June 1996

Root Page of Article: Viewing the Web as a Marketplace, by Gina O'Connor and Bob O'Keefe


Despite the excitement of Web-based marketing and retail and the success of some small companies, there are a number of cautions that small companies would do well to consider.

Limited bandwidth. Bandwidth is a present and future problem with the Internet which has been exasperated by the Web. In the same way that software developers find new ways to use up the growing amount of harddisk space available on personal computers, Web site developers find new ways to use up bandwidth. While this is a demand problem for the consumer, who does not want to wait for pages to be downloaded, it is equally a supply problem for businesses trying to locate themselves on the Web. Companies who pay for large bandwidth connections or locate in a mall or with an ISP that can provide this are the equivalent of "just off the highway". Companies that locate with low bandwidth connections or unreliable service providers find themselves "up a back road."

Biases in the Web as a marketplace. Companies will have to contend with creeping biases in the Web as a marketplace. Online services such as America Online (AOL) provide their own marketplaces, more easily accessible to AOL users than the Web. Users of Netscape now find links to certain directories and services already part of their browser. Local phone companies, who in the U.S. are still considering their reaction to the growing use of the Internet (and Baby Bells are presently kept out by regulations covering long distance traffic), could provide very low cost Internet connections with added services such as electronic yellow pages. These may be more attractive to consumers than a global entity like the Web. In the future, just setting up shop on the Web may not be enough to attract customers. Technical Advances as Barriers to Entry. HTML 2.0, the present standard, is relatively easy to use by computer literates, and is simple enough that conversion from word processors is relatively trivial. The Web, however, is rapidly moving towards the much more complex HTML 3.0 and the programming language Java as de-facto tools. As time progresses, more companies will become increasingly sophisticated in their technical prowess at formulating interesting Web pages. Thus, a small company that had the skills to develop a Web site 18 months ago now finds itself lacking the new skills and the cost of hiring such skills becomes a barrier.

Market Segmentation. It is already apparent that the size of the Internet user community is illusionary. Small companies trying to pitch their product or service to an audience of over 30 million have found, in some case, angry reactions. The size of the market does not relinquish the vendor from understanding the market segments they want to target and who their potential customer is. Moreover, attempts to sell globally will not succeed unless cultural differences are understood. What looks like an appealing service and Web site in the U.S. may be considered overly complex, simple, or insulting elsewhere in the world. ^

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