‘Internet’ was seen as a dirty word by many after the mass hysteria of a few years ago that saw the rise and fall of many an online entity. People became cynical about anything that ended in dot com after spectacular disaster stories like boo.com who invested at staggering stg£100m developing and advertising a Website that launched late and proved difficult to navigate. Good sense left companies and investors alike as they seemed to forget you needed a good business plan and sound financial forecasting to back up your online proposition.
So what’s it like now? It seems that dot coms have come through their sticky adolescence to become mature adults, after many infant casualties of course. Now you see online ventures that are well grounded and have a real value proposition to offer their target market.
Why should a business go online and what are the business models that that will work on the Internet? Take directski.com (www.directski.com) which was founded 3 years ago and already claims to have close to 10 percent of the market share for ski holidays in Ireland. According to CEO Anthony Collins, the demographics were favourable as Internet penetration amongst the skiing population was around 80 percent and credit cards were also a given in this group.
Then there were the cost savings associated with servicing the online community as opposed to the physical community. ‘People come and book for a group of typically five or more’ says Collins ‘at around EUR4000 per transaction the marketing costs are lower for a higher margin’.
But there has to be some clear value proposition to the consumer for going online. For directski.com being able to book online is the competitive advantage. ‘If someone is surfing at the end of a working day they are more likely to book online there and then rather than send off 10 different e-mails for price quotes and wait for the replies the following morning’ says Collins. Even in the UK where there are 250 ski operators, not many have online booking. The tactic for directski.com to compete in the UK market is to maintain the ‘best of breed’ status in online ski holidays so that as more and more people move over to booking their ski holidays online they will be a front runner.
Another company that saw a niche in providing a service that was difficult to get offline is DVDrentals.ie (www.dvdrentals.ie). Set up 13 months ago, the subscription based service allows users to rent a specified number of DVDs per month. Although 60 percent of customers are from the Dublin area the service is of most value to people who live in an area not serviced by DVD rental companies like Xtravision. Frank O’Grady, managing director, cites Boyle, Co Roscommon as an example. ‘Boyle was considered to have too small a catchment area by Xtravision but it is still a sizable town.’ Even those customers that do not have any rental outlet on their doorstep are still using DVDrentals to get titles they can’t get in the rental stores such as TV serials and overseas movies.
And there are some services that are unique to the Web. Sarah Carrol, MD of eventznet.ie (www.eventznet.ie) saw an opportunity when she tried to arrange a birthday party for a friend. ‘I wanted to contact a lot of people at the same time with the same information and then do something meaningful with the information afterwards.’
Mother necessity
Her frustration at not being able to find an online application that wasn’t aimed at the teen market led her to set up eventznet.ie which enables users to set up an interactive microsite — Party Platform — that enables the user to send personalised invitations, track responses and send reminders. There’s also a directory of suppliers that will provide everything from limousine hire to chocolates. The pilot, which was launched in November of last year, was aimed at the business end of the market and brought three early adopters. Since opening it out to the consumer market eventznet.ie has attracted over 80 regular consumers.
For cinehub.com (www.cinehub.com) the decision to launch their product, Virtual Production Office (VPO), into the American film and TV market may have seemed ambitious but as Des Cullen, CEO, explains there was a clear value proposition. ‘Everyone thinks of the film industry as being at the cutting edge of technology, which they are when it comes to special effects, but when you are talking about the transfer of information it’s back to writing everything out in triplicate and hand delivering.’
For legal reasons everything has to be kept for a minimum five year period in this industry. ‘Even for a small production you would have a large room full of bankers’ boxes of all the associated material’ explains Cullen. The Web based VPO means they have the information at the touch of a button. The entire production process is managed using this system from story boarding and scripts to contracts. By Web enabling the paper based process, it has meant cutting the turnaround times from days to hours.
As well as the cost saving, the real value will be when studios start using the product as a real time management tool across several productions. ‘They will be able to see how much overruns cost, what they spent on X today, where they are in the shooting process. VPO allows them to mine into a particular show or across several shows’. With a production team that could be made up of a director in Prague, a location manager in Nova Scotia and studios in LA and London being able to communicate simultaneously is also vital.
What all these companies have in common is that they are using the Web either to provide a service, or as a base for an application, that will make people’s lives easier. As Cullen points out ‘our world is the Web, but our customers do not see it like that, they just see it as making their life easier’. This marks a move away from the Web as a sexy and glamorous accessory to a tool that is being use for its uniqueness to deliver real value. The technology is seen as an enabler to the point where it becomes seamlessly integrated into our lives. As Mary Cryan, director of IT at Prospectus Consulting says of the Web ‘we used to say if people do not go online they are going to lose to competition. Now it’s more a matter of if they do not go online your business inefficiencies will become so costly that it will make you uncompetitive.’
This advice was taken by two small companies who have transferred all, or some of their business online. Grape ‘n Grain (www.grapengraindublin.com) used to have a retail outlet in Ranelagh from which it sold beer — and wine — making equipment and supplies for the home brewing market. It was closed down six months ago, since when the company has concentrated on selling through its Website. Derek Southern, who with his daughter owns and runs the business, explained: ‘With only a two person operation we were often out making deliveries so would miss customers in our store.’ The decision to go on the Web has provided a cost saving in overheads and a 10 percent increase in sales. ‘Because we already had a store for 15 years it was easy to transfer our brand online, we told our customers what we were doing and they have followed us’ says Southern. The Website has also given the company a channel into its hard to reach target market — young people.
The Burren Smoke House (www.burrensmokehouse.ie) in Co Clare has also tapped into a previously elusive market. The shop sells a variety of smoked fish and arts and crafts. The Website was started with help from the Ennis Information Age project and it has enabled Birgitta Hedin Curtin, who runs the Burren Smokehouse, to access the overseas market. ‘People who come to our store from overseas can now order back home for special occasions.’
Unseen brand building
There are few things less visible than a Website that nobody visits, so how can a business build its brand online? What does it take to promote a dot com company these days? Building brand recognition is more sophisticated: ‘You’re seeing companies teaming up with a physical brand presence to enhance their online brand presence,’ Mary Cryan notes. DVDrentals.ie has certainly taken this to heart by using a number of strategic partnerships with offline companies who have a similar brand equity. One such joint promotion is with AYA restaurant where you can get a EUR25 discount on a meal at AYA if you are a DVDrental.ie customer and as an AYA customer you will get 25 percent off rentals.
Getting your name on everyone’s lips has meant more aggressive marketing for directski.com who are looking to quadruple their marketing spend in the UK this year to compete in this crowded market. However Collins puts the marketing spend into perspective with the offline world: ‘We have reduced our costs of marketing spend against people who travel with us from EUR300 per head in the beginning to around EUR30 per head now. Not too bad when you consider that if you produce a brochure it costs about EUR16 a head for every person who travels and there is a 10 percent commission payable to the travel agents.’
For Sara Carroll of eventznet.ie, marketing spend has been limited to a Google word campaign which bought a third of eventznet’s unique uses. Carroll also points out that marketing is one part of the plan. ‘No sales channel works in isolation, it’s more than just a product, it’s the organisation behind it. We may use the Internet as the primary sales and promotion channel but it’s never in isolation.’
Challenges
It’s not been without its challenges for these companies. Carroll talks about the task of getting a Web based business up and running at the height of the dot com slump last year. ‘There was a huge amount of scepticism towards Internet startups, particularly amongst the funding agencies. Venturepoint, the Dun Laoghaire and Rathdown county enterprise board, were supportive and gave me the funding to conduct a feasibility study. But the general opinion last summer was not to touch a Web based business because they’ve all been proven a waste of money.’
For cinehub.com, the US film market seemed a daunting market to break into. ‘Four years ago when we started, there was a huge amount of resistance to using the Internet’ explains Cullen. ‘Everyone was saying they could do everything and here we were a small company from Ireland.’ By working with the production companies to design an application that met their exact needs Cinehub was able to build an identity within the market. The company is now working with some of the biggest names in the American market — NBC, MGM, Showtime, Lionsgate. Cullen notes the incredible statistic that ‘about 58 percent of all US television series are done using the VOP system’.
For some, the challenges have been practical. DVDrental.ie learned that finding the right envelope for posting back the DVD was one of the hurdles that had to be overcome. ‘The biggest problem we had was with post damaged DVDs’ explains O’Grady ‘ but we soon found an envelope that would protect them’.
When these companies talk about the future they talk in measured, yet optimistic tones. Their plans are grounded against their current business models and offer realistic forecasts. For Cullen the thinking is how to integrate more into the supplier side of the production business. ‘We want to start integrating the VOP system with other suppliers like payroll, financial systems and even intranets.’
Cryan agrees with integrating other parts of the business and foresees that people will demand ‘a more holistic technology offering by service providers, so you can get a Website, Web connection, integration of database all together….it becomes an end-to-end solution that you can purchase from suppliers. Customers are demanding this to prevent themselves from being vulnerable to people saying “it’s hardware; it’s someone else’s problem”.’
For Carroll the future includes rolling out eventznet.ie to the rest of the English speaking world, excluding the US, over the next year. She feels investors are more open to hearing about Internet based ventures now and in summing up the future for dot coms, had this to say: ‘What’s come out of the dot com crash are Web based businesses who really understand what the customer needs, provide it and support it.’
25/04/2003
Ltd
