Old Dogs, New Economy Are Compatible

Companies with the most experience are the most profitable online

Peterborough, NH  March 20, 2001 Experience plays a pivotal role in online profitability for B2B Web sites, according to e-business research firm ActivMedia Research. Data presented in the "Online Success Strategies in B2B Markets" study shows that 46 percent of B2B businesses that have been online for three or more years are profitable today. This compares to only 32 percent across all B2B Web sites regardless of the number of years online.

According to the report, few B2B businesses (18 percent) sell directly at their Web site. However, given that 43 percent of online businesses today have experienced a downturn in business since the advent of the Internet, many more B2B businesses will start selling online over the next 24 months. Many B2B marketers are being forced to do business online as a matter of survival. Firms that are online veterans are less likely to have seen a decrease in business, probably because they came online early in the e-business cycle. Notably, B2B e-businesses are much larger firms than those in other sectors. This may be a contributing factor to their relatively slow adaptation to the Internet.

In contrast to the B2C sector, most B2B firms do not expect their online business to ever exceed their offline revenue. Again, the most recent arrivals to the Internet are the most likely to believe this. They may feel that they were forced to establish a Web site and may not be ready to see that they can be successful online. Older firms, however, have established an online presence and have seen what the Internet can do for them.

"Half of all B2B firms that do business both online and offline indicate that their online order size is smaller than offline orders," comments ActivMedia Research's VP of Market Research Harry Wolhandler. "Another third find that the order size is the same. This provides little incentive for some B2B firms to develop their online business. Instead, cutting costs by conducting business functions such as purchasing online is another way to affect profitability margins. Whether a Web site is increasing revenue or cutting costs, the Internet opens doors to increased profitability."