For years Internet merchants have poured millions of dollars into new technologies to make their sites easier to use. So why aren’t online customers happier?
Customer satisfaction levels have remained almost flat through the last several years, according to a survey of about 20,000 online shoppers recently released by ForeSee Results, a consulting and research firm based in Ann Arbor, Mich. The problem, according to Larry Freed, ForeSee’s chief executive, is not so much that consumers have ignored the many improvements made in recent years. Rather, he said, they still expect more from Internet shopping than it has delivered.
“If we walk into a local store, we don’t expect that experience to be better than it was a couple years ago,” Mr. Freed said. “But we expect sites to be better. The bar goes up every year.”
In ForeSee’s latest survey, released last month, just five e-commerce sites registered scores higher than 80 out of 100, and no site scored higher than 85. They were, in descending order, Netflix, QVC.com, Amazon, Barnes & Noble and the pet supplies site Drs. Foster & Smith. It was much the same story a year ago, when just five scored higher than 80, with no site surpassing 85.
“Scores have inched up over time for the best e-commerce companies, but the overall numbers haven’t moved drastically,” Mr. Freed said. “At the same time though, if you don’t do anything you see your scores drop steadily.”
That dynamic has been a challenge for online merchants and investors, who a decade ago envisioned Internet stores as relatively inexpensive (and therefore extremely profitable) operations. Now some observers predict a future where online retailers will essentially adopt something like the QVC model, with sales staff pitching the site’s merchandise with polished video presentations, produced in a high-tech television studio.
QVC.com is evolving in that direction. The Web site, which sold more than $1 billion in merchandise in 2006, has for the last five years let visitors watch a live feed of the network’s broadcast. But in recent months, QVC.com has also given visitors the chance to watch archives of entire shows, and in the coming months visitors will be able to find more video segments from recent shows, featuring individual products that remain in stock.
Bob Myers, senior vice president of QVC.com, said the Web site’s video salesmanship is especially effective when combined with detailed product information, customer reviews and multiple photographs.
About eight months ago, for instance, a customer said that she could not determine the size of a handbag from the photographs on the site because she could not tell the height of the model who was holding it. Within two weeks the site tested and introduced a new system, showing the bags with women of three different heights. The results were immediate: women who saw the new photographs bought the bags at least 10 percent more frequently than those who had not.
Still, Mr. Myers said, video is a critically important element to sales.
“E-commerce started with television commerce,” he said. “The sites who engage and entertain customers will be winning here in the near future.”
Such a prospect is not necessarily daunting to other e-commerce executives. Gordon Magee, head of Internet marketing for Drs. Foster & Smith, based in a Rhinelander, Wis., said a transition to video “will be seamless for us.” The company, Mr. Magee said, has in recent weeks discussed putting some of its product on video “so customers could see a 360-degree view they don’t have to manipulate themselves.”
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The domain after-market is nearly as old as the internet itself. From domain and typo squatting through to legitimate ownership, the market for domain names has risen and fallen in line with the overall market.
1999 was regarded by many to be the peak of Web 1.0 and likewise 1999-2000 was the previous peak of domain sales. News that Business.com is on the market for $400million shone the spotlight on the domain sales marketplace again. For domain sellers it’s a party again like 1999.
Last week some $10million changed hands at auction for domain sales, with 16 domains being sold for 6 figures. Free Credit Check.com & Credit Check.com sold together for $3million, although as the DomainTools Blog points out this was at a relatively low multiple of around 7x yearly earnings. Seniors.com sold for $1.8 million and even Blogging.com raised $135,000. The exuberance in the market even extends to the spam infested .info domain, with Houston.info selling for $17,000.
Ultimately it’s up to the market to decide the value of anything; however the domain sales market appears to be outperforming the established site marketplace. Buyers of domain names seem willing to pay much higher multiples for a domain name than the buyers in the established sites marketplace are. A good domain name may have a wealth of untapped potential yet many of these domains are used by buyers as nothing more than spammy CPC advertising front ends powered by Google Domain Parking, Sedo and other similar providers.
It would be easy to suggest that the buoyancy in the domain market is indicative of an overall market boom that may inevitably lead to a bust, however the signs in the rest of the market would not suggest that this is the case. The money flooding into domains today is sustained by advertising that wasn’t as prevalent in 1999; the same advertising that sustains much of Web 2.0. Given that internet advertising still only makes up only around 7.0% of the overall advertising spend there’s still a lot of room for growth.. Whether domain name sales rates can stay at this high level though is yet to be seen. I’d think that they are getting close to a peak; the question is will prices plateau or decline once the peak is reached? Certainly if any readers are sitting on some great domain names, there has never been a better time to sell.
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Internet advertising and access spending by U.S. consumers will rise each year by double digits on average through 2011, fuelled by high-speed connections and social networking and entertainment sites, according to a forecast released on Thursday.
PricewaterhouseCoopers’ Global Entertainment and Media Outlook expects combined spending on Web advertising and fees paid by U.S. consumers to Internet providers to reach $78.4 billion by 2011, up from $47.2 billion in 2006, a 10.7 percent average annual growth rate.
The United States has the world’s largest online ad market, projected to grow to $35.4 billion by 2011. But China will overtake the United States to become the world’s largest Internet territory in terms of users by 2009, the report said.
“We expect that China will accelerate in use of the Internet from where they are today — in sheer numbers (of users) they are incredible,” said Joseph Rizzo, U.S. Advisory Technology Sector Leader for PwC.
Consumer fees for access are expected to grow at a 7.1 percent annual rate on average to $43 billion by 2011.
Rizzo said Internet advertising was being helped by a decline in television viewing by key audiences for whom “the Internet has become an integral hub of their daily experience”.
The report cited “triple-play packages” for combined Internet, telephone and television service as a driver for broadband growth in each global region, including the United States, over the next five years.
Telephone company investments in infrastructure will also contribute to broadband growth, as consumers migrate from dial-up services, causing spending on dial-up access to drop by an average of 25.5 percent annually, the report said.
Broadband access is expected to increase to $41.4 billion, an 11.9 percent compound annual advance.
By 2011, the number of broadband subscribers will grow to 89 million, an average annual increase of 12.2 percent, the report showed.
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