Company Sites - Asset or Liability?

Company Sites - Asset or Liability?

Most commercial organizations that willingly use traditional advertising are not ready to allocate adequate amounts to the Internet. As a rule, companies are responsible for these decisions by marketers who believe that everything is fairly simple on the Internet, therefore, work and advertising on the Internet should be cheap.

For example, it is considered normal and they are willing to pay for a professional 30 second video, more than a hundred thousand dollars and half a million for a two-week display on central channels (this is called image advertising with incomprehensible returns). But when they are told that their website, which will be the face of their company and with it, they will work for 5 years, can cost 20, 30, 40 or 50 thousand dollars, and that at least 100 thousand dollars should be spent on its development. year, they do not understand why it is so expensive.
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The reasons why this happens a lot:
• a huge offer of any services on the Internet at bargain prices,
• the difficulty to understand the details
• opinion: “The Internet is useless for our business”,
• previous experience with the Internet
etc.
I believe that the main problem lies in the approach of companies to work with the Internet. In his books, the famous American businessman, investor, writer and teacher Robert T. Kiyosaki recommends evaluating all actions from the point of view of Assets and Liabilities. I believe that his idea is very suitable for commercial organizations that want to effectively use the Internet for their business.

This article, in the summer of 2008, I wrote on the corporate blog blog.artus.ru , for our existing and potential customers. It seems to me that it can be interesting and useful to you, my colleagues and competitors. I apologize in advance to those who already know and use all this very well.

1. Price and Value.

Any site of a commercial organization can be considered as an asset or a liability of a company. The asset creates value, Liability brings losses. In the same way, branches, various divisions or lines of business are evaluated in companies.
Imagine a scale with two bowls. On one you put the value received from the site, on the other - the price you pay for it. Now compare what outweighs: Price or Value? If the value outweighs the site, then the site is ACTIVE, if the price is then PASSIVE.
This approach is applicable to any site, regardless of its purpose. Even if this is an informational site on which no commercial activity is conducted, and its goal is not the sale of goods or services, this approach is still applicable. After all, in fact, the goal of any information site is also a sale. Just selling not the goods, but the information that the company wants to convey to its potential consumers. In return, she receives attention and time spent by these visitors. And they are transformed into loyalty to the brand, goods or services of this company. Loyalty increases sales and, therefore, company profits.
Immediately I foresee reproaches that it is impossible to determine the value (and in fact the resulting loyalty) of image and information sites, therefore there is nothing to compare. How can we estimate the value obtained from the work of the promotional site, the purpose of which is PR of the company, brand, product?
Gentlemen, if there is a website, then it definitely has expenses that can be calculated, and it has a goal! The most difficult task is to specify the goal, to determine the criteria for its attainability. For this you need planning. And not abstract planning, but concrete, with numbers. You need to answer the question, what are the results and what indicators do you want to achieve from the site in a year, two, three. Present these results as numbers. How much are you willing to pay for them?
At the same time, determining the desired numerical indicators of the site, you should choose such characteristics that are directly related to the real business performance. If the site sells a product, then the best indicator of efficiency is the number of orders through the site. If the site is informational and its task is to increase loyalty, which indirectly affects sales, then performance indicators may be different (preferably complex). For example, the number of TARGET visitors to the site, the number of subscribers to the newsletter and the number of constructive messages in the forum.

2. Two examples for the representative site of a foreign automobile brand (they do not sell anything on the websites). All numbers are conditional.

EXAMPLE No. 1.
Site goals for three years: The number of target visitors for key queries from search engines is on average 1000 per day, as a result of three years - 1.100.000 visitors. From car portals - 500 per day, for three years - 550.000 visitors. Total - 1.650.000 visitors for 3 years. The base of subscribers to articles and news - 3% of the total number of visitors - 49,500 people.
The price the company is willing to pay for achieving the goals: Website creation - $ 20,000 (for how this amount was received, read in, developing the site, writing articles, creating a newsletter and forum, advertising on the Internet - $ 20,000 per month. Costs for 3 years since the start of the site: $ 740,000.
Agree, there is something to compare and what to strive for. The company has determined for itself what it wants to receive, and how much is willing to pay for it. The core value is 49,500 subscribers. They are the most loyal visitors for whom the company is willing to pay $ 15. And there is also a forum ...
Plans can and should be adjusted over time. Indeed, when planning, you can make mistakes in forecasts, underestimating or overestimating the expected results. There is nothing wrong with that. The main thing is to set guidelines for yourself, what to strive for, and then realistically and objectively evaluate your activities.
If a company exceeds its goals, the site is an asset; if not, a passive .

EXAMPLE No. 2
Goals without deadlines: Creating an information site for everyone we are interested in. Informing about new models, dealers, promotions. The establishment of feedback from consumers. Creating a forum mailing.
Costs: the same as in example No. 1.
All the same, but done without specific goals and plans to achieve them. That is, there are goals, but very blurry, without concrete numbers. It is not clear what to strive for and with what to compare. It turns out that by creating a website and launching it, we have already achieved our goals. In principle, you can no longer spend money. Many do so.
But even if we develop a site that has such non-specific goals, how to understand what we will get in a year? Costs are considered easy, they amounted to $ 20,000 for the creation of the site and $ 240,000 for its development and advertising. You can count the value that we received in return: the number of visitors, subscribers, etc. But is it hard to understand whether this is good or bad? How to evaluate the achieved results? What to compare it with? What's more: The value we received, or the price that was paid? What do we have: Asset or Liability?
From my experience and what I see on the Internet, in practice, in the overwhelming majority of cases, a second example is common: the websites of many companies are PASSIVES. When there are no specific goals, all work is chaotic. The value of information materials on the site is determined by their volume. The value of advertising campaigns - at the cost of transitions to the site. Optimization for key queries - in search engines. But the final result of the site, its usefulness, no one considers (how to count it, read the article.
Why it happens? After all, any organization creating a website wants to benefit from the Internet.

3. Two approaches: INVESTMENT and COST.

In commercial organizations, there are two approaches to using the Internet in your business: Investment and Cost.
Example # 1, described above, illustrates the Investment approach, when working on the Internet is considered an investment project. There are specific goals, deadlines, project budget, team and its leader. The success of the project is the achievement of goals in a timely manner and within budget. Everything comes from goals, the necessary resources are allocated for them, and these resources are considered as INVESTMENTS.
Example number 2. The company considers the costs of the site and its promotion as “COST”. Then the main goal is cost minimization. First, the annual budget is approved on a minimum, and then they try to cut it, there is still no return, and if it is, then no one can measure it. As a rule, in this case, site costs are an insignificant share of the total advertising budget of the company. Unfortunately, there are cases when a large budget is allocated for advertising on the Internet and for the development of a site, but it is inefficiently spent.
From the choice of approach to work on the Internet directly depends on the result!
Creating an ACTIVE on the Internet is possible (but not guaranteed !!!), only with an INVESTMENT approach.
With a COSM approach, only PASSIVES will be obtained.

If you have read the article to this place, I recommend you - try to evaluate the sites of your clients. Do you think these are Assets or Liabilities? What approach to the use of the Internet are your customers?

Evgeny Lerner, head of the Internet agency “Artus”