Economics of Web Content
Many would say the days of profit and innovation on the web are dead. The nineties brought product information and business communication to the home office. The turn of the century saw a rise in online purchases and a globalizing effect on product marketing. While both of these periods offered abundant success, it was more often met with uncertainty and inconsistency. As such, company websites have stagnated and online sales have fell into the control of several predominant vendors. These recent trends would lead one to believe that now is not the time to invest resources into a burnt out market, but in fact, now is a better time that ever to begin development for the coming wave of ecommerce.
With ecommerce, the are generally two methods by which the vendor generates their income, ads and fees. Ad revenue is not a new player in the business sector, but recent technologies have made it possible to add relevant ads to one's site with very little effort and knowledge of web development. Online sales methods have revised themselves from the unreliable, insecure stores of the past. Within these two methods of income lies the source of all current and coming prosperity.
Ad Revenues
Ad content on a website is generally comprised of similar sellers offering relevant products, services, or information. Within the use of ads on a website there lie several methods by which to maximize success, as well as several pitfalls of improper ad usage. The most important element of ad sites is the content. If there is no content, there are no visitors. Content can consist of many things, including information, opinions, and services. The content should limited to a concise topic. This will not only promote the recurrence of visitors, but it will also aide in the second element of proper ad implementation. For the ads to be most effective, they must relate directly to the content within the site. Most contemporary ad services, such as Google AdSense, actually parse the site in order to find the most relevant ads for the site. Finally, to maximize profit, the ads need to be properly formatted and they must be placed in a portion of the website which will generate the most clicks and investigation of the add vendors . Most providers of ad content not only offer information of page layouts to maximize success, but they also review your pages and offer suggested improvements. “Based on our system's analysis of your account, [Google] will make automatic recommendations of actions you can take to increase your AdSense revenue” (Google, 2007).
While there are many benefits to the ad based method of income, there are several common errors which can produce an ineffective site. When trying to promote a product on a site, competing product advertisements do not make economics sense. While they do generate revenue, they can detriment the loyalty a user may have for your product. Along the same lines, even the presence of ads is enough to make some users leave the site. When not laid out and designed properly, a site can easily be overpowered by flashy, bulky advertisements, turning it into a billboard instead of a source of information.
Online Sales
Aside from ads, the other primary method of income on the web is internet sales and services. Rather than the passive approach of ad-revenue sites, store sites generate revenue through the sales of products and/or services. While it may seem that there would be little reason to not have an online store, there are several common problems to consider. One major issue for vendors is the separation they have from the customer. While many customers enjoy browsing anonymously, the sellers have little ability to discuss and “sell” the products to the buyers. The average conversion rate between browsers and buyers on a website is only between five and fifteen percent (Dawson, 2007). While this still equates to a substantial amount of buyers, there are many methods which may be followed to increase the shopper conversion rate.
To make such an increase, it is important to understand what drives people to buy products online. The foremost reason for online purchasing is convenience. Buyers can access product info, read reviews, and shop, all from their desktop. Generally the products will even ship to your location. Many buyers see this as advantageous due to the reduced amount of travel time to shopping locations. It allows busy people the option of allocating their time toward completing the purchase rather than finding the location. Another quality of ecommerce is the quantity of products offered to buyers. Large sites such as eBay offer millions of items for auction (Frey, James, & Frey, 2006). Thousands of other sites offer extended quantities of products as compared to traditional stores. Because there is not necessarily “inventory” on an online store, businesses can offer more products without as much concern for product storage and warehousing.
Along with convenience and options, ecommerce site offer some form of extended support. Whether it is a frequently asked questions section, or even an online support center, buyers can always refer to the product information and support that is generally offered within the Internet store. With the addition of support services, online shops have attempted to add the element of personal communication with the buying process. These support services also take the upper hand to traditional services in that any questions that you may have or may consider have already been asked and answered.
Subscription Sites
In addition to selling products, many sites offer some form of subscription to access information or content. Along the same lines as a magazine subscription, many sites that offer valuable or educational content will charge a fee for viewing information. This is especially true in business interactions where the buyer will become a frequent user of the site. When subscriptions are considered , the sites themselves must hold content that is not only valuable, but that is updated and dynamic. Generally as soon as a site releases valuable information for sales, it will also surface in other locations on the Internet. Without updating content, a subscription site will most surely not attract buyers.
Trends
One of the characteristics of the Internet that is becoming key in ecommerce is that of speed of information. Many business sectors such as novelties and accessories thrive off the power of the buzz on the web (Gangemi, 2007). Because of the ease of placing hundreds of products online without having to stock store shelves, sellers of less expensive goods are finding the web a valuable tool in maximizing sales. If the price of the product is low as well as the complexity of the purchase, then it has been shown that the appropriate medium for selling the product is the Internet (Dawson, 2007). Along with the trivial buys, high end purchases are also benefiting from the connectivity of the Internet. When considering more expensive products, buyers still generally visit the physical stores in order to feel a connectedness to the product. This gives them the ability to experience and examine the product first hand. The part that ecommerce plays in this purchase is that of research. After going to traditional stores, the shoppers can go online and receive additional information about products. This information comes in tow forms, the first being information regarding competitors prices. Within several click, users can general compare several companies product specifications along side of their pricing. This has resulted in many vendors offering sales that are exclusive to Internet stores. The competition between ecommerce vendors often separates them from their physical business entities.
One of the most powerful trends would be that of social networking, distance training, and remote collaboration. 2006 represented the year of video and social information on the web (Gangemi, 2007). Sites such as Myspace and Youtube have not only made millions of dollars in profit, but they have also drawn many users onto the web which had little reason to go there before. Gone are the days of lonely and/or nerdy men ruling the Internet. In 2006, the demographics of online shoppers began to reflect that of traditional store shoppers. The percentage of female shoppers has increased to more than fifty percent, and with current advances in Internet connectivity, a broader spectrum of income levels are represented as well (Dawson, 2007).
Conclusion
Ecommerce consists to two different methods of revenue. Ads revenue offers the business owner the option of passively earning money through ad fees and customer interest in those advertisements. To successfully generate funds, content on an ad driven site must remain viable and useful to a large number of individuals. As there is less effort placed into earning the money, the resources can be used to develop the content within the site. Generally ad-revenue sites serve to allow users to generate content or comments for the sites. This creates a sense of connectedness with the website, and will draw them back to the page. In contrast to ad sites, store sites require more work on the sales end of things. While more money can be made through selling products, a greater amount of resources are required to do so. The time and money it takes to build an ecommerce site are growing as the online marketplace continues to develop. An balance between the two methods of revenue comes in the form or subscription sites. If the content is relevant, buyers will continue to subscribe for the offered information or media. With a subscription site, time and resources can still be directed toward content development, while at the same time not giving it away to everyone with an internet connnection.
References
Dawson, P. (2007) Create sites that make money. .NET Magazine, February 2007, p45-50, 2007
Frey Sr.,K. , James,L. & Frey II,K. (2006) eBay, eCommerce, eLaws. Tennessee Bar Journal, August 2006.
Gangemi, J. (2007) Smart startup ideas for '07. Business Week Online; 1/10/2007, p20, 2007.
Google Adsense Help, accessed 4/24/07
google.com/adsense/support/?sourceid=aso&subid=ww-ww-et-asui&medium=link
