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Doing Business on the Internet

By David Mendosa

The Internet, especially the World Wide Web, can add a powerful new dimension to small business marketing. While the Internet won't replace traditional marketing tools, it can be an efficient way for small businesses to compete equally with big business in reaching customers everywhere.

But walk before you run. On the Internet this means using and understanding basic tools such as email, mailing lists, and newsgroups before jumping onto the World Wide Web. Using nothing but email can be an excellent way to start tapping the Internet. Before deciding to set up a Web site, look at what others— particularly your competitors—are doing. In spite of the seductive hype of the Internet, remember that you don't have to do everything at once.

Mail Order Woes

Bill Todd was looking for a second career in the early 1990s after working for a couple of decades in Chicago's commodities markets. As a lifelong tea drinker he first thought about setting up a shop locally to sell rare teas.

But he realized that the affluent customers who would buy his teas were a small part of the Chicago market and yet were widespread around the country and the world. So he rejected the idea of a physical store.

So in late 1993 Todd jumped into the mail order business. Together with Bill Holland, his roommate at the University of Illinois 30 years ago, the two Bills created Todd & Holland Tea Merchants with offices in the Chicago suburb of River Forest, Illinois. They bought a mailing list, and their first print catalog of about 2,000 copies came out early last year.

Dramatic increases in the cost of paper and postage, however, threaten the entire catalog industry. Todd & Holland also had a special problem in reaching its narrow market. Todd says he discovered that there is no profile of tea drinkers that they could take to list brokers to get a well targeted mailing list.

"So I asked myself how we could reach our typical customer, who was often college educated and worked in senior management or was in academia or the computer industry," Todd recalls. "In searching for lists that functioned for us, I started to look to the Internet. I realized that in its history the Internet came out of research and the university, so university people were comfortable with it. That made it a logical fit for us."

Todd & Holland began its on-line marketing with an email address listed in its first catalog. But it didn't produce many sales, Todd admits. What is working for him now is the World Wide Web—or just the Web for short—the fastest growing part of the Internet.

Todd & Holland's Web page—the company's virtual location on-line—first went up last November, and it immediately began to generate sales. In December alone, he says, sales of about $10,000 to $15,000 came from the Web, accounting for 30 percent of the company's orders. Todd & Holland's revenue last year totalled less than $100,000, but Todd projects a 300 to 400 percent increase in sales this year.

Publishing On Line

Like Bill Todd, Lillian Williams takes advantage the Internet's demographics to sell her product. In her case she targets its overwhelmingly male audience with her self-published "Sports Sunday Cookbook," which went on line just before we spoke with her.

"These are easy to fix recipes that are especially great on Sundays, when you are watching a game," Williams, a former Chicago Sun-Times, says reporter who now lives in Akron, Ohio. "I am African-American, so the recipes I put in the book are truly soul food. And it didn't take forever for me to do the book, because I have lived them."

Simon Lermer in New York is another publisher who has gone on line. As the CEO of Corporate Travel Coordinators of America for the last eight years he has published the Corporate Rate Hotel Directory for business travellers. About 35,000 of them get the directory free; the company's revenue of under $1 million annually comes from about 2,100 hotels listed in the directory, who pay him because it is a source of income for them.

Lermer decided to make his 300 page publication available on the Web this year after getting many requests during the last two or three years for an electronic version. "But the hotels didn't ask for it," he says. "Business travellers did." On the road with their portable computers, they wanted an easy way to contact the hotels.

Except for some graphical differences, Lermer's Internet site has exactly the same information as the paper version. But they went one step beyond just having a Web address.

"We decided to further help the hotels and the business travellers whom we serve by providing every hotel in our publication with a free email address," he says. Only about 100 of the hotels listed previously had one. "So now not only can travellers read about the hotels that are offering business travellers great rates but they can also contact them by email. Not only that, but the hotels that advertise in our publication have a new resource available to them in marketing to business travellers who have sent them email. Having an email address these days is as important as having a fax number."

How much money does Lermer make from his on line venture? "We don't make any money by putting the book on line," he replies. "It costs us money. It is a value added service to the hotels and to our business travellers."

Putting his directory on line cost Lermer "big bucks," he admits, even though he keeps the graphics as simple as possible so busy travellers can get the information fast. Lermer hired an Internet presence provider to lay out the site at a cost of about $15,000 for the first year. He expects to begin advertising the site next year and expanding to include more hotels, but next year's budget will be about the same.

Disillusioned Web Advertisers

Not everybody is as happy with selling via the Internet as Todd, Williams, and Lermer. Neil Lurie, president of Silvercraft Inc. in Detroit is one disillusioned Web advertiser. His company does electroplating, mostly in aircraft and electronics, accounting for revenue of $800,000 last year. But two years ago they branched out and began plating real roses with 24 karat gold as a favor for friends.

The response from people who saw "Una Rosa dÈ Ora by Silvercraft" when they came to his show was overwhelming, Lurie says. "So we decided to make selling it a major project," he recalls. "I thought about the Internet, because I had read articles about it and found it an excting way to reach millions of people all over the world."

So he took some photos, designed an ad, and contacted a cybermall, which develops Web pages for companies to sell their products on the Internet. The advertisement appeared just before Valentine's Day this year, "thinking that a rose for Valentine's Day would be the ideal thing," Lurie remembers. "But for three months we got no responses.

In the next three or four months seven orders did come in at $75 each. "But that is very disappointint, because it is a long way from repaying our investment in our ad, which was $1,600 for a full year," he moans. "When people see our roses, they really like them, and it goes across all social, cultural, and economic lines. But it appears that this is a product that people have to see."

Unless sales pick up, Lurie does not plan to continue on the Web after his first year is up. One entreprenuer who has already given up on advertising his product on the Web is Paul Brooks, president of Kangaguru Australian Imports in La Jolla, California, with retail and direct marketing sales last year of $400,000.

One of the Australian imports that he sells a lot of through traditional channels is the Driza-Bone coat, Brooks says. "Last week at a Los Angeles show," he told Business95, "we sold 200 coats at $225, and in Europe they retail for $400 to $600."

So he thought that with lower sales costs on the Internet he could sell a lot of coats at $169. Instead, "we have had no sales—period," Brooks confides.

Why the Internet Exploded

These five businesses are a small sample of the more than 10,000 commercial sites on the Internet, but they provide a flavor of the range of experiences that small businesses have. All of these businesses promote their products on the Web, the part of the Internet where commercial ventures are most welcomed.

As the Internet grew slowly during the 1970s and 1980s it was the exclusive province of government and academia. As a result advertising is even today particularly unwelcomed on the traditional parts of the Internet, particularly on newsgroups and mailing lists.

But the Web, that part of the Internet most suitable for business, didn't even exist until 1991. The person most responsible for the Web is Tim Berners-Lee, who was then a computer specialist in the European Particle Physics Laboratory's computing and networks division. He designed the Web to combine text and graphics and permit users to jump easily from one area to another through what is called hypertext.

The other key figure is Marc Andreessen, one of the original authors of NCSA Mosaic, the free program released in mid 1993 that made the Web easy to use. Last year Andreessen became one of the co-founders of Netscape Communications Corp. in Mountain View, California, and to develop Netscape Navigator, the program now used by three-fourths of those accessing the Web.

The other limitation on advertising was the U.S. government's definition of acceptable use, which prohibited commercial activity anywhere on the Internet through its National Science Foundation, which provided the main telecommunications link. But with the appearance in the early 1990s of Internet Service Providers that sold access to the Internet commercially, the National Science Foundation's restrictions have faded away.

Now that businesses can promote their products on the Internet, its growth—and particularly that of the Web—has been explosive. Businesses large and small are flocking to it, often with little understanding of its strengths and limitations.

No One Knows You are a Dog

A famous Peter Steiner cartoon in the New Yorker shows two dogs talking, as they do in cartoons. One dog who is sitting in front of the computer turns to the other and remarks, "On the Internet, nobody knows you're a dog."

No One Knows You're a Dog
© 1995 The New Yorker. Reproduced with permission.

That's only a slight exaggeration. The equal opportunity the Internet gives small businesses is a special reason to consider Internet marketing. "It levels the playing field for small businesses," points out Sam Sternberg in his on-line book The Business Guide. "Size is less relevant when one net location can serve the world."

Based on his experience, Bill Todd of Todd & Holland concurs. "If you put up a web page, it doesn't matter who you are," he notes. "If you have a small local hardware store, you can put up a small catalog."

Not Ready for Prime Time

The big limitation of Internet marketing is that it isn't ready for prime time. The market is still small. While maybe 30 million people around the world have Internet access, perhaps only one-tenth of them can see the Web in full graphics. Last year all electronic commerce generated just $200 million in sales, says Forrester Research Inc. of Cambridge, Massachusetts. That's a drop in the bucket when compared with the $1.2 trillion in total U.S. retail sales.

Internet users are doing a lot of looking but very little buying, says Sunil Gupta, a professor at the University of Michigan who regularly surveys Web consumers. "Most of the on-line buying, by about 14 percent of the people we surveyed, is computer hardware or software," he says. "But almost a comparable number have bought books and music on line. What is interesting here is that on-line commerce opens a new channel for direct marketers, because very few people had bought books or music before by direct mail."

Considering the Internet's demographics—largely well educated, affluent, under 40, technologically savvy computer users—it's not surprising that computer sales rank first. Todd's rare teas perfectly match current Internet users.

Retailers addressing a broader market can't expect instant success. So why not wait until Internet business matures? "You have to describe us as betting on the come," declares Raymond Alvarez of Alvarez & Company in Longmont, Colorado. His Web product, a newsletter called "The NAFTA Watch" hasn't begun to make him any money, and he wrote in in 2005 that he no longer publishes his newsletter. "But it's not a fluke that all these numbers of Web sites are showing up."

All retailers using the Internet need to promote their site widely by listing their site in the major search tools like Yahoo and Lycos and including a reference to it in the electronic signature to their email and newsgroup messages. But advertising on the Internet is still tricky and must be low key. Anything more than a brief, informative announcement on almost all mailing lists and newsgroups triggers a firestorm of hate mail.

The Web site itself is necessarily a far cry from the glitzy hard sell used in most media today. Because another site is just a mouse click away, the site has to be more informative and interesting—and ever changing—than a blatant advertisement. Bill Todd's site deals with this issue by continually presenting new teas.

The Security Red Herring

Businesses that take credit card orders over the Internet generally agree that net security concerns are overblown. Netscape was the first browser to make transmission of credit card information secure. Several other companies have it under active development.

Even though Bill Todd is not yet able to use secure transmission, he expects to have it soon. Meanwhile, he says, "We cannot identify one customer we have lost because of their concern about security."

Starting with Email

Some business owners think the best way to approach this growing market is to start by putting their toes in the water. That means using only using email at first. Ken Rauch, the owner of Bean Bag Mail Order Company in Oakland, California, started taking orders with his America Online account about a year ago. He sold about $200,000 of beans and grains last year, very little electronically.

"I have just begun to market myself on line, and there have been more orders than I expected," Rauch says. "Word is spreading by word of mouth. I was just listed in the vegetarian food group not too long ago and probably got close to 100 catalog requests. Those postings in various groups have helped me generate more business. The other 50 percent of the email response I get are from regular customers who happen to have computers and prefer to order that way."

Has he thought about setting up a Web site? "No, I don't know that much about it," he replies.

Debra Monroe is another business owner who is using email to generate business. Her company, Monroe Personnel Service/Temptime in San Francisco, had revenue of $320,000 last year, none of which came from on-line connections. But this year she estimates that $20,000 came from fees she earned for temporary and regular placements from leads originating on line.

She literally stumbled into the on-line world. A broken right leg forced her to run her business from home where she participates in chat groups and exchanges email. She says that she has thought about putting up a Web site, but is going to wait until it is more accessible.

Is the Web Worthwhile?

Todd, Lermer, and many other pioneering Web entrepreneuers believe that with all its limitations it is absolutely worth their while to tap into this new media. "The way we are doing it it is worthwhile," Lermer maintains. "There are a lot of companies out there who are hoping to make millions of dollars by being on the Web, but that day isn't here yet.

"We certainly see the value of being on the Web," Lermer continues. "The Web is important. But I won't stop printing our book and being only on the Web. Not yet. Maybe 10 years from now you'll ask me and I will say, 'Book? Oh, yes, we used to print a book.'"



Commercial User's Guide to the Internet is more than a book. It is a loose-leaf binder of a wealth of information updated monthly by Thompson Publishing Group, (800) 677-3789). An annual subscription is $398.

Guerrilla Marketing On-Line by Jay Conrad Levinson and Charles Rubin is full of tips and good advice for the small business owner to compete on the Internet. The authors call it "guerrilla marketing" to connote the tactics for the defeat of the large by the small. Just published in July 1995 by Houghton Mifflin Company, this book is available in bookstores.

CyberMarketing, by Len Keeler (Amacom Books, 1995, $24.95) is divided into three sections. The first is the tools required, the second tells how to perform specific marketing tasks. And finally it explores the opportunities that new technologies make available.

Marketing on the Internet, by Michael Mathiesen (Maximum Press, 1995, $34.95) is a 12-step marketing strategy for selling in cyberspace with a thorough background on the medium. This is a thorough introduction, including even an excellent introduction to writing hypertext markup language (HTML) code to make your own Web page. To order, call (800) 989-6733.

The Internet Business Companion, by David Angell and Brent Heslop (Addison- Wesley Publishing Company, 1995, $19.95) describes Internet resources from the viewpoint of the entrepreneuer. Available in bookstores.

Doing More Business on the Internet, by Mary J. Cronin (Van Nostrand Reinhold, 1995, $29.95). This is a 1995 update of her earlier Doing Business on the Internet.


"Internet Week," news and analysis of Internet business opportunities, is published weekly both in print and on the World Wide Web by Phillips Business Information at (301) 340-1520 and by email at [email protected]

"The Internet Business Journal" is a monthly newsletter covering the broad range of issues in doing business on the Internet. The regular rate is $149 annually, $75 for businesses with fewer than 20 employees. Order from [email protected] or Strangelove Internet Enterprises Inc., 208 Somerset Street East, Suite A, Ottawa, Ontario K1N 6VN, Canada, or call (613) 565.0982.

"Internet Business Advantage" is another monthly newsletter covering business on the Internet. The rate is $99 for 12 issues. Call (800) 638-1639.

"Internet Business Report" is also a monthly newsletter. It's $279 for 12 issues. Call (516) 562-5000.

Audio Tapes

"What Works on the World Wide Web" is a set of three one-hour audio tapes supplemented by an MS-DOS diskette describing the key principles of Internet marketing. These are tapes of the seminar presented by Jim Sterne, president of Target Marketing, at Digital Consulting Inc.'s Webworld Conference in February 1995. Cost $195. Order from or Target Marketing, 1130 Arbolado Road, Santa Barbara, California 93103, or call (800) 549-4659.

Internet Mailing List

The Internet Marketing discussion mailing list is arguably the best list for on-line entrepreneuers. The moderator reviews all posts before they go out. To subscribe send email to [email protected] with the message "subscribe inet-marketing your_first_name your_last_name." The subject line is ignored. Do not use a signature.


Internet '95 will be held on October 4-6, 1995, at the Norfolk Waterside Marriot in Norfolk, Virginia. Its theme will be future technology, business, and the Web. The conference will host some 90 exhibitors and a projected audience of 6,000 attendees.

Internet World/Fall will be held on October 30-November 2, 1995, in Boston. For more information, call (800) 632-5537.


A FAQ (a discussion of frequently asked questions) on "Advertising on the Usenet," (which largely overlaps the Internet) is posted regularly on some Usenet groups. You can get a copy by sending email to [email protected]

Web Pages

"The Internet Advertising Resource Guide" has links to many other sites with information useful to entrepreneuers using the Web.

The "Blacklist of Internet Advertisers" shows how not to advertise on-line. Find it at

"Yahoo," and "Lycos" are two of the Web's best search tools. They live at and respectively.

"Marketing Lists on the Internet," one of the pages on HTMARCOM Showcase, shows how to subscribe to the free marketing resources on the Net.

"How To Let People Know about Your Web Page"

Shout it from the roof tops
Write it in the sky
Promote until your budget pops
Until they all surf by.

Announce in proper newsgroups
Mail directly through the post
Fire up the sales troops
Televise the most.

A 1-800 number
Won't get you any calls
Unless you advertise it
And paint it on the walls.

Put it on your letterhead
Put it on your cards
A Web site will be left for dead
Unless it's known on Mars.

Your Web site can be funny, pretty, useful, crisp and clean
But if you don't promote it, its message won't be seen.

Post by Jim Sterne, President of Target Marketing in Santa Barbara, California, on the "Internet Marketing" Mailing List, April 18, 1995. Reprinted with permission.

Sidebar: Getting Started on the Internet

To set up and view your own World Wide Web page—your site or location— these are the hardware, software, and service requirements:

1. A standard phone line, unless you set up your own Web site directly on the Internet, rather than go through a presence provider, in which case you may need a faster connection. Your own site can be both expensive and probably not a wise first step.

2. A fast computer, preferably at least a 486 running Windows and 8MB of RAM or a newer Macintosh running System 7.0 or better.

3. A fast modem that transmits at least 14,400 bits per second or prefererably 28,800 bits per second, if your Internet access provider—your phone connection to the Internet—supports speeds that fast, which they all will shortly.

4. A SLIP (Serial Line Internet Protocol) or PPP (Point-to-Point Protocol) account with an Internet access provider that caters to business needs. If you have a choice, a PPP account is more reliable. Every major city provides access via a local phone call to at least one local access provider. Ask Internet users locally for their recommendations. Prodigy, CompuServe, and America Online offer Web access as well.

5. Software. You need a minimum of three programs: a dialer, a Web browser, and email software.

If you use Windows, this software is included with Web access to Prodigy, CompuServe, and America Online, which makes them much easier to set up. For most other services, you will need to obtain shareware or commercial programs. If you use Windows, the standard dialer program is Trumpet Winsock version 2.0B or later. About three-fourths of the people on the Web use Netscape version 1.1N or later to surf it. An excellent program to read and write your email is Eudora version 1.4.4 or later. All of these are shareware. However, a commercial program called Internet In A Box that is widely available in book and computer stores can make a mind-numbing setup problem completely manageable.

If you have a Macintosh, the programs are MacTCP version 2.0.4, ConfigPPP version 2.0.1, Netscape version 1.1N, and Eudora version 2.1.1.

Contact your local Internet access provider for the best way to obtain and configure these programs.

6. To construct your Web site you will usually need to hire an Internet presence provider—a Web page developer—who can write html code. Or you can engage the services of a cybermall. One way to find an up-to-date directory of Internet presence providers is to search Yahoo ( for "Internet presence providers." The cost is all over the map. Sometimes Internet presence providers are very reasonable and others are very expensive. That's true too for cybermalls. This market is too new for the development of a standard pricing strategy, so cost is not an indicator of quality.

7. Aggressively announce and advertise your Web site in every appropriate place. Put the address on your stationery, business cards, press releases, print ads, and in the signature of your email messages. Tell the search tools, such as Yahoo, what your Web site is all about. Write it up for the Usenet newsgroup comp.infosystems.www.announce. Other newsgroups and mailing lists in your field may also appreciate low pressure announcements, while resenting high pressure advertising. Read before you write.

An edited version of this article appeared as "CYBERselling!," Business95, August/September 1995, pages 18-20.

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