One-Third of Web Revenue Headed to B-to-B Firms

Web sites that market to other businesses online comprise the second largest industrial group with 38 percent of publicly listed domains on the English-language Web, according to a report by ActivMedia Research, which also found that (more importantly) the online business-to-business (B-to-B) industrial sector is leading the way in revenue growth in the year 2000.

On average, B-to-B sites project rapid growth in the coming year, and expect to triple their site revenues to reach $134 billion in 2001, according to the report “Real Numbers Behind B-to-B Online 2000.” In 2000, B-to-B sites are expected to garner one-third of global Web-generated revenue, or $46 billion of projected total Web-generated revenues during the year of $132 billion.

The average B-to-B Web site expects to double 1999 revenues, reaching $445,000 in 2000. For 2001, the average B-to-B Web site expects to triple that of 2000 to $1.2 million and double again to $2.3 million in 2002. This shows that e-commerce activity is strong among B-to-B Web sites even though many state their primary motivator for being online is client relations instead of e-commerce.

Average E-Commerce
Revenue Among B-to-B Sites
Year Revenue
1999 $269,000
2000 $445,000
2001 $1,200,000
2002 $2,300,000
Source: ActivMedia Research

ActiveMedia’s study also found that sites that intend to generate sales directly at the Web site are most likely to generate profits. More than four in ten (44 percent) sites that sell online are profitable today from Internet revenues compared to only 25 percent of those that do not sell online. Professional services are in the middle of the two (32 percent).

Eighty percent of B-to-B marketers are integrated companies that sell both online and offline. Unlike the world of B-to-C, only one-third of B-to-B Web sites is actually designed to accept orders online. For the majority, the goal of the Web presence is to stimulate and support a relationship that is also largely conducted offline. While it may run contrary to expectations, the Web is often used as a tool for stimulating personal staff contacts. Unlike B-to-C, where off-the-shelf products are heavily packaged and pre-priced, the world of B-to-B is highly negotiated, and personal customer service is still highly valued.

“Contrary to expectations, the research shows that being online is helping to improve reseller and distributor relations, as well as attracting new business for traditional companies,” said ActivMedia’s VP of Market Research Harry Wolhandler. “This is great news for marketers with complex selling channels. The recent emergence of online vertical marketplaces capable of dynamic pricing, auction-style settings, or managing traditional requests for quotations and proposals may have an impact several years down the road, but impacts to date are minor. No matter what, old-fashioned person-to-person relationships will dominate B-to-B activity moving forward.”

Among the 80 percent of businesses that have both online and offline sales channels, Web activity is rapidly becoming the mainstay for revenue. Companies project that, on average, the Web accounts for one dollar in four of total business revenue in 2000, rising to more than a third in 2001 and reaching half by 2002.

Just over half of all online B-to-B marketers have experienced growth in total business since the advent of the Internet, with an average increase of 29 percent. B-to-B online firms that have been online the longest are the most likely to have experienced an increase in their business. On the other hand, 40 percent of B-to-B e-marketers have experienced a decline in overall business since the arrival of the Internet. Many of these are latecomers who are now playing “catch up” to regain business lost to earlier adopting Internet competitors.

Many substantial real-world businesses are only beginning to get their stride online. Lessons drawn from the world of consumer sales clearly show that long-term staying power and persistence can outweigh flashy first-to-market hotshots in the long run. The goal of all business is to create satisfied customers, and the essential nature of the B-to-B relationship means that a company must not only market efficiently online to get ahead, but it must be able to perform well in the real world to ensure that clients become loyal.

B-to-B players are also going increasingly global. According to Internet Executive Panel, a study by International Data Corp. (IDC) that tracks e-commerce companies’ globalization efforts, 60 percent of B-to-B companies are globalizing their Web sites. This is up from 37 percent in the previous year’s study. By 2004, IDC predicts the percentage of B-to-B companies that globalize will level off at 80 percent.

“Globalization pays off by converting browsers into buyers,” said Rob Rosenthal, research analyst for IDC’s Internet Economy program. “Globalized and non-globalized companies have roughly the same percentage of foreign visitors. Globalization makes it easier for those visitors to buy, and that has an enormous effect on top-line revenue.”

According to IDC’s study, companies that do nothing to globalize project foreign revenue earnings of 10 percent in 2000 and 12 percent in 2001. However, companies that are globalizing project foreign revenue earnings of 25 percent and 30 percent during those same years.

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