Company Sites - Asset or Passive?

Company Sites - Asset or Passive?

Most commercial organizations that are willing to use traditional advertising are not ready to allocate adequate amounts on the Internet. As a rule, in companies companies are responsible for these decisions marketers who believe that everything is quite simple on the Internet, so 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 two weeks of showing it on central channels (this is called image advertising with incomprehensible returns). But when you tell them that their site, which will be the face of their company and they will work with him 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.

There are many reasons why this happens:
• a huge offer of any services on the Internet at bargain prices,
• the difficulty to understand the details,
• the opinion: “The Internet is useless for our business,”
• previous experience with the Internet
, etc.
I believe that the main problem is 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 in terms of Assets and Liabilities. I think that his idea is very suitable for commercial organizations that want to use the Internet effectively 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 liability of a company. An asset creates value; a liability causes losses. In the same way, companies, branches, various divisions or lines of business are evaluated in companies.
Imagine a two-bowl scale. 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 it outweighs the value, then the site is ASSET, if the price is LIABILITY.
This approach is applicable to any site, regardless of its goals. Even if this is an information site on which commercial activity is not conducted, and its purpose is not to sell goods or services, then this approach is still applicable. Indeed, in fact, the goal of any information site is also sale. It’s just that the sale is not of goods, but of information that the company wants to bring to its potential consumers. In return, she receives the attention and time spent by these visitors. And they are transformed into LOYALTY brand, products or services of this company. Loyalty increases sales and, consequently, the company's profits.
Immediately I foresee reproaches that the value (and in fact the received loyalty) of image and information sites cannot be determined, therefore there is nothing to compare. How can you evaluate the value obtained from the work of a promo site, the purpose of which is the PR of a 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 concretize the goal, determine the criteria for its attainability. This requires planning. And not abstract planning, but concrete, with numbers. You need to answer the question of what results and on what indicators 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 a site sells a product, the best indicator of effectiveness 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 posts in the forum.

2. Two examples for a representative website of a foreign automobile brand (they don’t sell anything on websites). All figures are conditional.

EXAMPLE No. 1.
The objectives of the site for three years: The number of targeted visitors for key queries from search engines an average of 1,000 per day, resulting in 1,100,000 visitors in three years. From car portals - 500 per day, for three years - 550,000 visitors. In total - 1.650.000 visitors for 3 years. The base of subscribers to articles and news - 3% of the total number of visitors - 49500 people.
The price that the company is willing to pay to achieve the goals: Creating a site - $ 20,000 (how this amount is received, read in, site development, writing articles, creating a newsletter and forum, advertising on the Internet - $ 20,000 per month. Costs for 3 years from the start of the site: $ 740,000.
Agree, there is something to compare and something to strive for. The company has determined for itself what it wants to receive, and how much it 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 each. 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 overstating the expected results. There is nothing to worry about. The main thing is to set guidelines for yourself what to strive for, and then realistically and objectively evaluate your activities.
If the company exceeds its goals, then the site is an Asset; if not, it is a Passive .

EXAMPLE No. 2
Goals without deadlines: Creation of an information site for all we are interested in. Informing about new models, dealers, promotions. Establishing feedback with consumers. Creation of a forum, mailing list.
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 specific numbers. It is not clear what to strive for and with what to compare. It turns out that by creating the site 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, then 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 calculate 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 result? What to compare it with? Which is greater: The value we received, or the price we paid? What do we have: Asset or Liabilities?
From my own experience, and what I see on the Internet, in practice, in the vast majority of cases, the second example is common: the websites of many companies are LIABILITIES. 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 is the price for clicks to the site. Optimization for key queries - in places in search engines. But no one considers the end result of the site’s work, its usefulness (see how to read it in the article.
Why is this happening? After all, any organization creating a site wants to benefit from the Internet.

3. Two approaches: INVESTMENT and COSTS.

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

If you read the article to this place, then I recommend you - try to evaluate the sites of your customers. Do you think these are Assets or Liabilities? What is your client’s approach to using the Internet?

Evgeny Lerner, head of the Internet agency “Artus”