*** Financial Times Article ***
Euphoria subsides
They may have made a strong start, but all the signs are that the new cyber brands face stern commercial challenges, writes Louise Kehoe
We have finally entered the "post-internet euphoria" era. It is time to stop applauding companies simply for creating "dot coms" and start asking how well they "do coms", or commerce, online.
Forget those breathless stories about how amazing it is to be able to buy this or that product straight from your desktop - there are serious questions about "e-business" and in particular some of the biggest names in the field.
Nobody is suggesting that electronic commerce will not continue to grow rapidly and have profound effects on many industries, as well as on consumer behaviour. But there are sobering signs that the new cyber brands face challenges every bit as complex as their bricks-and-mortar counterparts.
This is not just another backlash against internet hype - although that might not be such a bad thing. For the first time in their short lives, internet companies face tough issues.
For a start, the average cost of those ubiquitous "banner adverts" on web sites is declining, according to market researchers. And fewer than 1 per cent of web users click on the adverts to get more information.
That is very bad news for a lot of web publishers who have based their business plans on rising advertising revenues. The problem is not a decline in demand from advertisers for more exposure on the web. Rather, it is the almost limitless supply of "space" on web pages.
Targeted advertising, linked to "content" that appeals to certain interest groups or high-spending segments of society, is selling at a premium, but in general the rates that web sites can charge their commercial sponsors is falling.
The alternative to more adverts is subscription charges. Yet the recent decision by Slate, the high-brow "e-zine" published by Microsoft, to do away with subscription charges is another warning sign. Internet users do not expect to have to pay to read online publications, it seems, no matter how worthy their content. |
