Don't Get Trapped In The World Wide Cobweb

Too often, opening a site leads only to vast disappointment-not vast sales

Deborah Levin, an agent for syndicated cartoonists, scrawls her disappointment with the World Wide Web on the back of an unsold postcard drawn by her biggest client, John Callahan. "How do you make $1 million on the Internet?" Levin quipped. "Invest $10 million." The card, along with the cartoonist's mugs, T-shirts, and books, was supposed to be snapped up by fans cruising to the lively interactive Web site the duo spent $10,000 developing. Advertisers would pay thousands for exposure. Editors would discover Callahan. "The designers of the site told me I had a gold mine," Levin says. "I didn't know what they meant, but I liked that word."

Callahan online, as it turned out, was nothing but a money pit. In eight months, it sold $200 worth of merchandise. The rest clutters Levin's Santa Monica (Calif.) office. Advertisers and editors were nowhere in sight. Worse, Levin spent several hours a day answering E-mail, neglecting her $250,000 business. "They'd say, send me a Callahan original. I'd say, send me $500, and I'd never hear from them again." She finally ignored fans and refused to pay designers to update the site, before finally killing it last spring. "I demanded to know who was making money," she says. "All they kept telling me was Dilbert."

That's because the mad rush to the Web is producing far more Callahans than Dilberts, the cartoon character who grew from funny pages to multibillion-dollar empire. Lured by hype about cheap, swift exposure to 30 million people around the world, 24 hours a day, as many as 400,000 businesses have opened digital doors. One in five small firms has a virtual presence, according to Net researcher O'Reilly & Associates, and more than 1,000 new domains crop up each month. But everybody--from the dry cleaner with the low-budget site featuring grainy shots of pressed shirts to the nation's most powerful realtors' group that gambled $12 million--is reaping the same bounty: vast disappointment.

"They gave a great party, and nobody showed up," says Don Ulsch, managing director of the National Security Institute, an Internet think tank. "Right now, we're going through a dip in the belief of the effectiveness of the World Wide Web."

In a recent KeyCorp poll, 90% of small-business respondents said the Net has had little or no impact on their businesses. Over two years, Ulsch interviewed 600 executives, a third of whom owned small businesses. "Most have not gotten back what they invested," he says.

He and other analysts estimate that businesses have poured tens of millions of dollars into setting up sites, maintaining them, and renting space on a server that connects to the Internet. Forrester Research Inc. says that, on average, companies spend $1 million on an Internet site, though many start-ups have shelled out only hundreds--by investing in Web page-making software or teaching themselves the hypertext markup language (HTML) that allows users to point and click through files. Most, though, are not getting off easily: Last year, businesses spent four times what they expected to on Web sites, according to International Data Corp. (IDC), and took twice as long as planned to get them up and running.

EARLY DAYS. Analysts are quick to point out that the Web is in its infancy and is already yielding profits for a handful of companies. Even with most of the wired population just browsing, online sales have reached $5.5 billion--a fivefold increase in just a year, Ted Julian, Internet research manager at IDC says. Mainly, that's computer-related goods and other products that don't have to be touched or tried on. Inc. has gained fame successfully selling books, and PC Flowers rang up $15 million in sales in its first year. As more people become wired and consumers become more comfortable about typing their credit-card numbers online, sales are expected to soar past $117 billion at the end of the decade, IDC predicts. And advertisers have spent $10 million for banners on other people's Web sites.

But profits are far below investments, leaving the 17 million pages of graphics, text, and animation that make up the Web largely telling a story of shattered dreams. "The majority of us don't feel it's where we want it to be," says Dinene Clark, president of Cookie Bouquets in Columbus, Ohio. She hoped her modest investment in the Web would boost her $1 million mail-order business. But she is barely covering the $150 monthly cost of renting space on the server that ties her site to the Net.

Even major corporations that have sunk millions into single sites are struggling to make sense of their investments. About three-quarters have sites, IDC says, but a quarter are expected to be killed or completely revamped this year. The biggest admission of defeat came in September, when the National Association of Realtors killed its ambitious online program after losing $12 million in less than a year.

The disenchantment is running so deep that many are pulling the plug on their sites or letting them become badly outdated and neglected, giving rise to cyberblight. "Thousands of sites are collecting dust," says Julian. "There are whole ghost towns cropping up."

ANYBODY HOME? People the world over can click on calendars for events long passed. There are sites full of links to pages that no longer exist, and others that are virtually unreachable. Reams of E-mail and questionnaires go unanswered. There are expired coupons: 20% off a meal at Arigato Japanese Restaurant & Sushi Bar in San Francisco, excluding Fridays and Saturdays, good until Aug. 31, 1996. "Oh, it's still there?" asks proprietor Isao Nakamura. "For three months, I've had no response."

At least he's still around to talk about it. Visitors to International Tank Service Inc.'s cybersite find a photo of President and Treasurer Everett S. Kirk Sr. smiling away. However, a caller to the company's headquarters in Lima, Ohio, was told that Kirk died last year. "World Wide What?" asks puzzled Controller Dennis Conrad. "We don't even use the Internet."

So fast and furious is the rush to the Web that many business owners aren't stopping to think about who's going to see their site. A recent Georgia Institute of Technology survey of 11,700 Web users shows that the average user is 33 years old with at least a high school degree. Women have vastly increased their presence--it's now 31.5%. Most users aren't the heavy-hitting investors Prospector Petroleum of Houston was seeking when it dumped $10,000 into a Web site pushing its oil wells. "Every shoe clerk, student, and computer geek was calling and E-mailing," grumbles David Mangum, a consultant. "We had to kill the site."

Web madness gripped the Burlington (Mass.) office of Organizational Dynamics Inc. late last year. "Suddenly there was this blind push for a Web site," Dudley Samoiloff, business development manager, recalls with horror. "I kept saying: `What do you need it for?' And they kept saying: `We just have to be there."' Higher-ups prevailed, and a designer was paid $5,000 to create a site where customers could obtain information about the employee-training company's latest offerings, sales, and job openings. Still, the site has nothing but an "Under Construction" sign, which Samoiloff says will probably be there until well into 1997, when the $30,000 needed to complete it is available.

HIGH MAINTENANCE. Businesses are also underestimating the time and money it takes to keep a site fresh enough to keep people coming back. "It got to the point where I was spending 5 to 10 hours a week updating the site--more than I ever expected," says Robert Provost, chief executive of Foresight Engineering Group Inc. in Chardon, Ohio. He finally ignored it. "It's important, but there are more important things to do."

Many don't understand the first thing about how to attract Netizens. "Everybody thinks they can open a Web site and go lie on a beach while accountants put checks in the bank," says John Audette, president of Multimedia Marketing Group Inc. in Portland, Ore., which is among a wave of new companies in the business of channeling traffic to deserted Web sites. "It's like building this elaborate billboard and putting it in your basement." It takes advertising--in the real world, on literature, products, television, newspapers. It takes up to two months to get sites listed on search engines, the online equivalent of the yellow pages.

Even then, many small businesses get lost as more savvy competitors learn how to manipulate the system to get their sites read first. Candyce Jewellery, for example, falls way at the bottom when users ask for sites containing "gifts." The result: Only 84 people have visited in a year. None bought the $15 "animal tail" metal brooches Candy Glaze makes out of junkyard scraps. "It's embarrassing," she says.

The major myth about the Web is that the more you spend the more you earn. Many entrepreneurs who have been successful, in fact, have spent very little. Bill Murphy, who owns Napa Valley vineyard Clos LaChance, bartered wine for the design and maintenance of a modest site that displays his products and accepts online purchases. His Web address is displayed on bottles and in his tasting room. He's listed on search engines and has rigged it so that his site pops up at the top of wine and gift lists. The result is overwhelming: He gets orders from as far away as Japan (which are too costly to fill) and has sold tens of thousands of dollars worth online. The Net is still not a significant share of his $500,000 annual revenues, but Murphy says it will help boost profits by eliminating the cost of printing and mailing newsletters.

FINE TUNING. At the other end of the spectrum, Clearly Canadian Beverage Corp. invested $100,000 in a site that was a pivotal part of its marketing effort in its May launch of Orbitz, a kids' soft drink with colorful mucus-like globs floating in it. dances with an illustration by a pricey syndicated cartoonist. It carries a story about a fictitious land and solicits E-mail. The site provides no information about the product--not even the company's address or phone number. In fact, an E-mail request for that information was answered a week later--with a toll-free number accessible only in Canada. "We just can't keep up with the response," says Kelly Lendroy, an assistant vice-president for communications who championed the site. Among other things, the company is developing a frequently-asked-questions page to diminish E-mail generated by 200 to 300 visitors a day.

It's the kind of fine tuning that's marking the next phase of the Web revolution. Where disaster and despair now reign, rebuilding and smarter entrances have begun. "All these people with neglected sites will go back to them," Ulsch says. "It's an irreconcilable issue. It's not going away." Even Callahan the cartoonist is being reborn on the Web. Although he swore he would never get wired again, a charitable fan who just happens to build Web pages has persuaded him to try just one more time.

Before it's here, it's on the Bloomberg Terminal.