Report: Executives Give the Web a 'Thumbs Down'

Although their companies continue to spend money on many different aspects of e-business, corporate managers see less promise in the Internet than they did a year ago, according to a report released Wednesday by the Yankee Group.

"Over the past year, the perception of Internet business has swung from one extreme to another, from the extremely positive to the extremely negative," said the report, which stems from an annual survey of companies that do business on the Internet.

The report, which blames "the economic downturn and media negativity" about the Web for causing the Internet to fall from favor, said that the number of Internet strategists who believe their bosses do not consider the Web important to business strategy has doubled over the past year.

The main reason for executive antipathy towards the Web, the strategists said, is that businesses find it difficult to measure the success of their Web sites.

"Today, corporate executives want proof that online investments pay off and Web site ROI (return on investment) is not just a fantasy," said Yankee analyst Lisa Melsted.

That means companies need to "incorporate measurement" into Internet strategies, tracking statistics such as site traffic and use, marketing campaigns and "internal efficiencies" achieved as a result of using the Web, Melsted said.

The Real Driver

The report, based on a survey of Internet strategists at some 200 large and medium-size U.S. companies, also found that site traffic remains "driven by primarily offline methods."

Melsted told the E-Commerce Times that companies, rather than putting in place "integrated marketing campaigns" using a combination of Web ads and offline advertising, are merely listing their Web addresses in traditional marketing material.

Still Spending

Concerns about the effectiveness of the Web notwithstanding, companies are continuing to spend money on Web design, site strategy and other aspects of e-business, according to Yankee.

Many companies prefer to outsource at least some of these functions, Yankee said, showing "there is still significant opportunity" for companies that offer Web design, systems integration and hosting services.

The average corporate budget for online business strategies among the companies surveyed was US$478,000 per year, or about $40,000 a month, Yankee said. The median number for all companies is probably about $38,000 a year, or $3,200 a month.

Bad Reputation

E-commerce in general "has gotten a bad reputation over the past year," Yankee said. Nevertheless, most of the Web executives surveyed are expecting online sales to grow over the next year.

Overall, survey respondents said that about 13 percent of their companies' total sales came from e-commerce transactions last year, and they expect the number to grow to 21 percent this year.

According to Yankee, companies that use online commerce are saving money and getting more business. The report cited Hilton Hotels (NYSE: HLT) as an example of a company that is "having success in both the business-to-business (B2B) and business-to-consumer (B2C) arenas."

Hilton is using an online marketplace to buy supplies for its hotels, which saves the hotel chain money on purchasing. In addition, the online reservations system has proved popular with guests, Yankee said.