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Continued from previous page
Thompson, chairman of ad agency Flycast Communications,
would probably agree with the theory that
profitability can be sustained so long as volume continues
to increase. One of his major clients is a Palo
Alto firm named Speedlane, which sells software
that speeds up the movement of data through modems.
Customers download the software off the company's web site
for $19.95, so its cost of selling each additional copy is
negligible. As long as Speedlane spends less than $20 to
acquire each new customer, it keeps making money.
The desire to work with such clients was one of the reasons
Thompson launched Flycast Communications. In
1995, with the rapid increase in web-based publishing, the
hot issue was how companies could advertise their products
on the web. During the fall of 1995, Thompson, then a second-
year MBA student, mulled over various options,
chatting with friends over pizza and beer in Vance Hall.
They went through four or five business plans; each time
they thought of an idea, someone else was already doing it.
Finally, Thompson came up with a vision.
The idea was simple: the company would create a platform
where ad-space on the web could be bought and sold, much
as stocks are traded on the Nasdaq. Companies that wanted
to buy ad space on the web could do so using Flycast’s software,
which would also monitor how effectively different ads
were working. Flycast’s model has clearly worked for clients
like Speedlane, which Thompson estimates now spends
about $100,000 a month to buy 33 million advertising banners,
or digital blocks of text and images.
Keep It Simple
Part of Speedlane’s success, Thompson says, stems from
one factor: mousing around its website is easy. That conclusion
is at the heart of Lohse’s research on what makes
some web-based retailers click, while others are lost in
obscurity. Lohse along with Peter Spiller, a consultant at
McKinsey & Co., analyzed the websites of the most effective
Internet retailers in the hope that this might offer
pointers to others.
The core of their message is that nothing succeeds like
simplicity. “Each additional mouse click that a buyer has to
make reduces the possibility of an online sale,” says Lohse.
He compares the situation to a customer who might go into
a convenience store to buy coffee, but walks away if he sees
20 people in line before him. Most effective online retailers
shorten the process of getting price and product information
as well as buying the product. A case in point:
Amazon.com’s “one-click” shopping system, which allows
potential buyers to instantly purchase books of their choice.
Lohse says that florists, too, have figured out how to sell
effectively on the Internet. For example, 800 Flowers’ web site
has a Quick Shop feature. Clients see photographs of
popular selections, such as a bouquet of a dozen red roses
that cost $60, which they can buy by clicking on a button.
The website also lets buyers search for flowers by price or
by occasion. Says Lohse: “Whom do you buy from? From
those who make it easiest for you to shop.”
Lohse and Spiller found that presenting price and product
information in a simple format makes a tremendous
impact on an online store’s performance. “At least 60 percent
of the variation in the monthly sales data of online
retailers can be explained in terms of how price lists are presented,”
Lohse says. Another factor is the number of store
“entrances,” or Internet sites from which potential buyers
can access the site. Each link that a store establishes with
other websites increases its ability to attract online traffic.
In addition, just as in the physical world, stores with a
wider selection draw more shoppers. Features such as a
Feedback section or Frequently Asked Questions also help
increase online sales.
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