mention the Web
site in newspapers, magazines, TV ads, brochures, mailings, and other
promotional materials. This invites consumers who are already receiving your
marketing message to interact further with your company. Second, try to get
attention in the press. If you cannot catch the media’s attention, hire a PR
firm to spread the word. Third, you could trade hyperlinks with other sites on
the Web. If someone from the other site really likes your Website, they may
place your hyperlink on their site without asking for anything in return. The
fourth, and most complicated, is purchasing banner advertising and hyperlinks on
the most popular sites. In the early days of the Web, this was a popular means
of advertising a Website, but is now considered only one of the many promotional
tools available to marketers. Like a human salesperson, a marketer’s web site
must achieve results—by learning about a customer’s preferences, providing
service, retaining loyalty, and ultimately landing future sales (71). Principle
3: Consumers Must Be Compensated for Disclosing Data About Themselves Tens of
millions of people worldwide are searching the Web in search of surprises, cheap
thrills, knowledge and entertainment, timesaving services, plus information on
products that they hope will enhance their lives (20). These people, consumers,
are the focus of the third and fourth principles of Webonomics. These two
principles put the consumer in the driver’s seat, and steer them to find
benefits and information on the Web. The third principle focuses on the idea
that a consumer is not going to disclose information about themselves unless
there is a great benefit in return. Web surfers run across millions of sites
that ask for registration of personal information that ranges from: name,
address, gender, phone number, interests and the like. The chance of consumers
actually taking the time to disclose this information for nothing in return is
highly unlikely. By requiring consumers to disclose their data as the price for
entry into a site, you put up a barrier that causes some consumers to take a
detour around the site. The key to this point for web sites is to provide enough
value in return for information so that consumers gladly enter into the bargain.
Some of the benefits that are suggested to provide value are the use of coupons
in which Ragu partakes, free online time in exchange for data, discounts on
products, paying consumers money and gearing sites to the interest of the
consumer. The benefits must outweigh the cost of providing information.
Consumers know that their personal information is valuable, so marketers must
make the benefits rich in value. Another concern about disclosing information on
the Web is to acknowledge the actual use of the information. Some companies use
the information to help develop their sites into a user-friendlier environment,
yet others sell the information to marketers. In order to make sure that
consumers information is handled correctly CASIE, an industry coalition formed
in 1994, has specified how to handle personal data. CASIE states that if a
marketer seeks personal information that they should do two things: inform the
consumer whether the information will be shared with others, and give the
consumer the option to request that their personal information not be shared
(89). Under these rules, consumers can feel safe about disclosing their
information. As long as consumers are compensated for disclosing their data, as
long as they are properly informed about how such data will be used, consumers
can decide for themselves what information to give out and to whom (91).
Principle 4: Consumers Will Shop Online Only for Information-Rich Products Not
only do consumers choose whom to give their personal information to, but they
also choose what information they receive from the Web. Many consumers will look
on the Web for what is called information-rich products, ones that are wrapped
in sheaves of facts, news, knowledge, wisdom, and advice (92). Some of the
products that are considered information-rich include: music, books, computers,
cars, software, travel packages, houses, and gift items. When consumers are
debating on buying an information-rich product they will go to many links to
seek out the best buy. Some of the ways that consumers get help in making a
decision are to ask advice, research the product and ask friends for
recommendations; all of which can be done on the Web. In order for companies to
entice consumers to buy products on the Web, they must supply consumers with
sites that have facts, news, knowledge, and advice about products (116). Many
companies that are following this route are seeing an increase in the usage of
their sites. One example is Virtual Vineyards, an online wine store. The site
contains valuable information on the quality, taste, ratings, reviews, and
recommendations of good wine (97). The site is successful because of its ability
to convey specialized information. Once consumers discover and trust the value
of the information that they are receiving, they will become a return visitor.
Thus showing that information-rich sites do have an impact on the
consumer-to-company relationship. The idea of shopping the Web for
information-rich products will never replace the experience of in-person
shopping. Instead, it will force stores to add entertainment to the whole
shopping experience. Adding entertainment to stores is an attractive way of
distinguishing themselves from online shopping (105). Physical stores and
virtual stores do not have to be split they can work off of each other. By the
two working in tandem and supporting each other through the process of winning
over customers, ringing up sales, and maintaining brand loyalty they can help
compensate for the weakness of the other (105) Principle 5: Self-Service
Provides for the Highest Level of Customer Comfort Self-service is becoming
mandatory in many industries—as consumers demand increased comfort, control,
and convenience (137). A bank that builds a user-friendly, graphical user
interface on the Web can invite millions of consumers and business clients to
help themselves to a wide array of financial services. A bank that fails to
design such an interface will not be in business for very long. Like the Web
itself, the bank of the future will know no borders in the global “marketspace”.
Yet, such an entity can forge intimate relationships with individuals, reaching
into your home and taking your money with the nicest smile that software can
simulate. When you compare the way people bank today with the way they used to
bank, you see an enormous difference. In the olden days, consumers chose their
bank based on where it was located. You had to conform to what is known as
“banker’s hours”. Now, automated teller machines (ATMs) have got the
public in the habit of servicing themselves. We now see that the focus of
choosing a bank has changed to the location of automated teller machines of the
bank. The banks tend to view the ATMs like a blessing. ATMs reduce staff,
resources, and service costs. Suddenly, local banks saw a whole new world of
opportunities, while also experiencing an increase in competition. The first
bank to wholeheartedly embrace banking on the Web was Wells Fargo. The San
Francisco-based bank actually jumped into the online water back in 1990, with an
online banking service on Prodigy. Customers could check balances on their PC
screens and transfer funds between accounts. As the growth of the Web exploded,
the bank suddenly became keenly aware of the demand for such online services. By
the summer of 1996, the number of Wells Fargo customers doing banking online
shot up tremendously. Through consumers utilizing the Web for self-services,
they establish a high level of comfort through convenience (i.e. banking after
hours, banking from remote locations, and solving privacy issues). Principle 6:
“Value-Based Currencies” Enable You to Create Your Own Monetary System One
of the biggest questions concerning electronic commerce has to do with how
people will pay for whatever they purchase online. Several different electronic
currency systems, known as digital cash, are being marketed as answers to this
question. Most of those payment systems are doomed to failure because the U.S.
Treasury, or any other country’s treasury department, for that matter, does
not back these new forms of currency. They are not even legal tender for all
debts public and private. Companies of all kinds would do well to create their
own monetary systems, offering loyal customers points that can later be redeemed
for goods and services. The Web will be the place where such points can be
earned, bought, sold, traded, and redeemed. Telephone companies have already
jumped into this game. AT&T, with its True Rewards program, offers one point
for every dollar spent on long-distance calls. Digital cash, the other form of
Web money, promises security and flexibility when purchasing products in
cyberspace. The problem with these new forms of payment is that they are not
needed. Several of these digital cash start-ups will likely go out of business
in the next few years due to lack of consumer acceptance. For buying products on
the Web, the current choices are just fine. Any online currency system must
establish trust. Not only between banks and merchants, as today’s credit card
companies do, but also between individuals, just as today’s coins and bills
do. This fact means that anyone in the business of winning the trust of
consumers could get into the digital cash business. Principle 7: Trusted Brand
Names Matter Even More on the Web Brand names are not here to bombard us. They
have a benefit. When you as a consumer have many choices and limited time, it
pays to be loyal to brands you trust. A brand can serve as a mark of quality, of
something familiar. As such, they can actually save you time and aggravation.
Reach for that comfortable brand name, and you do not have to bother sorting
through all the other choices, all the noise and clutter in the marketplace.
Before you can build brand equity, you have to start building brand awareness.
Strong brand images are becoming more difficult and expensive to establish in
the first place. TV audiences are fragmenting into smaller and smaller caps,
with prices going though the roof for the rare mass audiences that do gather
during the Super Bowl, the Olympics, or the very top rated TV shows. Similarly,
the noise level on the Web is getting higher and higher. “Every day it gets
tougher to establish a new brand name,” says Mark Kvamme, chairman and CEO of
the CKS Group, a multimedia-marketing firm in Cupertino, California (156). A
well-known brand name can serve as a beacon on the Web, in a sense casting its
glow in all directions and compelling loyal customers to come toward the light.
“On the Web, brands must become technologies,” says Less Ottolenghi,
director of emerging technologies for Holiday Inn. The Web is the perfect place
to catapult a trusted brand name beyond the original products for which it is
already known. Brand names that evoke a certain sensibility, core competency, or
comfort factor can be used to sell almost anything on the Web. Ultimately,
companies that establish a strong affinity with customers can establish an
online community of interest around their brands. Principle 8: Even the Smallest
Business Can Compete in the Web's Global "Marketspace" The start-up
costs associated with a new business in today's world are exorbitant; this fact
alone hinders many entrepreneurs from entering in the first place. But, with the
advent of the Internet and the evolving of e-commerce from it, almost any
individual can start their own company on the Web with the normal business costs
either greatly reduced or eliminated completely. There are three elements of
business that have changed when making the transition from a traditional
business to e-commerce. First, we no longer rely on going to the mall or
department stores to fulfill our needs. This "infrastructure" of
physical buildings has been replaced by cyberspace. We need only to connect to
it to be able to purchase Macadamia nuts from Hawaii, coffee from Colombia, or
oranges from Florida. Second, because of the computer itself, there is no need
to have face-to-face contact; the computer screen has replaced this. However,
many times this interaction with the computer leads to face-to-face contact. And
lastly, what is being purchased has changed drastically. No longer are we just
buying and selling actual goods, but we are also in the big business of selling
and trading information. The Internet has enabled all sizes and types of
organizations to compete globally. In addition, the Internet allows small
corporations to act large and large corporations to act as if they are small
(i.e. agile, flexible, and responsive like a small company). International
borders have been eliminated; tariffs, quotas, and restrictions do not apply to
goods purchased over the Web. And companies like UPS, FedEx, and DHL enable
businesses to ship goods across international waters to any country in the
world, which eliminates any paperwork that the business has to tend with as they
take care of all of the paperwork for us. The global competition on the Web not
only brings products to people, but it also brings people together. All over the
world there are people from almost every country connected to the
“marketspace” of the Web. Even though these connections exist there is a
huge gap in Internet penetration between industrialized nations such as United
States and the developing economies of the world (189). Statistics taken from
1996 are astounding, but are nothing less than expected. There is a direct
correlation to the economic status of a country and the number of citizens per
host of that country. A host is a PC or mainframe of some sort that allows
high-speed connections to the Internet. For example, the United States boasts 70
citizens per host while the industrialized countries of Western Europe follow
behind. Looking at less industrialized countries like South and Latin America
where Venezuela has 18,026 citizens per host or Nicaragua that has 29,787
citizens per host we see a huge gap. As expected, African and Middle Eastern
countries have extremely poor Internet numbers. As such, South Africa leads the
region with 932 citizens per host, and Uganda with 337,414 citizens per host.
Yet, the countries with the highest numbers are those countries with the highest
populations, such as China. China has a ratio of 500,000 citizens per host.
Furthermore, India has the highest (worst) ratio with one million citizens per
host. With almost all countries competing for connections to the web another
issue to look at is that of the language barrier. Today, English is the dominant
language on the Web. Yet, it is imperative that we cater to those of different
languages. Otherwise, we limit ourselves to where our information can go and
simultaneously be understood. Many sites now are being translated into different
languages, and there is also translation software available that can be plugged
into Web browsers. In addition to language barriers, we must also contend with
cultural barriers. As Schwartz points out, a perfect example is pizza. In the
U.S., the most popular topping for pizza is pepperoni, but in Japan, it is squid
and in Australia, it is eggs! We must continue to cross cultural barriers to
survive and succeed in other countries economically. Principle 9: Agility Rules
- Web Sites Must Continually Adapt to the Market In today's complex and rapidly
changing world, to succeed there is no time for web industries to rest on their
laurels. It is all about being flexible, and being able to adapt quickly in such
a rapidly changing environment. Today's sites must be able to easily recognize
when a particular aspect of a site is not working, and have the ability to
adapt. One of the most important aspects of change in technology is how these
sites react to it - can they upgrade without "threatening to shake and
rattle the very ground of an industry's competitive landscape"(193)? But,
one must also constantly be on the cutting edge (or close to it) to remain
competitive in this environment. This means paying attention to what consumers
are looking for and are interested in. In addition, it would be wise to update
your site by adding new features on a regular basis. As we know, the Internet is
geared towards information. Now technology is changing the way we receive this
information for advertisements - push or pull. Traditionally it was a push
environment with TV, radio, newspapers, but the Web is on the pull edge. If you
see an Internet banner, for example, you have to click on that site to get or
pull the advertisement information. Yet, marketers are tailoring advertising on
the Web from a pull to push method. Conclusion These nine principles will enable
any Web-based entrepreneur to succeed, if the product is deemed worthy. Current
and future technologies will and do enable us as consumers to make better
decisions, and demand the best products from the companies that we purchase them
from. Consumers will demand even more from their Web-based companies that they
purchase goods and services from. If it only takes a few minutes to do some
serious cost comparisons, then business sites need to keep reinventing
themselves to keep their customers satisfied with not only their products, but
also the quality of interaction the customer received to get their product. This
is why Schwartz’s nine principles are essential.