Evan I. Schwartz, author of Webonomics: Nine Essential Principles for Growing Your Business on the World Wide Web, discussed his book and its lessons for small business. He also writes for Wired and is a former BW staffer.
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JackBW: Welcome to Business Week Online and another in our series of weekly BW Enterprise chats, presented jointly with America Online's Your Business Dinner program. Tonight's guest is Evan I. Schwartz (Eischwartz), author of the new book Webonomics. He's a contributing writer for Wired magazine -- and a former Business Week staffer. Welcome, Evan.
Eischwartz: Greetings, all, and thanks for the invite, Jack.
JackBW: Also, hi to Fred Strasser (SmallbizBW), editor of BW Enterprise.
SmallbizBW: Hi.
JackBW: These chats are presented by Business Week Enterprise, the edition of the magazine published eight times a year especially for small business and entrepreneurs. I'm Jack Dierdorff of BW Online, your moderator. Evan, I hear your book is the No. 4 best-seller at amazon.com. Congratulations!
Eischwartz: Yes, people on the Web are really buying the book.
JackBW: For starters, Evan, why don't you tell us the subtitle of your book? It explains what you are trying to do, in a way.
Eischwartz: The subtitle is: Nine Essential Principles for Growing Your Business on the World Wide Web.
BobABW: Hi, Evan. What do you make of the Chapter 11 filing of industrynet.com?
Eischwartz: Bob, good question. That was a business-to-business network for manufacturers, and it never got a critical mass. It was a good idea that may have been a bit before its time. Poor Jim Manzi sunk $50 million of his money into it, too.
JackBW: SmallbizBW (Fred), your question?
SmallbizBW: Well, the question is begged: What are the principles, and why should a small-business owner care?
Eischwartz: Well, I really wrote the book because I saw so much of the conventional wisdom about the Web being wrong. For instance, you hear all the time that the Web is on its way to becoming the next "mass medium." But even if there are 50 million of us surfing, it's really 50 million different, interactive, personal experiences. That's why the first principle is that "the quantity of people visiting your site is less important than the quality of their experience." The Web shouldn't be about attracting the most eyeballs, like TV.
BobABW: So, Evan, what's more important on the Web at this moment -- increasing revenues, or holding down costs?
Eischwartz: Well, I'd say finding new revenue streams is most important for now. If you look at some of the publishing sites, the ones making money are the ones that have created new "value-added services," like the San Jose Mercury News's NEWSHOUND, which costs $8 a month for personalized E-mailed news updates.
ReneHMI: When you refer to "quality of experience," don't you really mean that they find the information they are looking for? The fancy graphics, etc., really don't matter if the person looking for specific information can't find it.
Eischwartz: Yes, Rene, I think fancy graphics are overrated. Look at amazon.com. It's almost all text and very successful -- a high-quality experience.
BobABW: Evan, what are the two or three most successful small-business sites on the Web? And what's their secret?
Eischwartz: I'd say sites like Virtual Vineyards is one. The secret is selling information-rich products and being the expert on those products. The information leads to the sales.
JackBW: BW Online did a conference with the Virtual Vineyards guy -- you can download the transcript from BW Online (05/23/96).
ReneHMI: I work for a Microsoft SP, and we have many clients just looking for presence on the Web. We often recommend just starting with the basics and growing only as you see fit for your specific business. Many consultants try to sell them the world. Do you feel that it is better to start small? Grow as it makes sense?
Eischwartz: Yes, starting small is a good idea. But you should also have a strategy for adding value to a certain industry or experience.
ReneHMI: How do you recommend a small business start out on the Web?
Eischwartz: Rene, I would recommend doing something that no one else has done. For instance, there is a startup in San Francisco called owners.com that has developed a for-sale-by-owner database of homes in the U.S. Consumers list for free and pay only for enhancements like photos, and they sell sponsorships to moving companies, kitchen remodelers, etc. The point is that they are providing a searchable service that doesn't exist in any other way.
Hair623: I would like to know how to make money on the Web. I know many great recipes, and I'm a great cook.
JackBW: Are you thinking of selling your recipes?
Hair623: Yes, I have sold them, and I'm writing a book.
Eischwartz: Perhaps creating an online cooking community is the way to go!
Hair623: Sorry, I had to go take care of my son's bath.
Eischwartz: Hair, the problem with recipes is that this is one of those things that fall victim to information glut. There is too much free stuff on the Web.
Hair623: I see what you mean, but I can help organize a complete sit-down dinner from soup to nuts.
MaShona: I will be starting a wardrobe consulting service. How could I market my service on the Web?
Eischwartz: Interesting. So you're a fashion consultant.
MaShona: Not into fashion -- a stylist.
Eischwartz :I get questions like this often, and the answer always has to do with providing a value-added service that you know cannot be done in any other way. What do your customers want from a wardrobe consultant?
MaShona: How to put a casual business wardrobe together that they could wear 80% of the time. Their wardrobe would be based on their lifestyle, coloring, etc.
Eischwartz: Very hard to do on the Web. Perhaps photos of your success stories would lure people in.
MaShona: Is interactive service profitable?
Eischwartz: One of the main points of Webonomics is that economics as we know it doesn't fully apply in the Web economy. Perhaps Hair and MaShona can get together.
MaShona: Sounds O.K.
JackBW: What to wear to a sit-down dinner and to work, too!
Hair623: That sounds good to me. I have a friend who does what MaShona wants to do.
SmallbizBW: Evan, do you think it is mostly small businesses and startups
making money on the Web?
Eischwartz: The advantage that small businesses have is the speed and agility with which they can move. Amazon had a two-year advantage over Barnes & Noble, for instance. But the advantage of a big business lies in my eighth principle: that trusted brand names matter more than ever!
JackBW: Which of your nine principles is most important for small business to follow? Or all of them?
Eischwartz: I'd say the third one is important, and that is that "consumers must be compensated for disclosing data about themselves." This is all about giving people something tangible for their information, their demographics, their product preferences. Small businesses should form relationships with their customers and by giving something to them in exchange, they get to know them and establish trust.
JackBW: My AOL mailbox spills over with unsolicited E-mail pitching things. What do you think about junk E-mail, and what can we do about it?
Eischwartz: Jack, that's a good example of applying old media thinking to new media. Of course, junk E-mail doesn't work. It's incredible that it still goes on!
JackBW: More and more of it.
Eischwartz: However, look at Jack Daniel's site on the Web. They get people to fill out a guest book when visiting, then they follow with E-mail about new products and events. And people love getting it! So the relationship must come first.
BobABW: Speaking of Jack Daniel's, why is the strategy you just described successful in that case?
Eischwartz: Well, that has to do with BW's recent cover story: Internet communities [May 5]. The Jack Daniel's site provides a tour of the distillery and makes people feel a part of a group.
DkbBW: Evan, what kind of marketing differences are important to a company wishing only to augment its real-world selling as opposed to a Web-only company such as amazon.com or CDNow?
Eischwartz: That's something that hasn't been exploited that much. But if you look at Barnes & Noble, I bet that its Web site will draw traffic to the stores and vice versa, if it's done right. The Web and the real world should reinforce each other. J.C. Penney does this well online, too. They have a bridal registry online, so people can shop for gifts and learn about sale items in the stores.
SmallbizBW: Do search engines bring much traffic to a business site? Or do people go where they link or know?
Eischwartz: Good question, Fred. Search engines are getting more and more useless in terms of bringing people to your site -- there are too many listings. Marketers should rely more on other ways to promote their site and draw traffic, such as PR and integrating their Web address in all ads and everything else they do.
JackBW: Evan, any other examples of success stories on the Web -- and notable failures, too, perhaps?
Eischwartz: Well, one of my favorite flops was the site from Volvo. They just put a brochure of their cars online in 1994, with an E-mail address, but forgot to answer the E-mail. People wrote in with comments like: nice Web site, but my sunroof leaks. Lemon laws force you to take the CAR BACK if you don't respond, so they had to shut the E-mail feature down.
WORKHARK: Just wondering if you can start a mail-order business from home, and how?
Eischwartz: Sure, most Web retailing is mail order.
WORKHARK: With just a few items for sale to start -- an after-work hobby that can turn into something bigger.
Eischwartz: I would first pick an "info-rich" product to sell (See Chapter 4). Then you'd have to decide whether to do fulfillment in house or outsource it.
WORKHARK: Do you have to be incorporated to have a small business online?
Eischwartz: No, I have a small business online, Webonomics, and it's not incorporated. It's more important to TRADEMARK, to protect your identity.
WORKHARK: How do you protect yourself?
Eischwartz: I have Webonomics trademarked, and that should go a long way to prevent others to use the name -- and I don't have a lawyer.
WORKHARK: Thanks. How do you get a trademark?
Eischwartz: You apply through the U.S. Patent & Trademark Office, which takes about a year.
WORKHARK: Thanks. What is the cost for a trademark?
Eischwartz: $250.
WORKHARK: Does that just protect your name?
Eischwartz: Yes, a trademark protects the name only.
JackBW: Evan, suppose I have a startup business and want to create a Web site. Should I try to do it myself or hire one of these experts who are always advertising their services?
Eischwartz: I firmly believe that doing a Web site is not rocket science, so I would create basic pages myself, then contract with someone who does graphics and design to enhance it. This keeps costs low and provides you with confidence that you can update the site as you go.
CoverPub: What about advertising a WP service online?
Eischwartz: What's a WP?
JackBW: WP for word processing?
CoverPub: Yes.
Eischwartz: Or weird person?
JackBW: Speak for yourself :-)
Eischwartz: Oh, O.K.
CoverPub: And what about all those "targeted E-mail lists" that are advertised?
Eischwartz: You know, one of the principles is "self-service provides for the ultimate in customer comfort." There are many ways you can get consumers to do the work themselves. For instance, there is a great startup called iPrint, where people can design their own business cards online and order them.
CMatzin724: Can I possibly earn money without selling but providing a service?
Eischwartz: Without selling what?
CMatzin724: Selling service only.
Eischwartz: Sure, there are many examples of service businesses. But the Web excels in SELF-service, such as travel and such, so keep that in mind.
CMatzin724: Thanks.
DkbBW: Evan, generally, what are consumer perceptions on the Web's transmission security? Are credit cards finally catching on?
Eischwartz: Consumers are still a bit wary of putting their credit-card number online -- until, that is, they want to buy something! Then they put it in without a problem. Security is getting better, and the perception of risk is much greater than the reality of risk.
OFuen12144: What advice would you give to someone who is planning to sell stuff on the Web?
JackBW: Read Evan's book!
Mary513: Aren't online services trying to prevent Web businesses from soliciting?
Eischwartz: Mary, whether or not online services are preventing junk mail is beside the point. You shouldn't send unsolicited junk mail. You should lure people to your site, establish a relationship, then send them mail to reinforce.
SmallbizBW: Is there any point in trying to market on the Web if you provide a local, geographically based service? Is it so cheap that you might as well, as long as there's no maintenance?
Eischwartz: One of my principles has to do with global marketing. There are many products that do well in global markets, even though they are local. Look at Omaha Steaks.
WORKHARK: What about taxes and sales taxes for products sold online?
Eischwartz: Taxes? I believe it works like mail order.
WORKHARK: Am not familiar with how that works.
MaShona: Where could I get info on starting my Web site?
OFuen12144: Where can l get information or books on creating a good Web page?
JackBW: Both OFuen and MaShona asked about where to go for advice on creating Web sites. Do you offer any help at your Web site, Evan?
Eischwartz: My book is really for sophisticated business thinking about the Web. For a book on how to program and design sites, there is Killer Web Sites. Your site must do both -- look good, be well organized, AND do something of great value.
Mary513: I guess sophisticated wouldn't include me. I sell tarot readings online.
Eischwartz: Tarot? Well, what does the future of the Net look like?
Mary513: Grim -- and crowded.
WORKHARK: How do you collect $$$$ by tarot readings online?
Eischwartz: ;-)
JackBW: OFuen, do you have a quick question to end the chat?
OFuen12144: How can l protect my Web site from hackers? Thank you for taking my question.
Eischwartz: You always have a password for accessing your Web pages. That should help. But talk to your ISP for help in that area.
OFuen12144: O.K., thank you.
JackBW: Thanks to Evan Schwartz, author of Webonomics -- available at amazon.com and (I assume, Evan) at bookstores all over.
Eischwartz: Yes, it's in all bookstores, supposedly. More info about the book is at www.webonomics.com.
WORKHARK: Thanks for all your help, Eischwartz.
OFuen12144: Thank you, Eischwartz.
Eischwartz: Hey, thanks for everyone turning out -- this is exciting stuff.
OFuen12144: Bye.
WORKHARK: Bye and good luck.
MaShona: Thank you, Eischwartz.
Eischwartz: Goodnight, all.
WORKHARK: Goodnight.
JackBW: Thanks to the participants for the questions. Transcripts of this Enterprise chat will be available soon. Look under Talk & Conferences on the BW Online opening screen. Thanks again, and goodnight to all!
Copyright 1997 by The McGraw-Hill Companies, Inc. All rights reserved.
