OBSERVATION
As a business development consultant, I am continually honored by the opportunity to help people invest in technology and create some kind of functional tech product for their businesses. Over time, I have observed that a high volume of people investing in websites and/or web applications have had unrealistic expectations about the return on the investment they were making–in some cases, drastically unrealistic.
TYPICAL BUSINESS WEBSITE
The following is a typical situation that I see just at the point of publishing a website:
- Product: business website
- Features: some attractive flash snippets, a short video/slide show
- Cost: $3000.00
- Balance to web developer: Paid In Full
- Client satisfaction with look and feel: HIGH, product gleamed precise vision of business ownership at outset of development. They’d recommend this developer to anyone.
- Budget for pay-per-click: $0.00 (reason: client heard these campaigns were a rip-off)
- Budget for email campaign $0.00 (reason: client has staff to do this in-house, can save on cost so we’ll do it ourselves)
- Budget for blog-writing campaign with search term optimization: $0.00 (reason: client has staff to do this, company comptroller was an English major in college, can save on cost, so we’ll do it ourselves)
The following is what commonly ensues 6-8 months after the above site was published:
- # Blog Entries Made: 1, the one the web developer originally posted (reason: comptroller was too busy to write blogs because of some unforeseen accounting issues)
- # Visitors to site: Unknown (reason: comptroller has since lost the password to that analytics tool the web developer set up for us to analyse it ourselves)
- Hot leads/conversions generated by site: 0
- Site owner’s current satisfaction with investment: LOW
In the situation above, the site owner sometimes writes off the web as a bad investment, or begins to ask tech-savvy friends for second opinions on “things we could do with our site to get more results,” which sometimes results in suggestions about meta tags, alt tags, key word content, or a suggestion that the look of the site is just not professional enough (despite the satisfaction felt after the first publishing).
Is this you? Has this been you? Have you been the web developer on the other end of this? I’ll admit, I’ve been ALL of these.
ANALYSIS
I call the situation above the Field Of Dreams Fallacy – if you build it, they will come (This of course only makes sense if you’ve seen the Kevin Costner film Field Of Dreams).
Many business people who are new to the web have common expectations about the Internet–that just building something “cool and techie” on the web will bring us some return. We don’t always start with a long-term strategy, plan, or objective, so we end up with a really cool product that we are left uncertain of what to expect from it. No matter how fresh and new the web is, some things never change–common business realities apply here.
What should the return on our money be? According to this article at expert click, it is reasonable to expect 5-10% return per year on capital invested in a business, and anything higher than that will attract competition. Having a business degree and being a business owner and developer myself, I would concur.
I think most business people would agree with the estimations in the paragraph above, yet, I can’t deny hearing the words “website will pay for itself” uttered by so many business website investors. Here’s what I’ll offer: If in a year, a savvy stock investor could expect to make back $3000.00 on a website and continue making $3000.00 per year for years thereafter, that investor would change from stocks to websites in a heartbeat.
Let’s label any expectations about a website paying for itself returns, and discuss different types of returns we might expect. We’ll discuss 2 types of returns: exposure, and conversion (we will leave the science of capitalizing on traffic for advertising revenue for another discussion).
EASY RETURN: EXPOSURE
Exposure is a benefit (and I would argue is basic “table stakes for the game”) that starts simply with someone being able to verify that you exist online. A simple return might be someone who lost your card that you gave them when you met them, all they remembered was your business name, and they were able to find your phone number online to call you for a consultation. This return might be difficult to identify or evaluate, but if you really wanted to, you probably understand your business well enough to estimate/evaluate this if you try (I wonder if calculating this would come out to 5-10% per year over time…).
Another return on exposure is image–someone might be sizing you up against a competitor, and comparing benefits of your service or price against someone else. Again–difficult to evaluate. The website owner in the example discussed above may never realize this is actually happening, because a conversion did not result directly or knowingly from the website.
I would argue that while exposure’s benefits are the hardest to quantify and measure, they are the easiest to achieve, in that just by having a reasonably designed website that is online, the benefits of exposure as discussed here will ensue almost automatically (so in this context, if you build it–they will actually come!).
HARD RETURN: CONVERSION
In an exactly opposite fashion of exposure, conversion is the easiest to measure and the hardest to achieve of the two types of website return. A conversion would be someone who called, emailed, purchased a retail good, or requested a consultation of some kind that directly resulted in business purely from visiting the company website.
This kind of return requires another lesson from the Field Of Dreams: going the distance. This type of return on investment for websites is where I believe that most investors lose touch with reality, and I believe it is what most investors want after investing in a website — CONVERSION.
To go the distance and achieve conversion, an ongoing process of marketing, investment, research, maintenance, and energy are required. It is also important to note that this type of return, depending on your industry, may not even begin until after a substantial investment in ongoing promotion of the website. The website may even need to be adjusted several times through trial and error, depending on your strategy and product, to reach certain goals (which need to be set). The following ongoing promotion tools are typically overlooked by first-time web investors:
- Blogs/News Letters–changing relevant content for search engines to find and make available
- Pay-per-click advertising
- Extensive targeted email campaigns
- Ongoing search engine optimization
- Off-line marketing driving visitors to online point of sale
- In-person networking combined with a strategy/promotion to drive visitors to site
Depending on your business, any one of the above may be applicable, but they all have 1 thing in common: they all require investment of ongoing resources.
CONCLUSION
The most commonly overlooked factor that makes expectations unrealistic is the assumption that building something and investing a one-time sum will simply produce returns forever. I see this across I.T., not just in websites. Some business owners operate under a similar fallacy that they’ll just have to “invest in this computer network once,” and overlook maintenance, aging computer technology, wear and tear, and continuity issues/disaster recoveries.
Realizing this up front can save whole lot of mental pain by going into projects with proper expectations. Simply having piece of mind that you’re receiving return on 24/7 exposure that is provided by a basic and professional site is satisfying, much like a nicely designed sign does that sits out in front of a store front.
If it is conversion you want, be prepared to “go the distance.” Don’t make the mistake of thinking that the Internet is any different than any other medium for marketing–it requires a plan, a budget, goals, and ongoing energy.
Stay tuned for my next discussion on expectations for return on web applications in the same context
Need to sit down and talk about some of these issues yourself? Feel free to give me a call at (520) 229-8730, or request a free consultation
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