Companies, Halt
In web-based businesses, success is in the imagination of the beholder.
Originally posted on Byte.com
October 4, 2004
| A decade ago, when the World Wide Web first emerged from the desktops
of hopeless geeks into the limelight of public confusion, we believed
that it would permanently alter the very foundations of our capitalistic
economy. We were right. The web played no small part in relieving us of
our late-90s prosperity.
In those exciting, early days, everyone had an idea for creating a hyperprofitable web-based business. And even today, countless individuals have made their fortune on the Web. But what about those who aren't bankruptcy lawyers? How have they faired? Here's a look at three typically noteworthy companies that have found some degree of success on the Web. Spots Illustrated Founded as a print magazine in 1949, Spots Illustrated has long been the world's most popular monthly laundry magazine. Best known for its annual, extremely popular yet controversial "Prim Suit" issue (usually showing a beautiful model in a white dress), Spots Illustrated contains detergent reviews, ironing tips, and features on the world's most famous dry cleaners. For decades, this business model sold subscriptions, and more importantly, advertising. By 1996, circulation passed five million, and detergent companies paid up to $60,000 for a well-placed page in this slickly-printed, 300-page-an-issue monthly magazine. That was the year Spots Illustrated went online, and with web advertising found a whole new revenue trickle. Although the site was attracting an exceedingly large number of eyeballs, advertisers were unwilling to pay without proof that those eyeballs were attached to wallets. For instance, Bleached Whale Bleach didn't pay anything to get its banner ad on the site. But if a reader clicked on the ad, then proceeded to buy at least $100 worth of Bleached Whale Bleach, Spots Illustrated received 5 cents. The publishers responded to these low revenues by increasing the number of eyeballs. To do this, they added online-only content—primarily articles that had been rejected by the print magazine. With this strategy, they turned a low-cost, low-revenue venture into a high-cost, low-revenue one. Luckily, the print magazine continued to do well. At least until subscribers realized that they could read the same articles online for free. Today, the print version of Spots Illustrated is published eight times a year and occasionally runs as high as 52 pages. Most fans read the magazine online, although no one dares visit the site without a good pop-up blocker. The business occasionally sees a profitable quarter—or even 30 cents—although this would not be possible if the employees were actually paid. discountmilk.com When Franklin Flybynyte decided to start his own online retail company in 2000, he had to think hard about what to sell. By that time, a great many markets were already taken, and he couldn't afford to underprice those who had underpriced the original companies that had underpriced the founders of the industry. That meant he couldn't sell books, CDs, DVDs, games, toys, automobiles, frogs, furniture, airplanes, plastic surgery, or politicians. So he opted to sell milk. It was a novel idea, and he had some friends who could help him keep prices low. In fact, he was able to sell a gallon of organic skim milk for only .89 cents. Such are the advantages of consorting with cows. Business started slowly, but picked up after he started advertising on spotsillustrated_the_magazine.com. But a dairy depends on repeat customers, and few people ever bought milk online a second time. discountmilk.com hired a consultant, who decided that while the low prices attracted new customers, the $5.83 shipping charges kept them from coming back. With those results, Flybynyte retooled his business, increasing his prices slightly but eliminating all shipping charges. Of course, he had to make compromises. To keep costs down, the milk had to ship Standard Delivery, taking anywhere from two to four weeks. Sales when up, but once again he wasn't getting repeat customers, and once again he hired a consultant to find out why. It turned out that a surprising number of his customers were dying from drinking milk that had spent two to four weeks in the Post Office. Flybynyte was working on a new business plan when the competition hit. A new site, cheapermilk.com, appeared on the web and sure enough, it was undercutting his prices. How, he wondered, could anyone could possible sell milk any cheaper than his low price? He soon discovered the answer. His suppliers had gone into business for themselves. Such are the disadvantages of consorting with cows. Today, discountmilk.com is still in business, but the model has changed. The company no longer sells perishable goods; just the domain name discountmilk.com. Jugs of Heaven Common wisdom states that subscription-based web sites are doomed to failure; that only sites that give away their content for free can make a profit. Jugs of Heaven is the exception, bringing in over 58,000 subscribers willing to pay $35 a month to see photos of enormous jugs, long and sturdy battering rams, and intricate torture devices. Who knew that so many people were interested in relics of the ancient world? Obviously, the people running Jugs of Heaven knew. Since its inception in 1998, this site has been a major profit generator for its owner/creators, John Smith and Jane Doe. They declined to be interviewed for this story. © Copyright 2004 by Lincoln Spector |