OK, Amazon.com has been a huge commercial hit on the Internet, but is there room for other success stories?
That was the ongoing debate last week among exhibitors and attendees at the second annual Internet Commerce Exposition at the Los Angeles Convention Center.
The expo, which drew an estimated 15,000 people, provided a chance for exhibitors to show their wares to those companies interested in getting on the Internet.
Everything from instantaneous Internet product photo catalogues to software for Internet “malls” was on display.
The expo did not feature companies seeking to sell consumer products over the Internet; that is the focus of a much larger conference called Internet World.
Instead, there were people like Bill Jeffries, president of Beverly Hills-based Digital Boardwalk, which develops Internet commerce sites for businesses. Among the latest clients: E-Toys, which uses a search engine to help customers pick out the right gift toys.
“The interest in getting on the Internet has really taken off. We’re looking to be in the black in two months,” Jeffries said.
He said it was still to early to tell if his clients were making money, since many had just signed on in the last two or three months.
Bob Lozano, a marketing representative with St. Louis-based PaylinX Corp., which provides credit card billing and approval services for its corporate and merchant clients, said companies choosing to rely on the Internet as their main sales driver generally have been disappointed.
“Among our clients, those having the best success using the Internet are those who treat it as just another way to deal with customers. These companies also use face-to-face contact and call centers,” Lozano said.
A similar view was expressed by Jeff Watts, vice president of marketing for San Francisco-based Intershop Communications, which helps put companies on the Internet.
“Only a few types of companies have been successful so far in selling over the Internet and those have mostly been technology companies or those with niche markets,” Watts said.
Yet even these companies use other means of selling, he said. “The Internet is the third level of sales: first is the person-to-person and then you have catalogues and telemarketing.”
Expo participants cited two major reasons for the general inability to make money in cyberspace. First, growth of the Internet has slowed in recent months, in large part due to the stallout in sales of personal computers.
For the last year, U.S. household penetration for PCs has remained stuck at between 38 percent and 40 percent, with only about half of those using the Internet.
“Until we can get 50 percent or 60 percent PC penetration, the Internet market remains limited. That, in turn, limits the content that is available, which then further limits who is attracted to the Internet. It’s a chicken-and-egg scenario,” Watts said.
Even Netscape Communications co-founder Mark Andreesen, one of the keynote speakers, acknowledged the frustration that has been building in the Internet industry.
“This is a clear barrier that we’re hitting,” Andreesen said.
When asked why even Amazon.com, which has spent millions on mass marketing its book stock, has been unable to turn a profit, Andreesen said that the company has been concentrating on going after market share.
“That is still a good model for doing business on the Internet, but it takes major investment, which smaller companies may not have,” he said.
Another reason: the infrastructure for Internet commerce is still being experimented with, which appears to be scaring companies away who might otherwise venture on-line.
“In walking around here, I’m seeing that there is no standard format for the Internet. Without a standard, companies are reluctant to invest in the technology and time required to put themselves or their products on the Internet,” said Richard Graveley, executive vice president with Reston, Virginia-based Digital Commerce and one of the attendees.
Some expo participants expressed disappointment at the small size of last week’s expo, which they interpreted as a general lack of interest in doing business over the Internet. (Attendance after two days was running at about 10,000, on track to surpass last year’s 11,800, according to expo spokesman Ken Norton.)
“A lot of people are taking this Internet Commerce Expo with a jaded eye. They see all this hype about Southern California being the ‘Technology Coast’ and then only 15,000 people show up to see what it’s all about. It shows there is still a long way to go,” said exhibitor Nick Rosenberg, president of Los Angeles-based web designer W3-design Inc.